Proxy advisory firm Glass Lewis has recommended that Air Products and Chemicals investors elect all four of Mantle Ridge’s board nominees, significantly bolstering the activist investor’s campaign in the first major boardroom battle of 2023. This endorsement adds considerable weight to Mantle Ridge’s arguments for change at the industrial gases giant.
Mantle Ridge contends that Air Products needs a clear succession plan for its current CEO, Seifi Ghasemi, who is in his eighties and has led the company for a decade. The activist investor also criticizes the company’s capital allocation strategy and its pursuit of high-risk projects, advocating for a more conservative approach. By installing its four nominees, including founder Paul Hilal, Mantle Ridge aims to reshape the board’s direction and influence corporate strategy.
The upcoming shareholder vote, scheduled for January 23rd, unless a prior agreement is reached, will determine the outcome of this proxy fight. Glass Lewis’s recommendation provides crucial momentum for Mantle Ridge. The firm praised the “highly credible slate of candidates” put forth by the activist investor, highlighting their suitability for addressing the challenges facing Air Products. Furthermore, Glass Lewis criticized the company’s “poor performance,” attributing it to a series of costly and strategically questionable ventures that deviate from its core risk profile.
Air Products has sharply rebuked Glass Lewis’s assessment, deeming it “sloppily-compiled.” The company argues that accepting Mantle Ridge’s nominees would lead to a “destabilizing amount of change” and deplete the board’s valuable expertise. In a statement, Air Products asserted that following Glass Lewis’s recommendation would ultimately harm shareholder value.
This proxy contest marks the second time Paul Hilal of Mantle Ridge has challenged Air Products. A decade ago, as a partner at Pershing Square Capital Management, Hilal played a role in appointing Ghasemi to the company’s board, paving the way for his eventual ascension to the CEO position. This history adds another layer of complexity to the current battle.
Early in the campaign, Hilal indicated collaboration with former executives from Linde, a competitor of Air Products. Among them is Eduardo Menezes, whom Hilal suggested as a potential successor to Ghasemi, although Menezes is not among the proposed board nominees.
In anticipation of two director retirements this year, Air Products announced the appointment of Bhavesh “Bob” Patel, former CEO of chemical companies W.R. Grace and LyondellBasell. Patel has also been considered a potential replacement for Ghasemi. This proactive move by Air Products could be interpreted as an attempt to preempt Mantle Ridge’s criticisms regarding succession planning.
As the first proxy advisory firm to issue its recommendation, Glass Lewis’s endorsement carries significant weight. Investors now await the report from Institutional Shareholder Services (ISS), a larger rival in the proxy advisory space. ISS’s position could prove decisive in swaying shareholder votes. The outcome of this proxy fight will likely have significant implications for Air Products’ future strategic direction and leadership.
