D.E. Shaw seeks governance changes at Air Products

NEW YORK - The D.E. Shaw group, an investment firm with over $60 billion in capital, has publicly urged Air Products and Chemicals, Inc. (NYSE: NYSE:APD) to reform its governance and capital allocation strategies. The investment firm, which holds a significant stake in APD, expressed concerns over the company's prolonged share underperformance and governance deficiencies.

In an open letter released today, D.E. Shaw outlined a series of proposals aimed at enhancing long-term shareholder value. The recommendations include accelerating de-risking of large projects, tying capital investments to offtake agreements, and establishing a new capital allocation framework with a cap on capital expenditures beyond fiscal year 2026.

Additionally, the investor called for a transparent CEO succession plan, the appointment of independent directors with relevant experience, a restructuring of executive compensation to align with strategy and performance, and the formation of ad hoc board committees to oversee these initiatives.

The letter follows an October 2nd meeting with APD's Board of Directors and CEO, where D.E. Shaw presented its analysis and proposals. According to the letter, the board's response was unsatisfactory, with a follow-up meeting being canceled by the company's Lead Independent Director.

D.E. Shaw remains open to constructive engagement with APD to implement changes that it believes are necessary to improve the company's business, strategy, and governance.

This move underscores the active role that investment firms can play in advocating for corporate governance reforms and strategic realignments. The information is based on a press release statement from D.E. Shaw.

In other recent news, Air Products & Chemicals Inc. has been the subject of numerous analyst adjustments following strong third-quarter earnings, which saw an adjusted EPS of $3.20. Mizuho Securities raised its price target for the company to $360, while Jefferies upgraded the stock to Buy with a price target of $364. Evercore ISI also upgraded the company's rating to Outperform and increased the price target to $365.

BMO Capital maintained an Outperform rating with a price target of $323, and Citi raised its price target to $345. These adjustments come in light of the recent acquisition of a $1 billion stake in Air Products by activist investor Mantle Ridge.

The company has also been making significant strides in clean hydrogen initiatives, securing a green hydrogen supply agreement with TotalEnergies (EPA:TTEF) and planning to sell its LNG technology and equipment business to Honeywell (NASDAQ:HON). These recent developments highlight a period of significant activity for Air Products, positioning the company for potential growth.

InvestingPro Insights

Air Products and Chemicals, Inc. (NYSE: APD) has shown strong recent performance despite the concerns raised by D.E. Shaw. According to InvestingPro data, APD's stock has seen significant returns, with a 14.76% increase over the past month and an impressive 34.81% gain over the last six months. This recent rally has pushed the stock near its 52-week high, with the current price at 98.86% of that peak.

InvestingPro Tips highlight APD's commitment to shareholder returns, noting that the company has raised its dividend for 41 consecutive years and maintained dividend payments for 54 years. This track record of consistent dividend growth could be seen as a counterpoint to D.E. Shaw's concerns about capital allocation.

However, the stock's valuation metrics suggest it may be trading at a premium. The P/E ratio stands at 27.67, which InvestingPro Tips indicate is high relative to near-term earnings growth. Additionally, the Price / Book multiple is considered elevated at 4.71.

For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for APD, providing a deeper understanding of the company's financial health and market position.

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