The D. E. Shaw Group Releases Open Letter to the Board of Directors of Air Products and Chemicals

Expresses Disappointment with the Board's Failure to Manage an Effective CEO Succession Process

Announces Intention to Support Change at the 2025 Annual Meeting

NEW YORK, Jan. 3, 2025 /PRNewswire/ -- The D. E. Shaw group ("D. E. Shaw"), a global investment and technology development firm with more than $65 billion in investment capital and a history of working with companies to help build long-term value, today sent an open letter to the Board of Directors of Air Products and Chemicals, Inc. (NYSE: APD) (the "Company" or "Air Products") expressing continued disappointment with the Board's failure to manage an effective CEO succession process.

The text of today's open letter to the Board follows:

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Board of Directors
Air Products and Chemicals, Inc.
1940 Air Products Boulevard
Allentown, PA 18106-5500

Dear Members of the Board:

We are writing to express our continued disappointment in your failure to address shortcomings in Air Products' corporate governance that have led to a multi-year pattern of value destruction driven by the Company's current CEO, Seifi Ghasemi.

Mr. Ghasemi's seemingly unfettered decision-making authority, for which the Board is directly responsible, has led to the Company's high risk capital allocation strategy and longstanding share price underperformance relative to industry benchmarks. For years, Mr. Ghasemi appears to have gone virtually unchecked as he normalized the practice of committing to multi-billion-dollar projects without securing offtake partners—an uncharacteristically risky strategy for an industrial gas company—leading to billions of shareholder value destruction in the process. It was no surprise, then, to see Air Products' share price respond favorably to the prospect of a shareholder-driven change in leadership and strategy, nor was it a surprise to see the share price subsequently give back a substantial portion of its gains relative to peers and the broader market as it became clear that the Board was determined to resist value-enhancing change.¹

Holding a CEO accountable for their performance and planning for their succession are among the most important responsibilities of any Board. Indeed, the Company's Corporate Governance Guidelines list succession first among the Board's functions, specifying that the Board is responsible for "selecting, evaluating, compensating and planning for the succession of the CEO."² This Board is failing at its core responsibilities, which, in our view, is a direct contributor to the substantial underperformance in the Company's shares over a multi-year period.

Failed Succession Process Contributes to Longstanding Underperformance

In our meeting with members of the Board in October 2024, and in materials we delivered to the Board before that meeting, we expressed our grave concern with the Company's CEO succession process.

First, the Board appears to have initially ceded control of the Company's succession process to the Company's current CEO, Seifi Ghasemi. In August 2024, Mr. Ghasemi, indicated that he—not the Board—was undertaking succession planning: "I have decided to bring into the company [my]… successor." As if to underscore the point, he added, "I have started this process."³ Worse still, Mr. Ghasemi characterized his leading role as good governance.⁴

Second, the Board has failed to provide a clear timeline for transitioning the CEO role (and for Mr. Ghasemi's retirement)—which is particularly concerning given Mr. Ghasemi's age and his Board-approved evergreen employment contract. Despite being the second-oldest CEO in the S&P 500 (and oldest without a named successor), Mr. Ghasemi made clear that a leadership transition was not imminent, stating that he "fully intend[ed] to continue leading Air Products"⁵ and that a leadership transition would occur only "if something unexpected were to happen"⁶ to him.

The Board, not Mr. Ghasemi, should have firm and direct control of this process and its timing. That is why, in our meeting in October, we urged the Board to take a central role by publicly disclosing its approach and timeline for CEO succession. Nearly three months have gone by since our meeting and no such details have been disclosed.

The Board Has Continued to Give Shareholders Inadequate Information Regarding Succession

In its 64-page investor presentation released in conjunction with the ongoing proxy contest, the Company devoted just a single slide to the topic of CEO succession. And while the Company has indicated that it "anticipates" announcing a "new President" no later than March 31, 2025, the Company still has not provided a timeline for appointing a new CEO or for Mr. Ghasemi's retirement.

Shareholders should not have to wait until after casting their votes at the Annual Meeting to learn when the Board intends to name a new CEO and whether the Board intends for Mr. Ghasemi to remain on the Board (e.g., as Executive Chairman) or fully retire. Indeed, despite the brief attention given to this topic in the Company's presentation, future leadership of the Company and the process by which the Board will identify and recruit that new leader is the key issue in our view for shareholders to consider as they cast their ballots. Shareholders should have been given ample time before the Annual Meeting to evaluate the CEO candidate and succession timeline proposed by the Board and to make an informed judgment. 

Path Forward Requires Substantial Board and Leadership Change

It appears to us that the incumbent directors have failed to develop, oversee, and communicate a timely and appropriate succession process and should not be entrusted to oversee this critical function. There is no doubt that the timing and selection of a new executive leader will have profound implications for the Company, its strategy, and its capital allocation going forward. Mr. Ghasemi has been given too much authority, and the Board has remained too passive and abdicated its responsibility to shareholders.

Change in the Board's composition, including Mr. Ghasemi's retirement from it, is urgently needed to ensure the Board properly fulfills this most important function.

The status quo, in our view, exposes shareholders to the risk of continued lapses in oversight, a protracted leadership transition, and the suboptimal selection of a successor all of which will likely lead to continued share price underperformance.

Therefore, we intend to support change in the Board's composition at Air Products' 2025 Annual Meeting.

Best Regards,

Edwin Jager
Managing Director
D. E. Shaw & Co., L.P.

Michael O'Mary
Managing Director
D. E. Shaw & Co., L.P.

About the D. E. Shaw Group

The D. E. Shaw group is a global investment and technology development firm with more than $65 billion in investment capital as of December 1, 2024, and offices in North America, Europe, and Asia. Since our founding in 1988, our firm has earned a reputation for successful investing based on innovation, careful risk management, and the quality and depth of our staff. We have a significant presence in the world's capital markets, investing in a wide range of companies and financial instruments in both developed and developing economies. For more information, please visit www.deshaw.com. 

This letter reflects the opinions of D. E. Shaw & Co., L.P. ("DESCO LP") on behalf of certain investment funds managed or advised by it that currently beneficially own, or otherwise have an economic interest in, shares of Air Products and Chemicals, Inc. (the "Company" or "APD"). This letter is for informational purposes only and does not constitute investment advice or convey an offer or solicitation of any type with respect to any securities or other financial products. The views expressed in this letter are expressed as of the date hereof and are based on publicly available information and DESCO LP's analyses. This letter contains statements reflecting DESCO LP's opinions and beliefs with respect to the Company and its business based on DESCO LP's research, analysis, and experience; all such statements are based on DESCO LP's opinion and belief, whether or not those statements are expressly so qualified. DESCO LP acknowledges that the Company may possess information that could lead the Company to disagree with DESCO LP's views and/or analyses. Nothing contained in this letter may be relied upon as a guarantee, promise, assurance, or representation as to future events. The investment funds managed or advised by DESCO LP are in the business of trading (i.e., buying and selling) securities, and it is expected that they will from time to time engage in transactions that result in changes to their beneficial and/or economic interest in the Company.

Media Contact
Prosek Partners
Brian Schaffer / Kiki Tarkhan
[email protected] 

¹Air Products' share price has underperformed industrial gas peer companies and the broader market by 6% and 12%, respectively, in just over a month since Air Products filed its preliminary proxy materials recommending against shareholder board nominees.
²See Air Products and Chemicals, Inc. Corporate Governance Guidelines, Amended February 3, 2022.
³Source: Air Products and Chemicals Q3 2024 Earnings Call transcript, August 1, 2024.
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SOURCE The D.E. Shaw Group