2010-02-06 05:01:01.4 GMT

By Sophia Pearson and Zachary R. Mider
Feb. 6 (Bloomberg) — Cravath Swaine & Moore LLP, the 191-
year-old New York law firm, was sued by a former corporate
client claiming the firm had access to confidential information
while helping a rival prepare a takeover bid.
Airgas Inc., the Radnor, Pennsylvania-based distributor of
industrial gases, sued Cravath in state court in Philadelphia
yesterday. Earlier yesterday, Air Products & Chemicals Inc. made
public a $5.1 billion unsolicited takeover offer for Airgas
after suing its directors for allegedly ignoring the bid.
Airgas, founded and run by a former lawyer, Peter
McCausland, hired Cravath in 2001 and used it for at least 25
financing deals since then, Airgas said in its complaint. Ronald
Cami, a Cravath partner, notified Airgas last October that he
could no longer work for the company because of a conflict,
Airgas said.
That conflict, it later emerged, was Cravath’s advice to
Air Products, which earlier that month offered to buy Airgas.
After months of private exchanges, Air Products said it may try
to remove some of Airgas’s directors if they continue to reject
the bid.
Airgas officials, including McCausland, the chief executive
officer, violated their fiduciary duties to shareholders by
repeatedly refusing to consider the offer, Air Products said in
its complaint filed Feb. 4 in Delaware Chancery Court in
Wilmington. Air Products owns 1.5 million shares of Airgas.

‘Just Say No’

“This ‘just say no’ defensive posture is calculated to
entrench McCausland as chief executive and chairman and to
protect the other defendant directors’ positions in Airgas, at
the sacrifice of the unique and valuable opportunity offered to
Airgas’s shareholders,” Air Products said in the complaint.
Air Products, based in Allentown, Pennsylvania, is seeking
a court order compelling Radnor, Pennsylvania-based Airgas’s
directors to form a special committee of independent directors
to consider and negotiate the proposed transaction. The $60-a-
share bid followed two previous attempts that were rejected by
Airgas’s management, Air Products said yesterday in a statement.
Airgas rose $17.43, or 40 percent, to $60.96 in New York
Stock Exchange composite trading yesterday.
“Part of our reason for filing the lawsuit in Delaware was
to ask the courts to basically be shareholder friendly here and
not allow some of the anti-shareholder mechanisms that they have
in place to be implemented,” Air Products CEO John E. McGlade
said yesterday in a phone interview.
Airgas has a so-called poison-pill takeover defense,
according to Air Products’ complaint. Such defenses are designed
to make hostile takeovers too expensive by letting existing
shareholders buy stock at a discount when the bid is made.

Poison Pill

McGlade said Air Products is asking a Delaware judge to
block the poison pill.
The proposed combination would create a company with about
$13 billion in sales, replacing current U.S. market leader
Praxair Inc. and narrowing the gap on Air Liquide SA of France
and Germany’s Linde AG. Air Products would gain more than 1,100
sites that make and sell gases such as oxygen for hospitals,
argon for welding and carbon dioxide for beverages.
Airgas spokesman Jay Worley didn’t return a phone call
seeking comment on the Air Products complaint yesterday.
A Cravath team including partners James Woolery and Minh
Van Ngo has been advising Air Products on the unsolicited offer.
Cravath was the world’s sixth-biggest legal adviser on mergers
in 2009, according to Bloomberg data.
“The lawsuit is without merit. Beyond that we have no
comment,” Cravath said yesterday in a statement.

‘Non-Public Information’

In a letter to Cravath last November, Airgas’s general
counsel, Robert Young Jr., said he believed Cravath was in
possession of “material, non-public information” about Airgas
and asked the firm to stop working for Air Products.
Cravath partner Stuart Gold responded in a letter that “we
find nothing in our past representation of Airgas that would
require any consent from Airgas for Cravath to represent Air
Products in a transaction involving Airgas.” He said the work
for Airgas hadn’t involved “significant contact with your
senior management.”
Airgas is seeking a court order barring Cravath from
representing Air Products in addition to unspecified damages.
The suit is a rare public airing of a client’s grievances
against one of the nation’s biggest law firms. Last year, Dow
Chemical Co. sought to prevent Wachtell Lipton Rosen & Katz LLP
from representing Rohm & Haas Co. in a lawsuit over a stalled
$15 billion buyout because of previous work Wachtell did for
Dow.
A Delaware judge ruled that Wachtell, the seventh-biggest
merger adviser in 2009, could remain on the case.
The cases are Airgas Inc. v. Cravath, Swaine & Moore LLP,
ID100200857, Court of Common Pleas Philadelphia County
Pennsylvania, and Air Products & Chemicals Inc. v. Airgas Inc.,
CA5249, Delaware Chancery Court (Wilmington).

For Related News and Information:
Top Stories: TOP
Top legal stories: TLAW
Bloomberg legal resources: BLAW
Airgas News: ARG US CN
Air Products News: APD US CN

–With assistance from Jef Feeley in Wilmington, Delaware, and
Jack Kaskey in New York. Editors: Michael Hytha, Glenn
Holdcraft.

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