ANALYSIS-In Airgas bid, time is Air Products' enemy

* Less than 1 percent of Airgas shares tendered

* Higher offer may be needed

* Poison pill remains caveat

* Earnings for both companies out later in month

* Trial, Airgas shareholder meeting likely this fall

By Ernest Scheyder

NEW YORK, April 8 (Reuters) - Air Products and Chemicals Inc's chances for success in its hostile bid for Airgas Inc may be getting slimmer as each day ticks by, with shareholders and Wall Street seemingly content to let Airgas go it alone.

Both companies' quarterly earnings later this month will provide the latest read on growth potential, as the economy recovers, and Wall Street expects Airgas' profit for the fourth quarter ended March 31 to nearly mimic that of the same period last year.

The danger for Air Products is that the more time goes by, the longer Airgas has to prove that it can be independently lucrative. It also becomes harder for Air Products to attempt to elect its own slate to the Airgas board and abrogate a "poison pill" provision that prevents any one shareholder from amassing a stake larger than 15 percent.

"Because of this anti-takeover provision, time is (Air Products') greatest enemy," Morningstar analyst Basili Alukos said.

Radnor, Pennsylvania-based Airgas has a staggered board, and only three members come up for reelection each year.

Air Products went hostile in its bid for Airgas last February, offering $60 per share in cash. ID:nN22186622

At the time, Airgas shares had traded around $43, but they jumped after the offer and are now trading around $64.

Any shareholder wanting to gain a premium over the offer could simply sell in the open market today.

Last week Air Products said only 12,291 Airgas shares had been tendered in favor of its offer -- a measly one-tenth of one percent.

Air Products extended the deadline for the tender offer to June 4 without providing much of a reason. ID:nN01136618

"If more shares were tendered, you would know it was going to be a slam-dunk deal," Alembic Global Advisors analyst Hassan Ahmed told Reuters. "The fact that Airgas' share price is above the offer price basically could mean one of two things. Either you're just so comfortable, as a market, in the earnings growth power of Airgas, or the market has a view that the offer was a low-ball offer."

Air Products must decide whether or not to boost its bid to woo wary Airgas shareholders, and would likely have to top the current stock price. Ahmed said he believes the Airgas stock price has been kept high on hopes of a sweetened offer -- or a bidding war.

"A company like Praxair (Inc) could bid for Airgas and extract more synergies out of that deal than Air Products could," Ahmed said. "They could actually afford to put out a higher bid than Air Products."

Ahmed stressed that he does not know whether Praxair will bid. Praxair was not available for comment.

Airgas would give Radnor, Pennsylvania-based Air Products access to small packaged gas markets in North America.

Many analysts see that access as a key to growth in the industrial gases sector. Air Products sold its own packaged gas business, which markets canisters of oxygen and other gases to hospitals, retail stores and other locations, to Airgas in 2002. And even though it still supplies gas to Airgas, Air Products doesn't get the benefits of market penetration.

"Anyone who wants to get into the packaged gas business in the U.S., if they are hell-bent on getting into it, Airgas would be the right deal for them," Ahmed said.

Air Products is widely expected to put up a slate of directors for Airgas' board at Airgas' next shareholder meeting, which is expected to be held in September or October. and to try to get rid of the poison pill.

A lawsuit brought by dissident Airgas shareholders supporting the Air Products offer will likely be heard after the meeting, which a judge has said will probably end up as a "corporate plebiscite" on the offer. ID:nN18229119

Also adding to the drama is that Airgas founder and Chief Executive Peter McCausland is up for reelection to the board. There is a slight possibility that McCausland, who owns about 11 percent of Airgas shares, could lose his spot on the board to an Air Products nominee. (Reporting by Ernest Scheyder, editing by Gerald E. McCormick)