Prosperity Begins with Integrity
Effecting Board Refreshment
Over its first 73 storied years, Air Products’ employees, Board, and leadership protected this great company’s reputation and culture of integrity and honor. The current Board has failed to steward and protect this culture. And as the Company’s dismal performance shows, APD’s ability to retain, attract and motivate solid leadership, and to prosper, has suffered commensurately.
Mr. Ghasemi declares he will defeat any efforts to remove him, and has stated “As long as I’m vertical, I’m going to be Chairman of Air Products, and I mean that.”
But this Company belongs to the shareholders, not to Mr. Ghasemi. By effecting the Board refreshment we propose, we the shareholders can restore the Company’s integrity so it can return to prosperity. We must do so. For the employees, our partners, our customers, ourselves, and to restore honor to the Company’s legacy.
APD’s Misleading Claims About Its Performance
APD Claim
“Most profitable industrial gas company in the world”
Reality
- Return on Invested Capital (ROIC) is the single most important performance metric; as it deteriorated to industry-worst – half of best peer’s, despite considerably higher risk – it’s been either downplayed or omitted
- “Adjusting” EBITDA margin by adding JV income without associated revenue renders it meaningless, exaggerated, and misleading
- EBIT margin meaningfully trails best peer’s
APD Claim
“~2,000bps of margin expansion since 2014”
Reality
- Fairly calculated, EBIT margins expanded only roughly half as much
APD Claim
“~10% EPS CAGR” from 2014-2025
Reality
- Fairly calculated, EPS CAGR is just ~8%; over the period, this accumulates to a 50% overstatement of growth
APD Claim
APD’s “strong track record in large project execution… demonstrates [its] ability to deliver reliably on our investments.”
Reality
- Unprecedented-in-industry cost overruns and project delays, driven by poor underwriting and risk assessment, and poor execution thereafter
- Leadership and talent exodus severely compromises ability to improve execution
APD Claim
APD has executed “$5 billion in investments in large projects… with overall returns across these projects exceeding our target.”
Reality
- Estimated return on last 5 years of growth capex is only ~8%, below stated target, as larger onstream projects have produced only mediocre unlevered returns
APD’s Misleading Claims About Its Strategy
APD Claim
Pursuit of clean hydrogen opportunities necessitates taking risk far in excess of core business parameters
Reality
- Properly led, the Company can pursue clean hydrogen within the same low-risk parameters of the core – as peers do
- The excessive risk is not necessary, it’s just poor structuring and judgment
APD Claim
Supposed “first mover advantage” benefits cited to justify accepting excessive risks of speculative projects
Reality
- Supposed “advantages” are speculative at best
- Recklessness of approach underscored by unwillingness – to this day – of even natural customers to fully accept offtake risk
- Delays and overruns from overscoping caused still further self-inflicted damage
APD Claim
Speculative projects will earn returns that justify excessive risk
Reality
- Claimed returns are misleading, merely mediocre, and insufficient given risks taken; ultimate returns remain questionable, and unlikely ever attractive
- Far less attractive than core-like projects
APD’s Misleading Claims about Its Projects
APD Claim
35% of the controversial and high-risk NEOM project has been de-risked with a “take-or-pay” “offtake” agreement with TotalEnergies
Reality
- Publicly pressed months later for explicit confirmation that de-risk claims were true, CEO qualified, claiming “we are continuing to negotiate the details”, and General Counsel deflected enquiry
APD Claim
The NEOM project, under the terms of the TotalEnergies “offtake” agreement, would produce attractive 20% returns
Reality
- The Company pulled its “20% return” claim from its preliminary proxy statement. Why?
- Is it an offtake without “outs”?
- Was the return levered or unlevered?
- Did it account for time value of money?
APD Claim
World Energy: “attractive returns secured” and relationship is “business as usual with customer”
Reality
- Not “Secured”: partner’s financial distress means returns are not “secured” by anyone
- Not “Business as Usual”: The Company’s obfuscated $270mm, 15% lifeline loan to partner defaulted within months
- Not “Attractive”: Enormous cost and time overruns materially compromise any potential return; $2bn sunk, yet still lacks permits and is now paused; writedowns anticipated
APD’s Misleading Claims about Mantle Ridge’s Engagement, Proposed Leadership Solution, and Track Record
Air Products has distorted Mantle Ridge’s engagement and record. Air Products’ Board and CEO knew these statements were distortions, as we had discussed many of these items during our in-person interaction with the Board sub-committee, and they sought no clarifications or engagement on any matters. We had repeatedly reiterated these messages in our written letters to them, subsequently made public in our proxy materials. APD advanced these false narratives nonetheless in an attempt to avoid engagement on the Board reset and CEO replacement process shareholders deserve.
Misleading Claims About Mantle Ridge’s Board Engagement
APD Claim
- Mantle Ridge was “seeking control, including to replace all nine directors”
Reality
- MR sought collaboration on a reconstituted board, not control; regarding directors, MR sought to collaborate on a mix of new and incumbent directors
APD Claim
- Mantle Ridge demanded to “unilaterally dictate all directors”
Reality
- MR sought a collaborative discussion on independent nominees, including new directors proposed by MR and APD
APD Claim
- “None [of the Mantle Ridge nominees] were as strong as the Company’s existing directors”
Reality
- MR nominated superbly qualified candidates with demonstrated excellence in highly relevant fields
- APD’s Board never attempted to speak with or meet any of MR’s nominees
APD Claim
- Mantle Ridge demanded “to unilaterally dictate the composition of…senior management”
Reality
- MR sought a genuine succession process, not perpetuation of Mr. Ghasemi’s control, including consideration of Eduardo Menezes, a senior executive from the best-in-class industrial gas company
Distortions About Mantle Ridge’s Leadership Proposal
APD Claim
- Dennis Reilley’s knowledge and capabilities are stale as he has been retired for many years
Reality
- Mr. Reilley is the “architect” of the best-in-class peer’s playbook, which has delivered unparalleled value for shareholders and is still used today
- Mr. Reilley also has decades of relevant board experience
APD Claim
- Dennis Reilley “appears alarmingly unfit to lead Air Products or any public company”
Reality
- Mr. Reilley has never even been charged with any impropriety despite APD insinuating otherwise
- The primary reason Mr. Reilley stepped off his prior boards was due to his battle with lymphoma (a very treatable and curable cancer). Fortunately, today he is fully healthy and cancer free
APD Claim
- Eduardo Menezes is “insufficiently experienced” and has “no significant employment experience outside of his tenure at Linde”
Reality
- Mr. Menezes is an exceptional industrial gas executive with a clear record of success driving results at the best-in-class peer; having over three decades of success in this unique industry is precisely why he is such a credible CEO candidate
- At various stages, Mr. Menezes has been the senior-most operator in every region of the world for Praxair/Linde
- After Linde’s merger with Praxair, as EVP of EMEA, a segment with 18,000 employees and ~$8bn of sales, delivered ~550bps of margin improvement in just three years by applying the Praxair model to legacy Linde assets
- Most highly compensated executive at Praxair (excluding CEO) prior to the merger with Linde
Misleading Claims About Mantle Ridge’s Interests and Past Performance
APD Claim
- Mantle Ridge’s track record is poor; Mantle Ridge destroyed value for shareholders
Reality
- MR’s track record is strong; all prior investments delivered Total Shareholder Return outperformance vs. relevant industry peers
APD attempts to grossly distort MR’s record by (i) selecting misleading start dates that ignore the substantial increase in share price due to public confirmation of MR’s involvement, and (ii) ignoring comparisons to relevant peers
APD Claim
- Mantle Ridge has sold down its position in Air Products
Reality
- Mantle Ridge is a top ten shareholder, owning 4.1 million shares of common stock, representing 1.8% of shares outstanding
- Mantle Ridge has not sold any APD shares or returned any capital to Mantle Ridge’s investors
- Reduction in notional exposure, as reported in Air Products’ proxy statement, was solely a function of expiration of options and their net settlement into common stock at pre-defined dates (assuring Mantle Ridge’s entire position is votable common shares in advance of record date)
APD Claim
- Mantle Ridge is pursuing a “short-term agenda”
Reality
- Mantle Ridge is a long-term, aligned owner and steward
- Mantle Ridge has a permanent ownership mentality – indefinite vehicle life structure allows Mantle Ridge to maintain its equity interest — the shares it purchased and the shares received as compensation from its investors — indefinitely
World Energy: What Air Products Knew vs.
What Air Products was Doing and Telling Shareholders
April 2022
World Energy Developments
Project announced
APD investors immediately voice skepticism regarding World Energy’s credit quality
APD Commentary
“…the return on this project will be better than the general guideline that we have given you.”
– APD CEO, 4/22/22
“…if we don’t get paid by World Energy, we take over the facility.”
– APD CEO, 4/22/22
October 2022
World Energy Developments
Waste management firm sues World Energy for $47k of unpaid invoices1
May – June 2023
World Energy Developments
Construction firm sues World Energy for $340k of unpaid invoices and says World Energy claimed it was waiting on a “round of financing”2
APD Commentary
“…that project is moving forward as planned.”
– APD CEO, 5/9/23
“…we are pretty excited about that project.”
– APD CEO, 6/8/23
APD Actions
APD agrees to acquire World Energy facility “in response to mounting challenges facing the Project”5
APD Disclosure
May 2023 – Jan. 2024
No disclosure of World Energy’s financial distress, APD’s facility acquisition or APD’s loan to World Energy
November 2023
World Energy Developments
Media reports that judge in permit lawsuit will likely halt construction3
APD Actions
APD lends World Energy $270mm at 15% interest rate; funds used to repay existing debt5
APD Disclosure
Nov. 2023 – Nov. 2024
APD was asked about World Energy 5 times and never mentioned the loan or defaults
January 2024
World Energy Developments
Judge issues an order halting construction4
February 2024
World Energy Developments
World Energy stops paying interest, monthly operating and fixed fees to APD5
APD Commentary
“Attractive returns secured by new agreements.”
– APD Presentation
“The return on the project is fixed. We are going to get a return on the capital that we spent, no matter what the capital is.”
– APD CEO, 2/5/24
APD Actions
10Q discloses World Energy acquisition and loan, refers to them as a “financing receivable”
APD Disclosure
Feb. 2024 – Oct. 2024
No disclosure of World Energy’s defaults until lawsuit filed against World Energy’s guarantor
October – December 2024
APD Commentary
“…the relationship within Air Products and World Energy is excellent.”
– APD CEO, 11/7/24
“…when the project is built, whatever the cost of capital, whatever it is, Air Products would get 11% return on it.”
– APD CEO, 12/5/24
APD Actions
Air Products v. Risley: APD sues World Energy’s guarantor to collect unpaid interest 5
APD Disclosure
Feb. 2024 – Oct. 2024
No disclosure of World Energy’s defaults until lawsuit filed against World Energy’s guarantor
1 Source: Waste Management National Services, Inc. vs. West Coast Environmental Solutions, Inc., et al., 10/17/2022.
2Source: T.R.S.C., Inc. vs. Altair Paramount, LLC, 9/8/2023.
3Source: “Judge inclined to halt Los Angeles biofuel refinery expansion, siding with environmental groups,” Courthouse News Service, 11/17/2023.
4Source: Communities for a Better Environment, et al., vs. City of Paramount, et al.,5/16/2022.
5Source: Complaint filed in Air Products and Chemicals, Inc. v. John Carter Risley, 10/22/2024. Purchase and Sale Agreement to acquire the facility was dated 5/4/2023; sale and loan transactions closed November 2023.
6Source: Company public filings. Includes project-related spending, open purchase commitments, and the financing receivable associated with the facility acquisition and loan to World Energy.
Corporate Fraud
Cultural issues have arisen elsewhere under Mr. Ghasemi’s leadership:
A 2021 arbitration panel found that the company Mr. Ghasemi previously led committed a large-scale fraud on his watch
- In 2014, Rockwood Holdings sold its TiO2 business to Huntsman International for $1.1bn, representing 20% of Rockwood’s market cap at the time7
- Mr. Ghasemi – Chairman and CEO when the deal was negotiated and signed, and Chairman when it closed – received a $2.6 million bonus contingent upon the transaction’s closing8
- Huntsman eventually sued Rockwood, alleging fraud9
- In 2021, an arbitration panel comprising three former federal judges found that Rockwood had engaged in fraud in the sale, and the matter was settled for a staggering $665 million in damages, a full 60% of the total sale price10
7Item 1.01. Entry into a Material Definitive Agreement, Huntsman Corp. – Huntsman Int’l LLC, Current Report (Form 8-K), (Sept. 20, 2013) at 2.
8Executive Compensation – Annual Cash Incentives, Rockwood Holdings, Inc., Proxy Statement (Schedule 14A) (Mar. 28, 2014) at 53–54.
9Complaint, Huntsman Int’l LLC v. Albemarle Corp., index no. 650672/2017 (N.Y. Sup. Ct. Feb. 6, 2017) (Doc. No. 001).
10Item 53. Legal Proceedings – Rockwood Litigation, Huntsman Corp. – Huntsman Int’l LLC, Annual Report (Form 10-K), (Feb. 15, 2022) at 26.