Air Products and Chemicals(APD) CNBC·2024-10-19 11:49Company Overview - Air Products and Chemicals is an industrial gases company focused on energy, environmental, and emerging markets, providing essential industrial gases and related equipment across various industries [1] - The company operates in approximately 50 countries and is involved in clean hydrogen projects to support the transition to low- and zero-carbon energy [1] Business Model and Stability - Air Products' industrial gas business is characterized as extremely stable and low risk, functioning similarly to a risk-free, inflation-protected bond [3] - The company enters into long-term "take or pay" contracts with customers, achieving renewal rates exceeding 95%, which provides a stable revenue stream [3] - The business model is immune to economic cycles, with contracts that are inflation-protected and significant barriers to entry in the oligopolistic industry [3] Recent Strategic Shifts - The company has shifted focus from its core industrial gas business to more speculative investments in clean hydrogen projects, missing out on industry consolidation [4] - Air Products plans to invest nearly 1 billion stake in Air Products and has publicly engaged with the company to propose a seven-point plan aimed at improving value [7][8] - The plan includes urging the company to secure offtake agreements for large projects, limit annual capex, and repurchase discounted shares [8] - D.E. Shaw also emphasizes the need for a clear CEO succession plan and improved corporate governance, particularly in light of CEO Seifi Ghasemi's long tenure and compensation [9] Competitive Landscape - Peers like Linde and Air Liquide have successfully executed hydrogen projects with secured offtake agreements, contrasting with Air Products' current strategy [5] - The presence of multiple activist investors, including Mantle Ridge, indicates a growing concern among shareholders regarding capital allocation and governance issues [11][12]