A high-profile activist investment firm has reportedly built a large stake in Air Products & Chemicals (NYSE: APD) and plans to push for changes at the industrial gas manufacturer. Investors are excited about the news, which came out Friday afternoon. As of 11 a.m. ET Monday, Air Products shares were up by 8% from Friday's close.
Questions about succession, capital allocation
Air Products distributes essential gases to industrial and medical users. Over the past three years, the company's stock has significantly underperformed rival Linde, causing some restlessness among shareholders.
Activist firm Mantle Ridge has amassed a more than $1 billion stake in the company, according to The Wall Street Journal, and reportedly has ideas about how to improve its strategy and capital allocation. It also intends to press the board on succession planning for CEO Seifi Ghasemi.
Ghasemi, 80, is one of the oldest CEOs in the S&P 500, but succession plans at Air Products were thrown into question earlier this year when Chief Operating Officer Samir Serhan resigned.
Is Air Products stock a buy?
Mantle Ridge is a well-respected fund, with notable past successes including CSX. There is a clear opportunity here, given the essential nature of Air Products' gasses for a variety of industries.
But change takes time, and it is in the early stages of what could be a prolonged turnaround. Investors considering buying in might want to wait to see if this day-one enthusiasm fades in the trading sessions to come. If it does, they'd have the opportunity to pick up shares of Air Products at prices more similar to what Mantle Ridge paid when building its stake.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Linde. The Motley Fool has a disclosure policy.
