Bill Ackman, founder and chief executive officer of Pershing Square Capital Management estimated that the stock price of Air Products & Chemicals, Inc. (NYSE:APD) will double over the next three years if the industrial gas producer appoints the right CEO.
“This is a 200-plus-dollar stock over the next three years with new management,” said Ackman during the Harbor Investment Conference in New York. He emphasized that shares of Air Products & Chemicals, Inc. (NYSE:APD) are fairly valued, and it comes with a “free option on the company selecting a great CEO.”
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Air Products CEO agreed to retire
In September last year, John E. McGlade, chairman and CEO of Air Products & Chemicals, Inc. (NYSE:APD) announced that he will retire as CEO by June this year. He is planning to stay as chairman of the board for short time to assist in the smooth transition of responsibilities to the new chief executive.
Ackman is anticipating that Air Products & Chemicals, Inc. (NYSE:APD) will soon be able to find the appropriate executive who will replace McGlade. He said the search should conclude in the “short term.”
According to Reuters, one of the challenges that will be faced by the McGlade’s successor is to change the deeply rooted top-down and bureaucratic corporate culture of Air Products & Chemicals, Inc. (NYSE:APD), which hurt its market share and margins compared with its peers in the industry.
Ackman could influence CEO search
“The risk at Air Products is whether or not they are going to choose the right CEO,” said Ackman. He added that he is not a member of the board of Air Products & Chemicals, Inc. (NYSE:APD), thus he does not have formal authority to say who should be appointed as the next CEO of the company.
Pershing Square Capital Management is the largest shareholder of Air Products & Chemicals, Inc. (NYSE:APD) with a 9.7% stake. The activist hedge fund has significant influence in the CEO search despite having no formal authority in the decision making. Ackman said, “No one would be willing to take the job without having the biggest shareholder on their side.”
Air Products & Chemicals, Inc. (NYSE:APD) appointed three new independent directors last September. Pershing Square Capital Management supported those changes, and the activist hedge fund will support the directors nominated by the company during its 2014 shareholders meeting.
The company engaged the services of Heidrick & Struggles, an executive search firm to look for qualified candidates who will replace its board of directors reaching their retirement age. Air Products & Chemicals, Inc. (NYSE:APD) hired the firm before the activist hedge fund revealed its stake in the company.