The D. E. Shaw Group Calls for Air Products and Chemicals to Address Longstanding Underperformance

The D. E. Shaw Group, a prominent global investment and technology development firm, has recently sent a letter to the Board of Directors at Air Products and Chemicals (APD), urging the company to address its longstanding underperformance and implement necessary changes to drive superior returns for shareholders. Funds advised by D. E. Shaw & Co., L.P. hold a significant economic position in APD, underscoring the group's commitment to the company's future success.


APD has consistently failed to meet its own expectations for organic revenue growth, missing the 7%-8% benchmark in each of the last six years. Additionally, the company has experienced surprising profit margin declines while information services peers expanded margins by well over 100 basis points annually. This operational underperformance, coupled with misguided capital allocation and suboptimal business configuration, has led to persistent share price underperformance for a decade.


The D. E. Shaw Group believes that APD can significantly improve its performance by positioning itself as a standalone insurance-focused business, committing to organic growth acceleration and profit margin expansion within that business, and implementing credible Board oversight. By doing so, APD's stock price could appreciate by over 70%, equating to more than $20 billion of value creation for shareholders.

To achieve these goals, APD should consider the following strategic moves:

1. Divest non-core businesses: APD should focus on its core operations by divesting non-core businesses that have diluted the quality of its insurance assets and reduced its premium valuation.
2. Optimize capital expenditure: APD should optimize its capital expenditure to drive organic revenue growth and margin expansion, ensuring that each dollar of capital is allocated effectively.
3. Strengthen competitive position: APD should pursue strategic partnerships or acquisitions to strengthen its competitive position in the industry, further driving growth and enhancing shareholder value.
4. Align management incentives: APD should better align management incentives with shareholder interests to improve capital allocation and ensure that the company's strategic objectives are met.

By addressing these areas, APD can effectively tackle its longstanding underperformance and create significant value for its shareholders. The D. E. Shaw Group's call for change highlights the importance of strategic refocusing, operational efficiency, and effective governance in driving long-term success for the company.