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Change Began at Air Products Before Ackman Entered

As with a successful activist campaign with Canadian Pacific (CP), Pershing focused on board change, with the caveat that Ackman is now an independent director at the Canadian railway and could press additional change, while Pershing will have no direct representation on the board of Air Products.

"With a heightened focus on returns and efficiency, we believe APD has the potential to improve its performance over time to drive better returns that have been below peers for the past 5-6 years," John P. McNulty, a Credit Suisse analyst, wrote in a note to clients.

Even under outgoing CEO McGlade, Air Products was already in the process of reviewing certain business lines.

The company is expected to take restructuring charges of approximately $100 million to $150 million pretax, or $0.30 to $0.50 per share, in the fiscal fourth quarter, according to Bank of America Merrill Lynch analyst Kevin W. McCarthy. Commensurate cost savings could flow through Air Products earnings in the first quarter of 2014, the analyst said in a Thursday research note. McCarthy highlighted that Air Products could consider additional restructuring in its electronics business if cyclical headwinds remain.

"More detailed plans are expected," the analyst wrote, while rating shares 'underperform' as a result of a weak operating environment.

Air Products generated $9.6 billion in 2012 revenue, split between $3.7 billion in sales from its merchant gasses unit, $3.2 billion form its tonnage gases unit and $2.3 billion from its electronics business. The company also has an equipment and energy business that generated $420 million in 2012 sales.

The company faces the challenge of trying to convince investors such as Pershing Square that its management can execute on their guidance, even as some business lines, particularly those in Europe, suffer from weak macroeconomic fundamentals. On the flipside, if European markets revive, Air Products appears poised to recognize an over $3 billion backlog of long-term projects.

No source said they expected additional restructuring measures or strategy changes before a replacement is found for outgoing CEO McGlade.

For now, Pershing Square and Bill Ackman may have only needed a light touch to impart change that was already underway at Air Products. If cyclical conditions don't improve, Ackman has the opportunity to take a more active role. Pershing Square will have the ability to wage a proxy campaign in 2015 .

"In recent weeks, we have been delighted to get to know John and the rest of the board working with them on their mission of continuous improvement and long-term shareholder value creation. We look forward to a successful long-term partnership," Ackman said in a Thursday press release.

-- Written by Antoine Gara in New York.

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