Air Products and Chemicals, Inc, a global supplier of industrial gases and equipment yesterday made an unsolicited bid to acquire smaller rival Airgas Inc. for $5.1 billion in cash to create one of the world's leading integrated industrial gas companies.

Air Products had been engaged in a friendly takeover discussions with Airgas for the past four months, but the board of Airgas rejected two of its written offers and even refused to discuss its offer for a merger, said the Allentown, Pennsylvania-based Air Products chairman in a letter yesterday to his counterpart in Airgas.

Air Products is offering Radnor, Pennsylvania-based Air Products $60.00 per share to Airgas shareholders, a 38-per cent premium based on Thursday's closing price of $43.53 and 18 per cent above Airgas' 52-week high.

Air Products says it is willing to launch a hostile bid if this offer is once again rejected by the Airgas board, including staging a proxy fight for gaining control of the company.

Air Products, the world's largest hydrogen producer said that the total value of the transaction is approximately $7.0 billion, including $5.1 billion of equity and $1.9 billon of Airgas'assumed debt.

The merger of the two companies would bring substantial cost synergies of $250 million by 2012, and will be able to accelerate growth both in the domestic and international market by leveraging Airgas' extensive US sales force and packaged gases skills.

Air Products has a profitable packaged gas business in Europe and other key international markets, but is a small player in the domestic market, where Airgas is the market leader. Air Products believes that through the merger Airgas would be well positioned to achieve higher growth than it could achieve on a stand-alone basis.

The merger would also create the largest industrial gas company in North America and one of the largest in the world in packaged gases, liquid bulk and tonnage.

Air Products, which had revenues of $8.3 billion in fiscal 2009 is a supplier of industrial, energy, technology and healthcare markets worldwide with a unique portfolio of atmospheric gases, process and specialty gases, performance materials, and equipment and services.

Founded in 1940, with a market capitalisation about $16 billion, Air Products is a key player in semiconductor materials, refinery hydrogen, home healthcare services, natural gas liquefaction, and advanced coatings and adhesives in key growth markets with operations in over 40 countries employing 18,900 people globally.

Airgas, with a market capitalisation of approximately $3.6 billion, revenues of $4.349 billion in 2008 and employing 14,000 people, is the largest seller of industrial medical and specialty gases delivered in package or cylinders in the US.

It is also the third-largest seller of safety products and the largest producer of nitrous oxide and dry ice in the US.

Although Air Products believes it can lure enough Airgas shareholders, it will first have to win over Airgas' biggest shareholder, Peter McCausland, the founder, chairman and president of Airgas, who holds around 9.5 per cent of the company's stake.

(See: full text of of the most recent letter from Air Products to Airgas)