Airgas Inc, the largest distributor of industrial, medical, and specialty gases in the US, has rejected a $5.1 billion acquisition bid from larger rival Air Products & Chemicals, Inc as, Airgas said, the offer significantly undervalued the company.

Allentown, Pennsylvania-based Air Products, a global supplier of industrial gases and equipment, made an unsolicited bid last week to acquire smaller rival Airgas Inc for $5.1 billion, in cash, to create one of the world's leading integrated industrial gas companies. (See: Air Products launches $5.1 billion unsolicited bid for Airgas)

The total value of the transaction would be approximately $7.0 billion, including $5.1 billion of equity and $1.9 billon of Airgas' assumed debt.

Its offer valued Airgas at $60.00 per share, a 38-per cent premium based on last Thursday's closing price of $43.53 and 18 per cent above Airgas' 52-week high Airgas's chairman and chief executive Peter McCausland said in a letter written yesterday to his Air Products counterpart.

"It is a terrible time for Airgas stockholders to sell their company. We can certainly understand why Air Products would find an opportunistic acquisition of Airgas to be appealing to Air Products and its stockholders. However, it makes no sense for the Airgas stockholders to transfer the future value of Airgas to Air Products at a bargain basement price," he said.

McCausland, who holds around 9.5 per cent of the company's stock, said that Airgas' stock has consistently and significantly outperformed Air Products' stock, having risen 75 per cent over the last five years, whereas Air Products' stock had risen 25 per cent.

Airgas' stock had risen 471 per cent over the last ten years compared with 139 per cent for Air Products' stock.