The Scoop
An activist investor’s nominee to the board of Air Products allegedly gave secret information to a friend about the 2014 sale of Covidien, where he was a director, according to the testimony of a man convicted of insider trading on the deal.
Dennis Reilley, whom hedge fund Mantle Ridge has put forward for the Air Products board, is identified in court records as “D.R.,” a board member at medical device maker Covidien, DuPont, Marathon Oil, and Dow.
His friend and neighbor said in court during his 2019 proceedings that “D.R.” regularly sent him nonpublic information gleaned from role on all three boards, forwarded internal emails, and tipped him off in 2014 to Covidien’s $43 billion sale to Medtronic, but told him not to trade on it. The man pleaded guilty in 2019 to insider trading and received two years of probation.
Reilley was never charged with wrongdoing.
“Mr. Reilley is an industry legend and author of what is widely seen as the gold-standard model for performance in the industrial gas industry – a model that [Air Products CEO] Seifi Ghasemi has desperately chased, but fallen far short of throughout his career,” a spokesman for Mantle Ridge and Reilley said.
Air Products, one of the largest providers of industrial gases with a $69 billion market value, declined to comment.
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Liz’s view
Even by the rising standards of activist nominees over the years, Reilley’s blue-chip credentials stand out. He was CEO of Praxair, a direct rival to Air Products, and Mantle Ridge rightly calls him “the architect of Praxair’s best-in-class model,” which led the industry before the company was sold in 2018 to a European rival, Linde. And he’s been a board member at seven S&P 500 companies.
But this will be disqualifying in many investors’ eyes, and it’s hard to see how Mantle Ridge — which says it knew about the allegations before it nominated Reilley — got comfortable.
The View From Mantle Ridge
“This sad effort to tarnish Mr. Reilley’s reputation further exposes how fearful Mr. Ghasemi and his board are of the coming change, and how the ensuing positive inflection in the business will reveal their shortcomings,” the spokesman said in a statement.
Air Products investors “deserve a robust discussion on the relative merits of the board candidates up for election and the best way to create long-term, sustainable value — including through long overdue succession to leadership,” he said.