EXCLUSIVE-Mantle Ridge nominates new board for Air Products, pushes for new CEO

By Svea Herbst-Bayliss

NEW YORK, Nov 19 (Reuters) - Mantle Ridge has nominated nine directors to replace the board at Air Products and Chemicals APD.N, with the activist investor pushing the industrial gases maker to name a new CEO, shift its capital allocation and abandon riskier projects.

The nominees include Paul Hilal, Mantle Ridge's founder and CEO, and Dennis Reilley a former executive at rival gases maker Linde who has been identified for a possible leadership role, according to documents seen by Reuters and sources familiar with the matter.

The others are executives with experience in energy, decarbonization, finance and mergers and acquisitions who have served on public company boards and are independent.

Mantle Ridge wants to replace the company's CEO and has named Eduardo Menezes, a former executive vice president for Europe, Middle East and Africa at Linde, as a suitable candidate. Menezes is not one of Mantle Ridge's board candidates.

Air Products did not immediately respond to a request for comment and has not commented previously on Mantle Ridge's campaign.

Mantle Ridge's nominations come one day after Air Products said it would replace two directors retiring at next year's annual meeting.

One of the company's newcomers will be Bhavesh "Bob" Patel, a former CEO of chemical companies W.R. Grace and LyondellBasell LYB.N, who has been mentioned as a possible replacement for Air Products' current chief executive officer.

Air Products is valued at $73 billion, and its stock price has climbed 15% since Mantle Ridge's roughly $1 billion stake in the company was revealed in early October. A second activist investor, D.E. Shaw, last month signaled it is supporting Mantle Ridge's efforts instead of pressing ahead with its own board challenge.

Mantle Ridge is pushing the company to improve its capital allocation and to find someone to replace Seifi Ghasemi, the octogenarian chief who has been CEO for a decade.

Barclays analysts wrote on Monday that investors would likely prefer Mantle Ridge nominee Dennis Reilley as board chairman and Eduardo Menezes as CEO, given the pair's experience at an industrial gases company. The report also says Patel has a solid track record running commodity and specialty chemical businesses.

Menezes did not respond to a request for comment.

For Hilal, the campaign at Air Products is the second time he is pushing for changes at the Allentown, Pennsylvania-headquartered company. As a partner at Bill Ackman's Pershing Square Capital Management, Hilal in 2014 helped identify Ghasemi as the company's CEO and put new directors on the board.

Investors will vote early next year on who will sit on the company's board unless the two sides reach a compromise beforehand. Last year's annual meeting took place in January.

Hilal often begins a proxy fight by nominating a large number of board candidates, sending a powerful warning to the company, and then whittles his list down later as he and the company hold discussions. Mantle Ridge has told the company that even though it has nominated nine directors, it remains ready to engage in a collaborative process, the sources said.

Since spinning out of Pershing Square to launch his own firm, Hilal has invested in a small number of companies, including CSX CSX.O, $Aramark(ARMK-W)$ ARMK.N and Dollar Tree DLTR.O. At each company, he appointed new chief executives.

(Reporting by Svea Herbst-Bayliss; Editing by Sonali Paul)

((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters Messaging: svea.herbst.thomsonreuters.com@reuters.net))