A Delaware court declined on Friday to disqualify a law firm that Air Products and Chemicals Inc
As part of its bid, Allentown, Pennsylvania-based Air Products is using the services of Cravath, Swaine & Moore LLP, a law firm that has done work in the past for Airgas.
That prompted Airgas to sue, hoping to persuade a judge that Cravath has a conflict of interest by representing Air Products.
Airgas has rejected Air Products' takeover offer.
Cravath has worked consistently for Air Products for at least 43 years.
It also worked for Airgas from May 2001 until October 2009, when it decided it could no longer work for Airgas in light of Air Products' brewing offer.
Calling disqualification a Draconian measure, Delaware Chancellor William Chandler III said he had seen no evidence Cravath would use any information from its time representing Airgas in the buyout case.
Airgas here has not demonstrated ... persuasively, let alone clearly and convincingly, that it would be disadvantaged by the presence of its former counsel as advocate for its opponent, Air Products, Chandler said in his ruling.
Airgas said it was disappointed in the ruling, and that is continues to feel Air Product's offer grossly undervalues its assets.
We are prepared to take all necessary steps to preserve and protect stockholder value, the Radnor, Pennsylvania-based company said.
Air Products said the entire suit against Cravath was a side show to draw attention away from the bid, and that it remains committed to completing the deal, worth about $60 per share cash.
Rather than acting as responsible fiduciaries and meeting with us to discuss our offer, the Airgas Board has continued to permit management to 'just say no' to our compelling offer while offering only the vague promise that Airgas shareholders will receive greater value 'simply with the passage of time,' Air Products said in a statement.
New York-based Cravath said the court's ruling speaks for itself, and declined to comment further.
On the New York Stock Exchange, Air Products rose 2.1 percent to $73.42 while Airgas fell 0.2 percent to $65.71 shortly before the close.
(Reporting by Ernest Scheyder; Editing by Richard Chang)