By Svea Herbst-Bayliss

NEW YORK (Reuters) – Hedge fund D.E. Shaw shifted course in its campaign for change at industrial gases company Air Products and Chemicals (NYSE:) and is now supporting a rival activist’s efforts instead of pressing ahead with its own board challenge, sources familiar with the matter said on Thursday.

D.E. Shaw no longer plans to nominate a slate of directors to the company’s board and will support the campaign launched by Mantle Ridge, the activist firm run by Paul Hilal, the people said.

The two hedge funds merged their efforts days after each said separately that the company needs new directors on the board, a succession plan for its octogenarian CEO, should allocate its capital differently and scale back on risky projects.

D.E. Shaw was concerned about Air Products’ sharp rise in capital expenditures and its bet on a clean hydrogen strategy, telling management that its recent decisions made it look more like a “high risk commodity trading business” instead of the “stable industrial gas infrastructure business” that it has historically operated.

It also told the company that changes could create over $25 billion in incremental equity value, translating into a 50% gain in the share price.

D.E. Shaw declined to comment.

Air Products’ stock price jumped 13% on news that there were two powerful investors pushing for changes at the company.

D.E. Shaw held discussions with Mantle Ridge over the last days and arrived at its decision to back off its public campaign recently, the sources said.

Mantle Ridge advanced its campaign last week when it signaled plans to work with Dennis Reilley and Eduardo Menezes, two former top executives at Linde (NYSE:) Plc.

Hilal is eyeing Reilley to become Air Products’ executive chairman while Menezes might become chief executive officer, sources familiar with Hilal’s thinking said.

Wells Fargo analysts called the pair a “dream team” and said their joining with Mantle Ridge could make a big difference in the campaign, given their strong track records and experience.

Activists often research the same companies given their readily visible vulnerabilities, but hedge funds then guard their plans closely, which can lead to more than one showing up at a company at the same time.

Two years ago, at least four activists piled into Salesforce (NYSE:), for example.

But bankers and academics say there are times it makes sense for one activist to take the lead and minimize distractions caused by several battling publicly for bragging rights.

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