By Swetha Gopinath
(Reuters) - Air Products & Chemicals Inc
Air Products shares rose as much as 6.9 percent, taking gains to almost a quarter since Ackman's Pershing Square starting building up a $2.2 billion holding in June.
Ackman argued the company was undervalued and lagged peers after Pershing Square revealed a 9.8 percent stake that made it Air Products' largest shareholder.
In a deal on Thursday, Air Products said it would add the three new independent directors immediately and three unnamed directors would retire before the company's 2014 meeting.
The departure of McGlade in 2014 was not spelt out in the agreement, revealed in a regulatory filing by Air Products, but analysts said he was a prime target for Ackman.
"The main thing that Pershing Square wanted was a change in management and they have got that without a proxy fight," said SunTrust Robinson Humphrey analyst James Sheehan.
"Pershing will probably make other demands as well, but the fact that they are going to have a role in selecting a new CEO means that they will have a friendly management team to deal with."
Two years ago, McGlade set a target of $15 billion in annual sales and a 20 percent operating margin by 2015, but the company's revenues have remained stuck at just under $10 billion a year.
Ackman has previously pushed for CEO exits at J.C. Penney Co
The hope is that Ackman can replicate his wildly successful turnaround strategy for Canadian Pacific at Air Products by focusing on efficiency.
Pershing Square was supportive of the company's actions, McGlade said in a statement.
One of the new directors, Matthew Paull, is an adviser to Pershing Square. He will serve on Air Products' finance and corporate governance committees.
The others are Emerson Electric Co
Pershing Square agreed not to present any proposal for action by Air Products shareholders or to present any nominees for the company's board at the 2014 annual shareholder meeting or at any interim special meeting.
Without a deal, the hedge fund could have submitted at least four director nominees at the meeting.
Air Products has lagged rivals Praxair Inc
At the end of last year, Air Products had a 14.5 percent operating margin, well behind Praxair's 22 percent and Linde's 23.1 percent. By focusing on volume growth rather than pricing, Air Products has harmed profit, analysts say.
Pershing Square started building up its Air Products holding in June and unveiled the holding at the end of July, as rumors swirled and Air Products adopted a "poison pill" takeover defense to stop Ackman going beyond 10 percent.
"Poison pills" are designed to forcibly dilute holdings of an investor by issuing more shares, should the investor's stake exceed a given threshold.
A committee of the board and an executive search firm will begin the search for a new CEO immediately, Air Products said, adding that McGlade would serve as chairman for an agreed-upon transition period in 2014.
Air Products shares hit a high of $114.74 in morning trade on the New York Stock Exchange, before easing back to $110.51.
(Additional reporting by Ernest Scheyder; Editing by Kirti Pandey and Rodney Joyce)