Further Information Available at www.JANAAguAnalysis.com
NEW YORK, Feb. 20, 2013 /CNW/ - JANA Partners LLC today released the following
open letter to shareholders of Agrium, Inc. ("Agrium") (TSX / NYSE: AGU).
Agrium announced at the end of the day last Friday that its Annual General
Meeting of Shareholders will be held on April 9, 2013 and that shareholders of
record on February 25, 2013 will be eligible to vote.
February 20, 2013
AN OPEN LETTER TO AGRIUM SHAREHOLDERS: Why We Said No to the Status Quo at
Agrium, and Why You Should Too
Dear Fellow Agrium Inc. Shareholder,
We have invested more than $1 billion in Agrium, making us the largest
shareholder with approximately 6.5% of its outstanding shares, because we
believe Agrium can generate substantial additional upside for all shareholders
by addressing 5 core issues: Costs, Controls, Capital Allocation,
Conglomerate Structure and Corporate Governance. Agrium however refuses to
fully address these issues, and has subverted traditional notions of good
governance by fighting off our highly qualified independent nominees and
choosing their own directors merely because we have questioned its performance
and strategy. We note that the market has had a swift and negative reaction
to this refusal to engage, including a 7% share price decline last week after
Agrium's new directors were announced and our rejection of its insufficient
Upending Notions of Good Corporate Governance. Agrium has sought to turn
traditional notions of board oversight of management upside down by making any
questioning of management's prior performance or strategy a disqualification
for board service. When asked recently why Agrium refused to consider our
candidates, Agrium's CEO responded that "It is not typical to bring someone on
the board who tells you your strategy is flawed and indirectly tells you
you're incompetent." (The Globe & Mail, Feb. 4, 2013). JANA has of course
never called management "incompetent." We have simply identified areas of
substantial opportunity and proposed qualified nominees to help explore them.
This same fortress mentality was on display in our recent settlement
discussions, with Agrium demanding at one point that we drop all of our issues
in exchange for merely proceeding with talks, and refusing to even speak to
This thin-skinned and insular attitude leads us to conclude that Agrium's new
directors have been pre-screened to ensure compliance with the status quo. We
further note that Agrium did not cast a very wide net to locate new board
appointee Mayo Schmidt, given that Viterra's distribution business was
acquired by Agrium in a transaction in which he earned over C$30MM. We also
note that our board nominees stand to benefit only to the extent that all
shareholders benefit and each meets the definition of "independence" under the
CBCA, NYSE rules, and Agrium's own governance guidelines.
Just last Friday, Agrium doubled-down on its approach, shifting up the usual
date of its annual meeting by over a month in an apparent attempt to cut short
this debate. While we are confident that this move is too little, too late,
it further paints a picture of serious governance issues at Agrium. As one
analyst put it, "Friday after the close at the start of a holiday weekend
isn't typically when company Boards disclose things they are proud of, but you
can't fault the Agrium Board for consistency. An abrupt shift in the dates for
the shareowner meeting looks designed to perpetuate the lack of transparency
and accountability that seems to be the (very) unexpected legacy of CEO Mike
Wilson. Investors who have been supportive of Agrium thus far will have to
think hard about whether this is the sort of behavior they want to encourage
elsewhere, when they cast their ballots in this accelerated election." (Credit
Agricole / CLSA, Feb. 19, 2013)
Refusal to Address Core Issues. When Agrium approached us seeking a
settlement, we made clear that for any settlement to occur the board would
need to commit to conducting a full review of the branch footprint of its
distribution business ("Retail") and corporate overhead (Costs) and a full
review of Retail senior management performance objectives (Controls), to
communicate a targeted dividend payout ratio or some other mechanism to
clarify ongoing capital return plans (Capital Allocation) and to retain a new
investment bank to perform a review of Agrium's structure (Conglomerate
Structure), in addition to adding highly-qualified and independent new
directors rather than fighting off such change (Corporate Governance). Agrium
however refused to commit to even the mildest versions of these concepts.
Appointing New Directors Who Lack Relevant Experience. Neither of Agrium's
chosen new directors addresses the board's lack of distribution experience,
which is of crucial importance given the size of Agrium's Retail business.
-- Mayo Schmidt. While Mr. Schmidt served as CEO of Viterra Inc.
before it was acquired by Glencore and Agrium, Viterra's
distribution business accounted for less than 15% of EBITDA and
served primarily to advance its grain handling business. Agrium
has also noted significant opportunities for improvement at
Viterra's distribution business, which calls into question Mr.
Schmidt's abilities in areas like cost management. We also note
that like Agrium, Viterra struggled in basic areas of oversight
and performance including Costs, given Viterra's consistently
high annual growth rate in corporate overhead, and Capital
Allocation, given that Viterra executed no share repurchases
(instead issuing over $2 billion of equity) and initiated a
small dividend only after coming under pressure from
shareholders to do so.
-- David Everitt. Mr. Everitt ran a unit at Deere & Co. that
manufactured and sold capital equipment to a separate
independently-owned and operated dealer network. While he has
experience in agriculture and with manufacturing and supply
chain issues, he brings no experience in managing true
"breaking bulk" distribution of primarily third party
manufactured products, which is a crucial gap given that
Agrium's Retail business purchases the vast majority of its
products from third party suppliers and breaks bulk to
distribute to farmer customers.
By contrast, 3 of our 5 nominees bring more than 75 years of combined
experience creating substantial value in true "breaking bulk" distribution and
excellent track records of deploying capital with a true owner orientation.
Questions for Every Shareholder.
-- Wouldn't a board more concerned with good governance and
continuous improvement than avoiding criticism have agreed to
merely fully explore the issues we set forth above, given the
billions in potential value creation?
-- Why would the board resist adding a minority of new directors
who actually have the experience to ask the right questions
about Retail's operations and strategy?
-- Why would a board that has spent $4 billion on Retail
acquisitions that have failed to meet Agrium's minimum return
hurdle and which failed for years to engage in significant
shareholder return of capital until pressured to do so refuse
to simply clarify its ongoing capital return plans?
-- Why would a board that has overseen a 14% annual growth rate in
corporate overhead, has a Retail footprint which by Agrium's
own admission and measurement standards has a glaring degree of
duplication, and has generated negative operating leverage
refuse to consider seriously examining its costs?
-- If Agrium's conglomerate structure truly creates more value
than a separation, why is the board so resistant to an
independent and fair review, particularly given the flaws in
its initial review including manipulating trading comparables
and hiring advisors who once argued against Agrium's structure
to now defend it, and given that our nominees will constitute
only a minority of the board once elected?
-- Why would a board that has consistently set compensation
targets for Retail management that prioritize growth through
acquisitions over profitability refuse to an enhanced review of
these compensation targets and objectives?
-- Why would a board that has overseen a litany of corporate
governance failings including talking down its own value to
avoid a debate, botching a significant share repurchase,
accelerating its annual meeting date and more resist adding
independent and shareholder-oriented new directors?
We believe the board should be saying yes to these opportunities to unlock
Agrium's full value creation potential, rather than wasting substantial
shareholder money fighting them off, and we remain confident that once our
highly qualified and shareholder-focused director candidates are elected, the
board will do so.
JANA Partners LLC
Information in Support of Public Broadcast Solicitation
JANA is relying on the exemption under section 9.2(4) of National Instrument
51-102 – Continuous Disclosure Obligations to make this public broadcast
solicitation. The following information is provided in accordance with
corporate and securities laws applicable to public broadcast solicitations.
This solicitation is being made by JANA, and not by or on behalf of the
management of Agrium.
The address of Agrium is 13131 Lake Fraser Drive S.E., Calgary, Alberta T2J
JANA has filed an information circular containing the information required by
Form 51-102F5 – Information Circular in respect of its proposed nominees,
which is available on Agrium's company profile on SEDAR at www.sedar.com and
Proxies for the Agrium shareholders' meeting may be solicited by mail,
telephone, email or other electronic means as well as by newspaper or other
media advertising, and in person by managers, directors, officers and
employees of JANA, who will not be specifically remunerated therefor. In
addition, JANA may solicit proxies in reliance upon the public broadcast
exemption to the solicitation requirements under applicable Canadian corporate
and securities laws, conveyed by way of public broadcast, including through
press releases, speeches or publications, and by any other manner permitted
under applicable Canadian laws. JANA may engage the services of one or more
agents and authorize other persons to assist it in soliciting proxies on
behalf of JANA. All costs incurred for the solicitation will be borne by JANA.
JANA has entered into agreements with Kingsdale Shareholder Services Inc.
("Kingsdale") and The Laurel Hill Advisory Group Company ("Laurel Hill")
pursuant to which Kingsdale and Laurel Hill have agreed to assist JANA in
soliciting shareholders should JANA commence a formal solicitation of proxies.
Kingsdale's responsibilities will principally include advising JANA on
governance best practices, where applicable, liaising with proxy advisory
firms, developing and implementing shareholder communication and engagement
strategies, and advising with respect to meeting and proxy protocol. Laurel
Hill will be principally responsible for the solicitation of retail
shareholders and other strategic advice. Pursuant to the agreement with
Kingsdale, for its solicitation services, Kingsdale would receive a fee in the
range of $125,000 to $250,000, plus disbursements and a telephone call fee.
In addition, Kingsdale may be entitled to a success fee on the successful
completion of JANA's solicitation, as determined by JANA in consultation with
Kingsdale. Kingsdale will also receive a separate fee for its other services.
Pursuant to the agreement with Laurel Hill, Laurel Hill would receive a fee of
up to $100,000, plus disbursements and a telephone call fee. In addition,
Laurel Hill will be entitled to a success fee of $100,000 on the successful
completion of JANA's solicitation. All costs incurred for the solicitation
will be borne by JANA.
JANA is not requesting that Agrium shareholders submit a proxy at this time.
Once JANA has commenced a formal solicitation of proxies, a registered holder
of common shares of Agrium that gives a proxy may revoke it: (a) by completing
and signing a valid proxy bearing a later date and returning it in accordance
with the instructions contained in the form of proxy to be provided by JANA,
or as otherwise provided in the final proxy circular, once made available to
shareholders; (b) by depositing an instrument in writing executed by the
shareholder or by the shareholder's attorney authorized in writing, as the
case may be: (i) at the registered office of Agrium at any time up to and
including the last business day preceding the day the meeting of Agrium
shareholders or any adjournment or postponement of the meeting is to be held,
or (ii) with the chairman of the meeting prior to its commencement on the day
of the meeting or any adjournment or postponement of the meeting; or (c) in
any other manner permitted by law. A non-registered holder of common shares
of Agrium will be entitled to revoke a form of proxy or voting instruction
form given to an intermediary at any time by written notice to the
intermediary in accordance with the instructions given to the non-registered
holder by its intermediary.
To the knowledge of JANA, neither JANA nor any of its managers, directors or
officers, or any associates or affiliates of the foregoing, nor any of JANA's
nominees, or their respective associates or affiliates, has: (i) any material
interest, direct or indirect, in any transaction since the beginning of
Agrium's most recently completed financial year or in any proposed transaction
that has materially affected or would materially affect Agrium or any of its
subsidiaries; or (ii) any material interest, direct or indirect, by way of
beneficial ownership of securities or otherwise, in any matter currently known
to be acted upon at the meeting of Agrium shareholders other than the election
JANA Partners LLC, +1-212-455 0900
SOURCE: Jana Partners LLC
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CO: Jana Partners LLC
ST: New York
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-0- Feb/20/2013 17:03 GMT
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