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Jana Founder Says Agrium Plan to Add $50 of Value a Share

Barry Rosenstein, the co-founder of activist hedge fund Jana Partners LLC, said his proposal for Agrium Inc. (AGU) to spin off its farming supply stores and make other changes may add an extra $50 a share of value.

Jana, Agrium’s largest shareholder, is proposing a so- called tax-free separation of the Calgary-based company’s retail operations from its wholesale arm. The hedge fund is also calling for Agrium’s management to boost capital returns, improve disclosure and reduce costs and working capital, Rosenstein said today in a presentation at the Value Investing Conference in New York.

“There is no legitimate reason to deny shareholders this value-creation opportunity,” he said, according to an advance copy of the presentation obtained by Bloomberg News.

Jana said Aug. 14 that Agrium’s retail network, the largest in North America, had been mismanaged, had too much money tied up in working capital and should be spun off to “unlock significant long-term value.” Agrium Chief Executive Officer Mike Wilson rejected Jana’s demand and hired Morgan Stanley as an adviser.

“There is nothing new in statements made by JANA today,” Wilson said today in a statement. “Agrium remains confident that shareholders will receive far greater value, with less risk, under the company’s current strategy.”

Agrium rose 1.7 percent to C$103.69 at the close in Toronto. The shares have gained 52 percent this year.

Retail Network

Agrium’s network of 872 agricultural retail outlets in Canada, the U.S., Chile and Argentina sells seeds, fertilizer and herbicides to farmers. The company also produces the crop- nutrient ingredients potash, phosphates and nitrogen. Agrium generated 63 percent of sales from its retail operations last year while the wholesale fertilizer business accounted for 34 percent, according to data compiled by Bloomberg.

Jana’s estimate of potentially unlocked value assumes a $725 million “working capital rationalization opportunity” and a $1.5 billion plan to purchase its own stock in addition to a planned share buyback of as much as C$900 million ($916 million) that Agrium announced last month.

Market Intelligence

A breakup of Agrium doesn’t make sense for investors, according to Colin Isaac, a London-based analyst at Atlantic Equities LLP who has a rating equivalent to buy on Agrium. The wholesale and retail businesses benefit from each other, he said in a telephone interview.

“They clearly benefit from the market intelligence and the supply sourcing from the wholesale side,” Isaac said.

Jana is an event-driven hedge fund, meaning it generally invests in companies undergoing changes such as mergers, spinoffs and bankruptcies. It was founded in 2001 and manages investments worth about $3.5 billion.

The hedge fund invested more than $700 million in Jana and has a 4.1 percent stake in Agrium, according to data compiled by Bloomberg.

“I don’t know if Agrium has a good retail business and neither does anybody else because Agrium hasn’t disclosed enough information for us to be able to tell,” Mark Connelly, a New York-based analyst at Credit Agricole Securities USA Inc., said Sept. 28 by telephone.

“Agrium owes us a better answer than they’ve given so far, a better answer than ‘we’re doing a great job and the heck with them,’” he said.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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