Agrium Plans to Expand After Fending Off Jana Challenge

Fresh from beating back a proxy challenge from activist investor Jana Partners LLC, fertilizer maker Agrium Inc. (AGU) plans to refocus on expansion in the face of a commodities slump.

Agrium said at its annual meeting yesterday that investors rejected five Jana-backed nominees to the board. Agrium’s largest shareholder with a 7.5 percent stake, Jana has been pushing the Calgary-based company to spin off its retail division, a network of agricultural outlets that sells seeds, fertilizer and crop-protection chemicals to farmers.

Jana “obviously chose the wrong target,” Agrium Chief Executive Officer Mike Wilson said after the meeting in Calgary. “Now we can go and focus on what’s important to shareholders and that’s growing the company.”

Agrium’s victory allows Wilson to proceed with his strategy of building the company’s retail network to help counterbalance volatile fertilizer prices.

“Everyone would agree that now it’s all about execution, doing what the company can do to improve results,” Mark Gulley, a New York-based analyst at BGC Partners LP, said yesterday in a telephone interview. “Now the debate is all about operational excellence, it’s about the nitty-gritty.”

Agrium is the latest Canadian company to face activist shareholders aiming to boost returns. Last year billionaire hedge fund manager William Ackman succeeded in unseating board members and installing a new CEO at Canadian Pacific Railway Ltd. (CP)

Shareholder Pressure

Other company’s shares, including those of SNC-Lavalin Group Inc. (SNC), have rallied after minority investors sought to shake up management to boost earnings or spin off businesses.

Jana, which was founded in 2001 and invests in companies undergoing changes such as mergers, spinoffs and bankruptcies, promised to keep up the pressure on Agrium’s management.

Jana Managing Partner Barry Rosenstein, accompanied by two bodyguards yesterday, declined to say what his New York-based hedge fund planned as he left the meeting, which was attended by more than 200 people.

“This is the worst example of entrenched, power-hungry-at- any-cost behavior I have ever witnessed,” Rosenstein told investors before the vote. He said Agrium’s board lied to shareholders and labeled him a “New York hedge fund billionaire.”

Rosenstein said he plans to “investigate” how shareholders changed their votes after the deadline on April 5.

Falling Prices

Agrium fell 0.3 percent to C$96.24 at 11:01 a.m. in Toronto. The shares have gained 14 percent in the past 12 months.

Agrium faces the headwind of falling grain prices that may leave farmers with less money for agricultural chemicals and other farm inputs.

“In the short term, we believe the stock will be challenged as the activism story that had driven so much interest in Agrium now transitions to one of ‘‘What now?’’” Matthew Korn, a New York-based analyst at Barclays Plc, said yesterday in a note to clients.

Corn, soybeans and wheat, the biggest U.S. crops along with hay, have slid into bear markets with drops of more than 20 percent from 2012 highs.

“Agrium’s got long-term value,” Bob Schulz, a professor at the University of Calgary business school, said in an interview. “The shares aren’t going to surge up in the next couple of days, but in the long-run there’s value there.”

Retail Unit

Agrium’s farm retail division accounted for 66 percent of Agrium’s revenue last year, according to data compiled by Bloomberg. That compares with 31 percent at the company’s wholesale fertilizer business, which makes nitrogen, potash and phosphate-based products.

Jana contends the full value of the retail unit is lost within Agrium, while Agrium has argued it provides a useful offset to downturns in commodity markets.

Since Jana first approached Agrium in May, the Canadian company has improved transparency, bought back shares, increased its dividend and added directors with experience in bulk agricultural-chemicals distribution.

“Our integrated strategy is working,” Wilson said yesterday. “We don’t expect any changes to our strategy.”

To contact the reporters on this story: Jeremy van Loon in Calgary at jvanloon@bloomberg.net; Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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