Agrium refuses investor demand to spin off retail

Tue Aug 14, 2012 2:34pm EDT
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By Rod Nickel

(Reuters) - Canadian fertilizer company Agrium Inc (AGU.TO: Quote)(AGU.N: Quote) said on Tuesday it would not take the "substantial risk" of spinning off its retail operations, as the company sought to fend off pressure from activist investor Jana Partners LLC.

Jana disclosed on Tuesday that it had bought more than 6.5 million shares of Agrium, according to a filing as of June 30 to U.S. regulators. That makes the hedge fund the largest shareholder with about 4 percent of the company, North America's biggest retail supplier of agricultural products.

A source close to Jana said the investor had since added to its stake and now held nearly 5 percent.

Jana aims to convince the company to cut costs and spin off its farm retail distribution arm while improving operating performance, the source said, even as Agrium has produced bigger profits and seen its share price climb more than 40 percent this year.

"Agrium's board has carefully evaluated the idea of spinning off retail and has unanimously determined that it is contrary to the best interests of the company and its shareholders," Agrium Chief Executive Officer Mike Wilson said in a statement.

Spinning off the retail operations would expose Agrium shareholders to "substantial risk with no sustainable benefit," and the company will not pursue such action, Wilson said.

A spinoff is in the company's best long-term interests, the source close to Jana said.

"Hedge funds will be portrayed as focused on short-term value, but this is kind of the inverse -- (Jana is) pointing to value creation over a multiyear period, (Agrium is) looking at the last eight months.   Continued...