Exclusive: Activist Jana digs in for long Agrium battle

Fri Oct 26, 2012 1:52am EDT
 
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By Nadia Damouni and Rod Nickel

NEW YORK/WINNIPEG (Reuters) - From Agrium Inc's perspective, a campaign by Jana Partners LLC to break up the Canadian fertilizer company is effectively dead in the water. But the $3.5 billion activist hedge fund believes it is only getting started.

Jana's five-month-long agitation has put a spotlight on the $17 billion market cap company, which produces nutrients such as potash in bulk and sells fertilizers directly to farmers.

Shareholders are taking notice as both Agrium and Jana work the phones and hold meetings to make their respective cases, according to investors and sources close to Jana and the company. So are some rivals and private equity firms that are curious to see if Jana's battle throws up an opportunity for them to do a deal, sources close to those firms said.

Jana has made a number of demands, including that the Canadian company spin off its retail arm, return capital, cut costs and improve disclosure - moves that it says will add about $50 per share in value. Agrium's shares closed at $105.88 apiece on the New York Stock Exchange on Thursday.

The company, for its part, has raised its dividend this year and just completed a share buyback, and its shares have risen by more than half this year - which each side says bolsters its own case for what's best for the company.

Agrium and Jana also have diametrically opposite views of the evidence that is emerging from their behind-the-scenes blitz with shareholders, indicating that the activist investor may have a long, protracted battle on its hands. Jana is Agrium's largest shareholder with a roughly 4 percent stake.

Sources close to the company said most of the top 10 shareholders have told Agrium that they do not support Jana's idea to split the company by spinning off its retail arm.

The hedge fund, meanwhile, is not ready to go away. It believes "most shareholders want to see Agrium address the operational and structural issues we've raised," a source close to Jana said. For those who are not persuaded, the source said, the activist will "keep making our case for change as we've successfully done in other situations".   Continued...

 
Michael Wilson, president and chief executive officer of Agrium, addresses shareholders at the company's annual general meeting in Calgary, Alberta, May 12, 2010. REUTERS/Todd Korol