UPDATE 1-Agrium shares rise on dividend, buy-back news

Thu Jan 22, 2015 12:59pm EST
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(Updates with CEO comments and share activity)

Jan 22 (Reuters) - Canadian fertilizer and farm retail dealer Agrium Inc said it would pay out a larger percentage of its free cash flow as dividends and buy back up to 5 percent of its shares, driving its stock up as much as 5.6 percent.

The Calgary, Alberta-based company has shed non-core assets and cut costs under Chief Executive Chuck Magro, who assumed the top job a year ago.

As it completes potash and nitrogen expansion projects, the company stands to generate $7.3 billion in free cash flow over five years starting in 2016, including the existing dividend, Magro said at a CIBC investor conference in Whistler, British Columbia.

Agrium said it would pay out 40-50 percent of its free cash flow as dividends, up from its earlier target of 25-35 percent.

The company also said the Toronto Stock Exchange has accepted its plan to make a normal course issuer bid for up to 5 percent, or nearly 7.2 million, of the company's common shares over the next 12 months.

A normal course issue bid lets a Canadian company buy back its own stock in order to cancel it.

Agrium, which mines potash at Vanscoy, Saskatchewan, markets some of the nutrient offshore through Canpotex Ltd, a company that Agrium, Potash Corp of Saskatchewan and Mosaic Co own.

Magro said he expected flat to modestly higher global potash demand this year, with more sold to China and India but flat sales to the United States.

Meetings with activist shareholder ValueAct Capital, which disclosed last year a 5.7 percent stake, continue to be "friendly," Magro said. In 2013, Agrium won a proxy battle against activist Jana Partners, which sought to break up the company.

Agrium shares were up nearly 5 percent in Toronto and New York around midday, setting a record high in Toronto. (Reporting by Anet Josline Pinto in Bengaluru and Rod Nickel in Winnipeg, Manitoba; Editing by Joyjeet Das, Bernard Orr)