NEW YORK (Reuters) - Hedge fund Jana Partners said on Monday Canadian fertilizer company Agrium’s AGU.TO AGU.N share price could rise about $50, or 50 percent, if the company took steps to improve its business.
Barry Rosenstein, who runs the $3.5 billion hedge fund that often pushes for management changes, said Agrium has lagged its peers in part because its two businesses — seed, chemical and fertilizer production and selling directly to farmers — do not fit well.
“We think it is abundantly clear that the company has underperformed its peers,” Rosenstein said at the 8th Annual Value Investing Congress on Monday.
“We encourage Agrium to reverse course,” Rosenstein added. “Why should shareholders settle for good enough?”
Laying out a plan publicly for improvement at the company for the first time, Jana Partners put some numbers on where they think the share price should be.
Agrium’s stock rose more than 2 percent to $105.80 on the New York Stock Exchange, and was up $1.84 Canadian at C$103.84 on the Toronto Stock Exchange late Monday afternoon.
Jana said the company has no real retail experience and was encouraging it to spin off the retail unit, which serves farmers.
Agrium Chief Executive Mike Wilson said Jana offered nothing new in its presentation.
“Agrium remains confident that shareholders will receive far greater value, with less risk, under the company’s current strategy,” Wilson said in a statement.
Agrium has met with shareholders since Jana disclosed its idea this summer to break up the company and has “overwhelming support” for the current integrated strategy, the company said.
Jana, which has owned about 4 percent of Agrium since the end of June, making it the largest shareholder, has so far tried to privately persuade the company to cut costs and consider the spin-off. But there has been no movement and Jana has since gone public by making its presentation at the conference where prominent hedge fund managers, including Bill Ackman, Mick McGuire and David Einhorn are scheduled to present.
Rosenstein said that companies “are never happy when we show up,” but that management often comes around to recognizing that the hedge fund’s ideas are often good ones.
Reporting By Svea Herbst-Bayliss in New York and Rod Nickel in Winnipeg, Manitoba; Editing by Maureen Bavdek and Richard Chang