Agrium Inc. says a U.S. hedge fund’s efforts to replace much of its board and spin off its retail unit is not supported by most shareholders, and is doomed to failure.
“We listen to our shareholders and the overwhelming majority continue to support the company’s position,” Mike Wilson, Agrium’s president and chief executive officer, said as Jana Partners LLC launched a proxy battle to replace five of the company’s 11 board members.
The statement marks the beginning of what promises to be a drawn out proxy battle between Agrium and its leading shareholder, which says the company would be more profitable if it split its fertilizer-making operations from its farm stores.
Calgary-based Agrium owns a global network of facilities where it makes fertilizer, and also has farm-products stores in Canada, the United States, Australia and South America.
“Before reaching the unanimous conclusion to reject a spinoff of retail, the independent directors of the board spent two months evaluating all of Jana’s ideas with our independent financial adviser,” said Mr. Wilson, who has been on the road since last week meeting with shareholders.
“Other than Jana, shareholders are not asking Agrium to consider a retail spinoff or to evaluate any other structural changes,” he said.
Agrium shares were up 3 per cent in Toronto on Monday at $100.80 a share, off highs for the year of $107.50 a share in October, but well up from levels closer to $80 in May. The stock started the year at just below $70 a share.
Jana – which owns more than 6 per cent of Agrium – accused Agrium in a statement on Monday of avoiding the issues it has been raising for the past six months.
“That façade is crumbling as more and more shareholders and analysts demand that Agrium’s board substantively address the issues we’ve raised,” Jana said in an e-mailed statement. Thomson Reuters said in a report in October that at least four of Agrium’s top 20 shareholders felt it should at least consider Jana’s proposals. It said two shareholders of record as of June 30 felt Jana’s arguments held no merit.
Jana has proposed four independent director candidates as well as its managing partner as potential appointments to the Agrium board.
The proposal launches a proxy fight that has been brewing since May, when the hedge fund informed Agrium it planned to build its position in the company from just under 5 per cent of the shares and also said Agrium should spin off its retail business.
“Agrium’s board has had every opportunity to respond constructively to our analysis, and instead simply attempted to avoid the issues,” Jana managing partner Barry Rosenstein said in a company release that also questioned how much support Agrium has from its shareholders.
In taking on Agrium, Jana hopes to duplicate the successes of U.S. hedge fund manager Bill Ackman, whose fight with Canadian Pacific Railway Ltd. led to an overhaul of the rail company’s board and management in May.
To aid it in its campaign, the hedge fund has hired two of Canada’s leading proxy solicitation firms, Kingsdale Shareholders Services Inc., which acted for Mr. Ackman in the Canadian Pacific shakeup, and the Laurel Hill Advisory Co.
Agrium has not hired a proxy solicitation firm for the time being, but it is being advised by Longview Communications Inc., an independent public relations firm specializing in corporate and financial communications.
The company has implemented three dividend increases this year, most recently in October, and announced a $900-million share buyback plan in August.