Agrium Inc. shaved $2-billion off the valuation of its retail business on Tuesday – that's the very same Tuesday that hedge fund Jana Partners pitched its idea to break the fertilizer company's retail and wholesale units apart.
How did it do such a thing? According to reporting by Bloomberg, by trading in its old group of comparable firms for a new list of peers. Since Agrium reported $921-million in earnings before interest, taxes, depreciation,and amortization (EBITDA) in its retail unit over the past year, that works out to a valuation of roughly $8-billion using its new group. But using its old group, that valuation hovered near $10-billion.
Agrium reportedly sent some presentations to analysts Tuesday noting that the retail potion of the business could trade around eight times EBITDA if detached. That's way off the 11 times the company's CEO suggested retail would be valued at 14 months ago.
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But never mind what the company said before. This is now, and Agrium told Bloomberg that the calculations it did last year have "little to do with how retail would trade in today's market as a separate public company." It was a goal, and it is now more than a year old. Plus, it says Morgan Stanley recently offered a fresh take on who its peer group should be.