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Rona Inc., the hardware retailer, and fertilizer purveyor Agrium Inc. are faced by frustrated shareholders aiming to revamp their boards. What do the experiences at the battles that are already won teach investors wondering who to support at Rona and Agrium?Fred Lum/The Globe and Mail

Activist shareholders have shown in the past two years that they are willing to take on almost any large Canadian company's board, but there's still much to prove when it comes to turning around a major company's results.

In one way or another, fully 10 per cent of the companies in the Standard & Poor's/TSX 60 index of this country's biggest companies have faced a challenge of some sort from an activist investor in the past two years. That list now includes Calgary's Agrium Inc., which is in a proxy battle with a large investor that wants to break up the company.

The number is much higher if you consider the fact that close to half the companies in that index are controlled by a large shareholder in some way, and so would be pointless for an activist to target. It is higher still if you factor in the backroom deals that are cut to appease shareholders before a scrap spills into the public arena.

Of the ones that have made it to the headlines, the biggest win was Bill Ackman's rout of the incumbents at Canadian Pacific Railway. At Maple Leaf Foods, activist Greg Boland got a seat on the board, and another independent director.

Grain handler Viterra soothed relations with its biggest shareholder, Alberta Investment Management Co., by offering a seat on the board after AIMCo criticized the incumbent group.

Now Rona Inc., the sad-sack hardware retailer, and fertilizer purveyor Agrium are faced by frustrated shareholders aiming to revamp their boards. What do the experiences at the battles that are already won teach investors wondering who to support at Rona and Agrium?

The answer is that what has happened hardly paints a clear picture of fundamental value creation by activists. The best one can say is it's a mixed picture. (To be sure, one must also acknowledge the small sample size, the short time frame relative to the time it takes to make big changes at a company, and the impossibility of knowing what would have happened had the activists not gained control.)

Viterra was sold before AIMco could get far with its plan to turn the company into a bigger global player. Maple Leaf's results look largely the same as before Mr. Boland got inside the company. And as much as the stock price at Canadian Pacific signals a huge turnaround, the fact is the shares have raced far ahead of the results in Mr. Ackman's short tenure since joining the board and installing a new chief executive officer.

Maple Leaf is just getting started on a five-year plan, and its results show no convincing trend one way or another. Enterprise value, margins, operating profit and revenue all look roughly like they did when Mr. Boland arrived on the scene. Margin expansion and other benefits are supposed to start flowing in the coming year.

In the short term, share prices are not always great indicators of real change in the underlying company, but they give a sense of other investors' hopes for tangible improvements. Maple Leaf stock is down 6 per cent since the board was revamped, though Mr. Boland's firm, West Face Capital, is still in the money because it bought its stock at a hefty discount.

At Canadian Pacific, there are some tangible signs of improvement in the one full quarter under Mr. Ackman and his hand-picked CEO, Hunter Harrison.

CP's key metric of cost measured as a percentage of revenue is moving in the right direction, but it's a long way from competitive in the railroad industry. In the last quarter, the so-called operating ratio stood at 74.1 per cent. According to calculations by Bloomberg News, that was the best since the third quarter of 2010, but still far from the industry average of 68.9 per cent for the six large North American railroads.

And yet, CP shares have run so fast and hard that the stock is now more expensive than that of rival Canadian National, which is still a better -run company. CP shares trade at a price-to-earnings ratio of 23.9, and provide a dividend yield of 1.53 per cent. CN can be had for 15.2 times forward earnings and comes with a dividend yield of 1.76 per cent.

The upshot is real results take time.

Standing back, there is evidence that activists can create value, at least on average.

A 2008 study by four professors, Alon Brav, Wei Jiang, Frank Partnoy and Randall Thomas, found that there is a payoff, both in share-price appreciation and the running of the underlying business. In their look at 882 target companies in the U.S. over the five years from 2001 to 2006, there was an "abnormal stock return" of about 7 per cent on average when an activist announces its intent, and that value gain was sustained in the following year. The target firms showed higher payouts and better operating performance, the study found.

However, averages hide the best and worst outcomes. Anybody who hitched their wagon to Mr. Ackman on his activist investment in Target Corp., which cost an Ackman-run fund 90 per cent of its value in one year, would know that from painful experience.

A fund manager making a career of activist plays, or as part of a broader portfolio, has a chance to make it work more often than not. For individual shareholders of companies like Maple Leaf, CP, Rona and Agrium, it's not as simple.

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