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The Jana man who wasn’t giving up on Agrium backs down

Jana Partners executive Barry Rosenstein leaves after Agrium's annual meeting in Calgary, Alta. on Tuesday, April 9, 2013.


Jana Partners boss Barry Rosenstein pledged in his vitriolic speech after losing a proxy battle with Agrium Inc. in April that he would not give up. Six months later, it appears he is backing down.

Mr. Rosenstein's firm has sold most of its stake in Agrium, leaving Jana with about 2.7 per cent of the fertilizer company. That means Agrium is no longer Jana's largest position. In a filing with regulators announcing the change, Jana has softened his stance on the company.

Much has changed since April's contentious annual meeting, which Mr. Rosenstein attended with bodyguards and where he made an aggressive speech.

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For starters, the stock is well off its early 2013 highs, suggesting Mr. Rosenstein's timing could have been a lot better when it comes to cutting his position.

But what is also notable is the change in Mr. Rosenstein's tone. At the annual meeting he accused Agrium of vote buying, and said he would get even. Here is a taste of what he said at the annual meeting: "You are a board that proved that if you play dirty enough, violate all precepts of good corporate governance, fair play, ethical behaviour and democracy, you can still lose the campaign but then barely manufacture a victory after the voting is supposed to be over."

He went on to say that he had no plans to give up and would "investigate the vote changes after the voting deadline and of course the vote buying, and to pursue all appropriate remedies."

So far, Jana has not pursued any attempts to complain to securities commissions, perhaps because any resolution there would be a long time coming.

And in the meantime, Jana now argues, it has gotten results on most of the things it was calling for, with the exception of a corporate split that other shareholders seemed lukewarm about.

The New York-based fund manager reserved the right to keep talking to the company, but it's hardly the fire-breathing rhetoric that Jana employed in the campaign to revamp Agrium's board.

Here is the guts of Jana's filing:

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"In the course of managing its overall portfolio, the Reporting Person has reduced the size of its investment in the Shares of the Issuer. While the Reporting Person continues to believe there are opportunities for substantial improvement in each of these areas, it is pleased by the Issuer's progress in many of them since the Reporting Person's initial engagement with the Issuer, including most recently: (1) capital allocation: the Issuer has continued to substantially increase its capital return to shareholders, (2) controls: new metrics regarding the profitability of the Retail business including ROIC, costs and working capital levels have been introduced and incorporated into determining management's compensation, (3) costs: the Issuer has announced it will convert to a "hub and spoke" supply system which should help rationalize costs and reduce excess working capital, and (4) corporate governance: the Reporting Person expects that recently announced management changes and scheduled board retirements will lead to improvements in the Issuer's openness and responsiveness to proposals for value creating change and to renouncing certain of the tactics employed by the Issuer in connection with the 2013 Annual General Meeting including the undisclosed compensation of brokers and financial advisers for soliciting votes for the incumbent board. With respect to the Issuer's conglomerate structure, the Reporting Person notes that the Issuer's newly increased dividend should help investors better appreciate the steady cash flow production of the Issuer's Retail business, although the Reporting Person still believes that an unbiased review of the Issuer's structure would benefit all shareholders. The Reporting Person may continue to hold an investment in the Shares and may continue to engage in discussions with the Issuer's management, Board, shareholders and other parties regarding the Issuer's costs, controls, capital allocation, conglomerate structure and corporate governance."

The filing can be found in its entirety here.

(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)

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