UPDATE 2-Agrium to double dividend payout, completes buyback

Mon Oct 22, 2012 10:02am EDT

* Company under pressure from biggest shareholder

* Dividend yield now just behind rival Potash Corp

Oct 22 (Reuters) - Canadian fertilizer maker and agricultural goods retailer Agrium Inc said on Monday it plans to double the annual dividend, marking its third increase to the payout in less than a year.

The move, announced as the company completed a C$900 million ($908 million) share buyback, comes amid pressure from its largest shareholder, Jana Partners LLC, which wants Agrium to explore options to boost shareholder value.

Jana has been pushing for a split of the fertilizer company's wholesale and retail division, but Agrium has stood its ground, arguing that its integrated business model benefits shareholders.

"It's definitely a positive," Lazard Capital Markets analyst Edlain Rodriguez said of the dividend increase. "I think Agrium recognized that it has to return more cash to shareholders, and to us this is just the beginning of it."

Agrium is a major producer of nitrogen fertilizers. It also produces potash- and phosphate-based nutrients used to boost crop yields. In addition, the company owns the biggest network of farm retail stores in the United States that sell seed, chemicals and fertilizer.

The Jana hedge fund, which owns about 4 percent of the Calgary, Alberta-based company, also wants Agrium to improve disclosure, reduce operating costs and working capital and address some corporate costs.

"The increased dividend and C$900 million substantial issuer bid are an indication of our confidence that our integrated business model will continue to deliver strong results for the benefit of shareholders," Agrium Chief Executive Mike Wilson said in a statement.

A spokesman for Jana could not immediately be reached.

Agrium said it intends to double its dividend to $2 a share on an annualized basis and move to a quarterly payment schedule from a semiannual payout, as of the next scheduled dividend in January. 

The move gives Agrium a dividend yield of 1.9 percent, comparing its annual dividend against its closing stock price on Friday, just behind that of rival Potash Corp of Saskatchewan but ahead of other North American fertilizer peers, said Ben Isaacson, analyst at Scotia Capital, in a note to clients.

Agrium shares rose 0.3 percent in early trading in New York and Toronto.

The company said it bought back about 8.72 million shares for roughly C$103 a share as part of its repurchase plan, and the amount represents some 6 percent of the company's outstanding stock.

Agrium reports third-quarter earnings on Nov. 7.

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