UPDATE 1-Agrium blasts hedge fund's break-up plans in proxy circular
* Agrium says Jana's plan to split company is "ill-conceived"
* Agrium says integrated strategy has paid off for investors
By Euan Rocha
TORONTO, March 4 (Reuters) - The war of words between fertilizer maker Agrium Inc and its biggest shareholder, Jana Partners, escalated on Monday with Agrium slamming the hedge fund's plan to split the company in a letter to investors ahead of its annual meeting next month.
Calgary, Alberta-based Agrium, which has begun mailing its proxy circular to shareholders ahead of the meeting on April 9, said Jana's plan is an "ill-conceived scheme" that will destroy shareholder value.
The activist U.S. hedge fund, which owns some 7.5 percent of Agrium's shares, has for months demanded a number of changes at the company, including a split between its wholesale fertilizer production arm and its retail business, which sells seeds, crop protection chemicals, fertilizers and other farm products.
"Nothing in Agrium's new appeal to shareholders addresses the board's total failure to unlock Agrium's true value potential," Jana said in an emailed statement to Reuters.
Talks aimed at developing a truce between the two sides broke down in February and Jana has proposed five candidates for election to Agrium's 13-member board.
The proxy fight is the latest in a series of high-profile battles led by activist investors seeking to shake up the boards of leading Canadian companies. Last year, U.S. investor William Ackman, using a similar playbook to the one now being employed by Jana, succeeded in installing his hand-picked candidate as chief executive of Canadian Pacific Railway Ltd.
Jana, a New York-based hedge fund, has in the past won high-profile campaigns at companies such as Marathon Petroleum Corp and McGraw-Hill Cos Inc.
In the fight with Agrium however, Jana faces an uphill battle convincing fellow shareholders of the merits of its case as Agrium's stock has more than quintupled in value in the last eight years, a fact Agrium repeatedly highlighted in a message to shareholders on Monday.
"This is a simple choice between Agrium's highly successful strategy that has delivered two consecutive years of record financial results and generated a 467 percent shareholder return since 2005, versus Jana Partners' ill-conceived scheme to break up the company," said Agrium's chairman, Victor Zaleschuk.
Jana argues that Agrium's retail business is undervalued within the combined entity. Agrium, which is currently the top North American farm products retailer, has gradually grown its business through a series of acquisitions and continues to do so. It says the retail arm acts as a buffer because its wholesale business is typically cyclical in nature.
The fund has also attacked Agrium for failing to have enough retail experience on its board. In response Agrium last month named two new independent directors who it says bring a wealth of industry experience to its board. Jana, however, panned the choices and accused Agrium of making a "hollow attempt to fight off real value-maximizing change."
Agrium in turn questioned the independence of Jana's slate in its letter to shareholders on Monday, stating the "dissident nominees have agreed to accept special incentive payments from Jana for serving on Agrium's board."
"The truth is that our directors only stand to gain to the extent that all shareholders gain and each meets the independence requirements of the CBCA, the NYSE and Agrium's own governance guidelines," Jana said in the statement.
Agrium last year doubled its dividend and completed a C$900 million ($875.53 million) share buyback amid pressure from Jana. At a recent analyst meeting, Agrium also provided analysts with much more detail on its retail arm, addressing another one of the issues highlighted by Jana.
Jana, however, says that Agrium is attempting to address the points it has raised around capital allocation, disclosure and relevant board experience "without having to embrace actual change."
Agrium fired a salvo back in its letter to shareholders, saying, "The bottom line is this: Jana's campaign isn't about corporate governance, operating performance or board experience. It is a Trojan Horse tactic aimed at securing board seats that Jana can then use to further its agenda of breaking up Agrium.
Agrium shares were down 2.27 percent at C$105.03 on the Toronto Stock Exchange. The company's New York-listed shares were down 2.29 percent at $101.99.
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