UPDATE 2-Agrium battle heats up, advisory firms differ

Wed Mar 27, 2013 10:19am EDT

* ISS endorses two of Jana's five board nominees

* Glass Lewis advises clients to back all Agrium nominees

* Glass Lewis says Jana's arguments not as compelling as Agrium's (Recasts, updates with contrary ISS recommendation)

By Euan Rocha

TORONTO, March 27 (Reuters) - The battle for Agrium Inc's future is heating up ahead of an April 9 vote after the two most influential proxy advisory firms disagreed on the candidates shareholders should back in the election of Agrium's board of directors.

Institutional Shareholder Services recommends clients back two of the five nominees proposed by dissident investor Jana Partners, putting it at odds with a Glass Lewis endorsement of all 12 of Agrium's board nominees.

Jana, Agrium's largest shareholder with a 7.5 percent stake, wants Agrium to spin off its farm retail arm, improve its use of capital and cut costs, among other things. Agrium favors the status quo and highlights a steep rise in its share price as evidence that it is on the right track.

The Glass Lewis recommendation follows similar views from smaller firms like U.S.-based Egan-Jones and UK-based Pensions Investment Research Consultants.

The conflicting views could cloud the outcome of a crucial shareholder vote on April 9. Proxy advisory firms like ISS and Glass Lewis advise institutional investors ahead of shareholder votes and their reports very often sway votes for or against management in proxy battles.

ISS, noting that Jana makes a compelling case for change at Agrium, a fertilizer maker and farm products retailer, endorses Jana nominees Barry Rosenstein and David Bullock.

New York-based hedge fund Jana has been locked in a war of words with Agrium for months.

Glass Lewis advised its institutional investor clients to back Agrium's nominees over Jana's five-member slate as it believes that Agrium had presented a "more compelling case" than the arguments put forward by Jana.

"We are pleased that Glass Lewis has recommended that its subscribers support Agrium's slate of director nominees," said Agrium's chairman, Victor Zaleschuk, in a statement.

Jana was not immediately reachable for comment.

The Glass Lewis recommendation comes close on the heels of public support for Agrium's own nominees from some of its major shareholders.

Investment management firm Letko, Brosseau & Associates, which owns about 1.5 percent of Agrium's outstanding stock, last week said it would back Agrium's nominees. Another shareholder in Agrium, British Columbia Investment Management Corp, also sided with the company this month, saying it believed that Agrium's current board was providing effective oversight.

Agrium shareholders have already begun voting, but some big investors were awaiting a recommendation from the proxy advisors.

The proxy fight is the latest high-profile battle led by an activist investor seeking to shake up the board of a top Canadian company. Last year, U.S. investor Bill Ackman, using a similar playbook to the one Jana is using, shook up the board of Canadian Pacific Railway and installed his hand-picked candidate as the railroad company's chief executive officer.

Jana itself has in the past won campaigns at companies such as Marathon Petroleum Corp and McGraw-Hill Cos Inc .

But Jana faces an uphill battle convincing fellow shareholders of the merits of its case against Agrium. Agrium's stock has more than quintupled in value in the last eight years, a fact Agrium repeatedly highlighted in statements to its shareholders.

(Reporting by Euan Rocha; Editing by Matt Driskill and Kenneth Barry)

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