UPDATE 2-Big funds pick sides as Agrium-Jana battle nears climax

Fri Apr 5, 2013 5:18pm EDT

* CPPIB says Jana hasn't made a compelling case for change

* Jana down plays significance of the CPPIB support

* Neuberger Berman to back Jana's slate - sources

* Agrium shares close slightly lower in New York, Toronto

By Euan Rocha

TORONTO, April 5 (Reuters) - Agrium Inc's fierce battle with activist investor Jana Partners could go down to the wire as Agrium's large institutional investors look to be split on who they are backing ahead of a shareholder vote at Agrium's annual meeting next week.

The big Canadian fertilizer maker and farm products retailer has been locked in a war of words for months with Jana Partners, a New York-based hedge fund, over the direction the company should take. Jana has named a slate of five nominees for election to Agrium's board and the battle is now set to come to a head at Agrium's AGM on its home turf in Calgary, Alberta, on April 9.

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

Many investors, analysts and proxy advisory firms have now taken sides.

The Canada Pension Plan Investment Board, one of the world's largest pension funds, said on Friday it has voted to support Agrium Inc's board nominees, in a setback for Jana.

"We are pleased that CPPIB has voted for Agrium ... and are confident that Agrium will prevail in the proxy contest," said Agrium spokesman Richard Downey.

A Jana executive, Charles Penner, played down the significance of the CPPIB support, noting that based on latest filings, CPPIB only controls 385,465 Agrium shares, or roughly 0.25 percent of Agrium's outstanding stock. He said Jana remains confident.

"Based on the aggregate numbers we have seen so far and historical voting turnout for contested elections, we are confident that we are going to be successful," Penner said.

New York-based asset manager Neuberger Berman, another major shareholder in Agrium that controls more than 2 million of the company's shares, has decided to vote its stake in favor of the Jana's slate, according to sources familiar with the situation.

OPPOSING MOVES

Agrium has won public support in recent weeks from a number of major investors and proxy advisory firms, but the company suffered a setback last week, when influential proxy advisory firm Institutional Shareholder Services (ISS) advised its clients to back two of the five nominees proposed by Jana.

The recommendation put ISS at odds with rival advisory firm Glass Lewis, which endorsed all 12 of Agrium's board nominees. Other firms such as U.S.-based Egan-Jones and Britain's Pensions Investment Research Consultants have also weighed in on Agrium's side.

The moves by Neuberger and CPPIB are especially interesting, as both of them have chosen to go against the advice given by their respective proxy advisors.

Neuberger's website states the firm is a client of Glass Lewis, which advised its clients to back Agrium's slate of nominees, while CPPIB is a client of ISS, which has recommended that its clients back two of Jana's five nominees.

With the shareholder vote just four days away, the opposing moves might signal a very close vote.

Agrium's shares closed down less than 1 percent in both New York and Toronto on Friday.