* Proxy battle is now 'near certainty' says analyst
* Agrium names two new independent board members
* Jana says Agrium is refusing to embrace actual change
* Agrium shares dip in early trading on TSX and NYSE
By Euan Rocha and Thyagaraju Adinarayan
Feb 12 The drawn out battle between Agrium Inc
and its largest shareholder Jana Partners looked set
for a bruising proxy battle on Tuesday, a day after the activist
hedge fund rejected Agrium's call for a truce.
The fertilizer maker and farm products retailer threw down
the gauntlet late on Monday by nominating David Everitt and Mayo
Schmidt as independent board members, passing over five nominees
that Jana has proposed for election to Agrium's board.
"We believe that a proxy battle, as opposed to a negotiated
settlement, is becoming a near certainty," said Ben Isaacson, an
analyst with Scotiabank, in a note to clients.
The two sides have been locked in a war of words as Jana, a
New York based hedge fund that owns 6 percent of Agrium, made a
range of demands, including that Agrium spin off its retail arm
and boost the level of industry experience on its board.
Agrium, the largest North American retailer of crop products
like seed, fertilizers and crop protection chemicals, says
keeping its retail and wholesale operations under the same roof
gives the company an advantage. Its wholesale division produces
nitrogen-, potash- and phosphate-based crop nutrients.
The looming proxy fight is the latest in a series of
high-profile battles led by activist investors seeking to shake
up the management of leading Canadian companies. Last year, well
known investor William Ackman used tactics similar to those
being now employed by Jana to oust the board of Canadian Pacific
Railway Ltd and install his hand-picked candidate as
chief executive of the railroad operator.
Jana, a top U.S. activist investor, has won high-profile
campaigns at companies such as Marathon Petroleum Corp
and McGraw-Hill Cos Inc.
Calgary, Alberta-based Agrium has gradually expanded its
retail arm through a series of deals. It believes that the
business provides it with a safety net, as its wholesale
business is typically cyclical.
In its statement late on Monday, Agrium said its two new
independent directors bring a wealth of industry experience to
its board, a nod to one of the main issues flagged by Jana.
Everitt was a long-time executive with Deere & Co,
the world's largest farm equipment maker, where he was
responsible for its tractor and crop care products business.
Schmidt led Viterra Inc, a global agri-business that was last
year acquired by Glencore International.
Jana, however, panned the choices late Monday and accused
the company of making a "hollow attempt to fight off real
value-maximizing change." It said Agrium is attempting to
address Jana's points about capital allocation, disclosure and
relevant board experience "without having to embrace actual
Agrium's shares dipped about 0.6 percent in early trading on
Tuesday in New York and Toronto.
Agrium last year doubled its dividend payout and completed a
C$900 million ($894 million) share buyback amid pressure from
Jana. At a meeting last month, Agrium also provided analysts
with much more detail on its retail arm, addressing another of
the issues highlighted by Jana.
Although it remains confident that Jana will not defeat it
in a proxy battle, Agrium said it reached out to Jana before
naming its new directors in order to negotiate a truce.
Agrium said Jana agreed to halt its pursuit of a break-up in
return for naming one of its director nominees to the Agrium
board. However, the company said Jana reneged on the deal at the
last minute by demanding at least two seats on its board.
"We are disappointed in Jana's decision to prolong this
fight which it is certain to lose. Shareholders are clearly not
supportive of Jana's initiative to break up Agrium," Agrium's
CEO Mike Wilson, said in a statement.