April 5, 2013 / 2:00 PM / in 5 years

Canada Pension Plan backs Agrium board nominees in Jana battle

TORONTO, April 5 (Reuters) - The Canada Pension Plan Investment Board, one of the world’s largest pension funds, said it has voted to support Agrium Inc’s board nominees ahead of a shareholder meeting next week, in a blow to activist investor Jana Partners.

The Canadian fertilizer maker and farm products retailer Agrium has been locked in a war of words for months with activist investor Jana Partners LLC, a New York-based hedge fund.

Jana named a slate of five nominees for election to Agrium’s board and the battle is set to come to a head at Agrium’s shareholder meeting on its home turf in Calgary, Alberta, on April 9.

A spokesman for Jana was not immediately available for comment on the CPPIB decision. A spokesman for Agrium said the company was pleased with the decision.

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, however, favors the status quo and highlights the steep rise in its share price as evidence that it is on the right track.

The Canada Pension Plan Investment Board (CPPIB), which manages net assets worth more than C$172 billion ($169.50 billion), said on its website that it decided to back Agrium’s slate of nominees.

It said “Jana has failed to make a compelling case for change to Agrium’s board of directors.”

CPPIB said that while it agrees there are opportunities for improvement, “the dissident’s nominees do not represent the best alternative for optimizing long-term value creation, particularly in light of Jana’s proposed director compensation structure.”

Agrium has questioned the independence of Jana’s nominees, stating the “dissident nominees have agreed to accept special incentive payments from Jana for serving on Agrium’s board.”

Jana in return argued that its directors only stand to gain to the extent that all shareholders gain.

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

Although it is unclear exactly how significant CPPIB’s stake in Agrium is, the fund’s move does have major implications, as it is a client of ISS. The move indicates that some top clients of the advisory firm may be willing to go against ISS’ advice in this particular proxy battle.

CPPIB, in its proxy voting principles and guidelines, says “We review the research and recommendation provided by ISS and if we disagree with the recommendation, our vote is changed.”

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