Agrium Inc. (AGU) investors rejected five dissident nominees to the board promoted by activist shareholder Jana Partners LLC, which has called for changes at the Canadian fertilizer maker.
The New York-based hedge fund, Agrium’s largest shareholder with a 7.5 percent stake, has been pushing the company to spin off its retail division, a network of agricultural outlets that sells seeds, fertilizer and crop-protection chemicals to farmers. The Calgary-based company also produces nitrogen, potash and phosphate-based crop nutrients.
Agrium’s victory, unveiled today at its annual meeting in Calgary, allows Chief Executive Officer Mike Wilson to proceed with his strategy of expanding the company’s retail network to help counterbalance volatile fertilizer prices.
Jana “obviously chose the wrong target,” Wilson said after the meeting.
“Now we can go and focus on what’s important to shareholders and that’s growing the company and expanding shareholder value,” Wilson said. “Our integrated strategy is working. We don’t expect any changes to our strategy.”
Since Jana first approached Agrium in May, the Canadian company has improved transparency, bought back shares, increased its dividend and added directors with experience in bulk agricultural-chemicals distribution.
Agrium is the latest Canadian company to face activist shareholders aiming to boost returns. Last year billionaire hedge fund manager William Ackman succeeded in unseating board members and installing a new CEO at Canadian Pacific Railway Ltd. (CP) Other company’s shares, including those of SNC-Lavalin Group Inc. (SNC), have rallied after minority investors sought to shake up management to boost earnings or spin off businesses.
“In the short term, we believe the stock will be challenged as the activism story that had driven so much interest in Agrium now transitions to one of ‘‘what now?’’” Matthew Korn, a New York-based analyst at Barclays Plc, said today in a note to clients.
Agrium ended the day down 2.8 percent at C$96.55 in Toronto after paring a drop of as much as 4.8 percent. The shares have declined 2.6 percent this year.
Jana has contended that the full value of the retail unit has been lost within Agrium, while Agrium has argued it provides a useful offset to downturns in commodity markets.
Agrium still faces the headwind of falling grain prices, including a bear market in corn, that may leave farmers with less money for agricultural chemicals and other farm inputs.
Jana, which was founded in 2001 and invests in companies undergoing changes such as mergers, spinoffs and bankruptcies, promised to keep up the pressure on Agrium’s management.
“You will find we are just as vocal and active outside of a proxy contest as we are within it,” Jana co-founder and managing partner Barry Rosenstein said at the meeting. “We will not hesitate to speak up should Agrium go back to its old ways, and we are not going away.”
Jana’s nominees to Agrium’s board were Rosenstein; David Bullock, a former chief financial officer of Graham Packaging Inc.; Stephen Clark, the former CEO of German chemicals distributor Brenntag AG (BNR); MSC Industrial Direct Co. Chairman Mitchell Jacobson; and Lyle Vanclief, a former Canadian minister of agriculture.
Rosenstein accused Agrium of “vote buying” by offering to pay a fee to investment advisers and brokers for shares voted in favor of Agrium’s directors. Wilson said today that the practice is commonplace.
“This is the worst example of entrenched, power-hungry-at- any-cost behavior I have ever witnessed,” Rosenstein told shareholders before the vote. He said Agrium’s board lied to shareholders and labeled him a “New York hedge fund billionaire.”
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