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Agrium CEO slams activist investor Jana, says proposals "all wrong"

CALGARY - Fertilizer giant Agrium Inc. (TSX:AGU) is showing no signs of warming to an activist hedge fund's plan to improve the company, with CEO Mike Wilson saying Monday there's no reason to seek a compromise because Jana Partners LLC's ideas are "all wrong."

In feisty remarks to sell-side analysts in New York, Wilson ridiculed Jana's notion of breaking up the company into separate retail and wholesale companies.

"I get questions like 'Mike, why don't you just embrace them, for God's sake? Why don't you make a compromise? Let's get this thing over with,'" he said

"Well, the answer is, their prime objective is to split our company. That is the wrong thing. That's huge value destruction. Their views on working capital, operating costs, operation rationalization, on governance — they're all wrong."

The roughly four-hour-long presentation was meant to provide analysts a "deep dive" into Agrium's retail business, which the company's management argues is worth more now than it would be on its own.

An oft-repeated number was the 480 per cent return Agrium shareholders have seen since its integrated strategy began in 2005.

In both the analyst presentation and in a briefing with journalists, Wilson quipped that investing in Agrium was the only thing Jana has done right since the saga began.

A corporate split isn't the only demand Jana has made since it first approached Agrium privately in May, but it is the proposal that has garnered the most attention.

Among other things, Jana also wants Agrium to cut costs, allocate capital more effectively, improve governance and disclose more information about its retail business.

Jana is now Agrium's largest shareholder, with a six per cent stake.

In November, Jana announced it wants five of its nominees to join Agrium's board. Its slate includes Jana managing partner Barry Rosenstein, former Liberal agriculture minister Lyle Vanclief and three men with the executive experience in distribution that the fund says is lacking on Agrium's board.

In a release, Rosenstein said it was good to see Agrium respond in detail after nearly eight months, but added that there are some key problems that still haven't been addressed.

"Nowhere has Agrium made a case that shareholders would not benefit from the experience and shareholder perspective that our candidates bring, nor have they explained why shareholders should have blind faith in a board which repeatedly failed to address basic issues like capital allocation and disclosure until we pressed them to do so."

While Jana generally prefers to solve problems privately with management, Rosenstein said getting its directors elected to Agrium's board is a bigger focus than reaching a compromise.

"Agrium management seems to be taking our analysis very personally, which is a little strange, but there’s not much we can do about that," he said in an email to The Canadian Press.

"The fact is that management does not get to cherry-pick the directors that will oversee them, and Agrium should be welcoming the experience and fresh perspective that Jana's nominees will bring to the board. There's nothing personal about that — it's just good corporate governance and we'll stay focused on that."

Wilson told reporters there's no good reason to appease Jana with board seats.

"Based on everything we've seen today, there's no reason for us to want to give them a seat on the board," he said.

"Why would you compromise when their position is so wrong?"

Wilson said the last time he met with Rosenstein was in October. Since then, the two have been lobbing criticism of each other through the media.

"If you can't have a constructive dialogue with him, why have it?" Wilson said.

Wilson is preparing to meet with major shareholders over the next few weeks to discuss the company's overall outlook, and it's likely that Jana, as the biggest investor, will be on that list, he added.

It's looking likely that the fight will be decided by a shareholder vote, which Wilson conceded can get expensive, but "you've got to do the right thing," he said.

Agrium normally holds its annual general meeting in May at its suburban Calgary headquarters.

Among the reasons to keep Agrium intact, Wilson said, is that it enables the company to make big acquisitions, relay key market information and keep a strong balance sheet.

He said Agrium would not have been able to buy agribusiness Viterra's retail arm — made available when Swiss-based Glencore agreed to buy Viterra last year — if not for its existing corporate structure.

Another benefit to keeping the company in one piece is that the retail segment can pass along market observations that help the wholesale business and vice versa.

For example, it's helpful for the retail segment to learn about a contract the wholesale side made to sell potash to China. Likewise, the wholesale segment can benefit from knowing what farmers are telling retailers.

And Wilson said Agrium is financially stronger now than it would be split up, with higher credit ratings and debt capacity allowing for more stability.

Jana has applauded recent Agrium steps to double its dividend and buy back $900 million in stock, but Wilson said he was "amazed" the fund took credit for those.

Agrium shares closed down $1.21, or 1.05 per cent, at $114.15 Monday on the Toronto Stock Exchange.


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