FERTILIZER:
Agrium eyes expansion
Fresh from beating back a proxy challenge from activist investor Jana Partners, fertilizer maker Agrium Inc. plans to refocus on expansion in the face of a commodities slump.
Jana “obviously chose the wrong target,” Agrium chief executive Mike Wilson said after the company’s annual general meeting in Calgary. “Now we can go and focus on what’s important to shareholders and that’s growing the company.”
Agrium’s victory allows Wilson to proceed with his strategy of building the company’s retail network to help counterbalance volatile fertilizer prices.
“Everyone would agree that now it’s all about execution, doing what the company can do to improve results,” said Mark Gulley, a New Yorkbased analyst at BGC Partners. “Now the debate is all about operational excellence, it’s about the nitty-gritty.”
Agrium’s largest shareholder, with a 7.5 per cent stake, Jana has been pushing the Calgary-based company to spin off its retail division, a network of agricultural outlets that sells seeds, fertilizer and crop-protection chemicals to farmers. However, investors rejected five Jana-backed nominees to the board.
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 Calgarybased Canadian Pacific Railway Ltd.
Other company’s shares, including those of SNC-Lavalin Group Inc., have rallied after minority investors sought to shake up management to boost earnings or spin off businesses.
Jana, which was founded in 2001 and invests in companies undergoing changes such as mergers, spinoffs and bank-
Agrium’s got longterm value U OF C PROF. BOB SCHULZ
ruptcies, promised to keep up the pressure on Agrium’s management.
Agrium fell 1.2 per cent to $95.38 at the close in Toronto on Wednesday. The shares have gained 13 per cent in the past 12 months.
Agrium faces the headwind of falling grain prices that may leave farmers with less money for agricultural chemicals and other farm inputs.
“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 in a note to clients.
Corn, soybeans and wheat, the biggest U.S. crops along with hay, have slid into bear markets with drops of more than 20 per cent from 2012 highs.
“Agrium’s got long-term value,” Bob Schulz, a professor at the University of Calgary business school, said in an interview. “The shares aren’t going to surge up in the next couple of days, but in the longrun there’s value there.”
Agrium’s farm retail division accounted for 66 per cent of the company’s revenue last year, according to data compiled by Bloomberg. That compares with 31 per cent at the company’s wholesale fertilizer business, which makes nitrogen, potash and phosphate-based products.
Jana contends the full value of the retail unit is lost within Agrium, while Agrium has argued it provides a useful offset to downturns in commodity markets.