Agrium rejects Jana’s takeover talk

Agrium Inc. came out swinging against activist shareholder Jana Partners LLC on Monday, rejecting every one of Jana’s major proposals and warning it would destroy billions of dollars of shareholder value.

Jana has publicly criticized Calgary-based Agrium for months, while proposing five dissident nominees for the company’s board. Investors have wondered what chief executive Mike Wilson would say when he finally responded.

Mr. Wilson pulled no punches on Monday in a presentation to analysts, arguing Jana is wrong about virtually everything and that he has support from the vast majority of shareholders.

He said he has no interest in reaching a negotiated solution, meaning this proxy bat- tle could run for a while.

“Why would you compromise when their position is so wrong?” he said on a conference call with reporters.

Jana welcomed Agrium’s entry into the debate and promised a more detailed response in the coming days. The fund maintained its board nominees would provide key industry experience that Agrium’s current board is lacking.

Jana’s main proposals are to separate the company’s retail and nutrient production businesses, while improving oversight on the retail side, which Jana believes is underperforming. It also proposed selling off the potash unit, according to Agrium.

Mr. Wilson said Jana hasn’t provided a detailed analysis that backs up its claim that a breakup would unlock massive value for shareholders. He said Jana backtracked on the analysis it did make, and argued the retail and wholesale businesses would likely receive a lower combined multiple than Agrium gets today. He suggested the multiples Jana is working with are way off-base.

But Agrium spent most of Monday trying to refute the criticism of its retail business. Jana has argued that costs are too high, and that at

Why would you compromise when their position is

so wrong?

least US$725-million of working capital could be taken out and returned to shareholders. Jana held up UAP Holding Corp., a company Agrium acquired in 2008, as an example of a more efficient retailer.

Agrium countered by saying it is focused on maximizing profitability at every retail location. The company noted it has closed more than 200 locations in the United States in the past seven years to optimize its network. It has also increased revenue and EBITDA per facility by 160% and 184%, respectively, since 2007, according to the presentation.

Agrium also stated that more than US$2.5-billion of shareholder value would be destroyed if its retail business was run the same way as UAP. Agrium argued it has significantly better EBITDA margins than UAP did, and better return on working capital.

“We’re not sitting on our laurels. We’re the No. 1 retailer and we’re going to continue to grow it,” Mr. Wilson said.

He became more heated when he discussed Jana’s criticism of the Agrium board, saying it is simply wrong to allow outsiders on the board “who say your strategy is flawed and indirectly say your management is incompetent.”

“I hate to say it, but it’s the way of the world today with activist shareholders, and I think a lot of CEOs are going to be busy with them,” he said.