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Agrium opposes retail spinoff

by Lou Whiteman | Published August 14, 2012 at 11:30 AM

Agrium Inc. said Tuesday, Aug. 14, it has no intention of spinning off its retail operations, responding to reports that hedge fund manager Jana Partners LLC is building a stake in the Canadian fertilizer producer and will push for a breakup.

Calgary, Alberta-based Agrium, one of the world's largest producers of nitrogen-based fertilizers and the leading farm retailer in North America, in a statement said that its board had "carefully evaluated" the idea of spinning off its retail operations. Company CEO Michael Wilson said that the board "unanimously determined that it is contrary to the best interests of the company and its shareholders."

The company's statement followed media reports that suggested that Jana is preparing to agitate for change at Agrium. The Wall Street Journal reported Monday that Jana will soon disclose in a regulatory filing that it has amassed nearly a 5% holding in the $15 billion company since June.

The report said that Jana intends to pressure Agrium to cut costs and consider options for its farm retail distribution arm. Jana on Tuesday disclosed a 6.5 million share stake in the company, or about 4%.

But Wilson in the statement said that "spinning off retail would expose Agrium shareholders to substantial risk with no sustainable benefit, and we will not be pursuing it." The executive said that Agrium has "created significant shareholder value across the business cycle," noting that the company has increased its dividend ninefold since December 2011 and has a planned C$900 million ($907 million) share repurchase program.

Shares of Agrium, which hit a low of $60.15 in December, closed Monday at $96.19, just shy of its 52-week high of $97.89. The stock pushed past that high on Tuesday morning, opening at $98.45, before falling back to $96.73.

The company has argued that the retail operation, with its predictable cash flow and profit, is a good hedge against its more volatile wholesale fertilizer business. Agrium has been seeking to bulk up its retail business, agreeing in March to buy the agri-products business of Viterra Inc., including retail locations, from Glencore International plc for $580 million.

But some analysts have complained that even after the stock's run-up, investors are still not fully appreciating the retail operation, which is responsible for nearly two-thirds of Agrium's $16.78 billion in annual sales.

Jana has scored some recent success as an activist investor. The firm last year joined with Ontario Teachers' Pension Plan to push McGraw-Hill Cos. to split its education business from its financial information unit. Earlier this year it won a pledge from Marathon Petroleum Corp. to consider spinning off its pipeline operations.

Another Jana investment, TNT Express NV, in February agreed to be acquired by United Parcel Service Inc. in a $6.75 billion deal.

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Agrium opposes retail spinoff

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