Jana Partners, a value oriented investment management firm founded by Barry Rosenstein, increased its stake in Agrium Inc. (NYSE:AGU) (TSE:AGU) to 7.5 percent, based on latest 13D filing with the Securities and Exchange Commission (SEC).

Agrium logo

Jana Partners purchased 1,751,288 shares of Agrium bringing its total stockholding in the company to 11,199,881. The company is a major supplier of agricultural products and services in North America, South America, Australia. Agrium is also global wholesaler of three major agricultural nutrients and specialty fertilizers. The hedge fund is the largest shareholder of Agrium.

Yesterday, Jana Partners released an open letter addressed to all the shareholders of Agrium regarding the company’s ability to generate substantial upside if it will address five core issues including capital allocation, cost, controls, conglomerate structure, and corporate governance. To help the company address these issues, the hedge fund proposed five new independent directors to join the 11-member board of the company.

“Despite the size and importance of Agrium’s retail distribution business (“Retail”), none of Agrium’s non-management directors have any relevant distribution experience, which we believe has contributed to Agrium’s historical share price underperformance compared to a weighted average of its peers. In addition, Agrium’s board failed to pursue many obvious value creation opportunities until pressured to do so, and has had troubling governance lapses since our engagement with the company began, underscoring the need to add a fresh perspective to the board,” said The hedge fund.

Jana Partners pointed out that the five nominees to the board of Agrium Inc. (NYSE:AGU) (TSE:AGU) are qualified and they have critical experiences to help in enhancing shareholders value. The company responded to some of the issues raised by the hedge fund, but it rejected the five nominees and appointed new directors.

The hedge fund criticized the action of the board of Agrium citing that they have failed to embrace actual change and refused to acknowledge the need for independent voices in its board to proactively seek-out shareholder-friendly improvements.

Jana Partners said the appointed new directors of the company lack relevant distribution experience, which is crucial due to the size of the company’s retail business.

Mike Wilson, president and CEO of Agrium explained that the company refused to accepts its Jana Partners’ nominees because “It is not typical to bring someone on the board who tells you your strategy is flawed and indirectly tells you you’re incompetent.”

Jana Partners said it never called Agrium’s management “incompetent” rather it simply pointed out the substantial opportunities that needs to explored and recommended executives to help.

In response to Jana Partner’s latest press release, Victor J. Zaleschuk, chairman of the board of Agrium Inc. (NYSE:AGU) (TSE:AGU) said, “JANA has been running its campaign for over eight months now. We are holding our Annual General Meeting a month earlier than usual to bring this matter to a close. We remain confident that we have overwhelming shareholder support.”

 “Agrium’s Board has given JANA’s ideas due and thorough consideration and we have rejected them. JANA’s analysis is flawed, and its ideas would destroy shareholder value,” added Zaleschuk.