Jana Partners released a new investor presentation regarding its case against Agrium Inc. (NYSE:AGU) (TSE:AGU). The new presentation strengthens its argument that a change in the leadership of the Canadian supplier and retailer of agricultural products and services is necessary, and its nominees to the board of Agrium are qualified and have significant experience in the agricultural industry to pursue opportunities to improve the company.
Jana Partners reiterated in the presentation that its primary objective is aligned with all the shareholders of Agrium Inc. (NYSE:AGU) (TSE:AGU), which is to maximize shareholder value. The value hedge fund reiterated that it is the largest shareholder in the company with 7.5 percent stake or approximately $1.2 billion investment.
The investment management firm opposed the argument of Agrium Inc. (NYSE:AGU) (TSE:AGU) that change is not warranted because its current integrated strategy delivered 467% return over the past seven and a half years. Jana Partners said that Agrium’s returns would decline from 467% to 231% if it would adjust its measurement date.
According to Jana Partners measurement period for the return covers the time when the company launched a hostile tender offer for a company, which was completed after extending its offer for five times and offered two separate price increases. Jana Partners emphasized that using the initial tender as a start date to measure Agrium’s return is beneficial for the company because it coincides with Hurricane Katrina, which temporarily depressed the stock value of the company due to record high prices of natural. Three months after when its tender offer gained enough support and gas prices declined, the shares of Agrium recovered. In addition, Jana Partners pointed out Agrium Inc. (NYSE:AGU) (TSE:AGU)’s end date for its returns measurement included the impact of its involvement in the company.
Furthermore, Jana Partners pointed out the Agrium Inc. (NYSE:AGU) (TSE:AGU) demonstrated relative underperformance even if it uses its non-standard measurement period and own selected peer composite. According to the hedge fund, Agrium’s peer-weighted composite increased by 817% in the same period compared to its 467% returns. The hedge fund said that the company’s underperformance is the same using the standard five and three years measurement period, and its return on capital during Agrium’s measurement period declined by almost 50%.
Moreover, Agrium failed to deliver the benefits from commodity tailwinds to its stock price particularly the declining prices of gas over that past five years.
Jana Partners strongly presented its position that its nominees for the board of Agrium would help the company to address issues to pursue opportunities to enhance the company including high costs in retail, growth in overhead, low returns on capital, insufficient capital return, misaligned management incentives, etc. The investment management firm reiterated that its nominees have relevant industry experience and shareholder mindset needed by the company.
Jana Partners also cited that a fair and independent review of Agrium Inc. (NYSE:AGU) (TSE:AGU)’s businesses is necessary because of the flaws of its initial analysis. The investment management firm emphasized that its nominees would be a minority of the board and would make decisions after the review and in accordance of their fiduciary duties. “None of them have any desire to destroy value at the company, which would also destroy the value of their own substantial investments in Agrium,” according to Jana Partners.
Barry Rosenstein, of Jana Partners said, “This debate comes down to whether Agrium’s board would benefit from the experience and focus on shareholder value that our nominees would deliver on behalf of all shareholders. We believe the answer is clearly yes, and we look forward to continuing to make our case for value-creating change.”