Fertilizer firm skirts list of five recommendations by activist hedge fund and appoints two new directors to board
Agrium, North America’s largest fertilizers dealer, has ignored five director nominees supported by New York-based activist hedge fund Jana Partners and appointed two of its own in the latest move in an escalating proxy battle.
Agrium appointed retired Deere & Co executive David Everitt and Mayo Schmidt, the former chief executive of Viterra, to its board over the objections of Jana, Agrium’s biggest shareholder with a stake of more than 6 percent. Jana says the company needs to appoint more independent directors with extensive industry experience.
‘For more than six years, Agrium rejected the need for industry experience,’ Jana says in a statement reacting to the naming of Everitt and Schmidt. ‘Then in response to growing shareholder pressure, it acknowledged the need for such experience and said it would look for such directors.’ But the company said ‘such directors would not question the company’s prior performance or strategy.’
The activist hedge fund accused Alberta-based Agrium of announcing ‘two new directors who apparently meet management’s criteria for board service by embracing an unquestioned status quo despite the clear opportunities for value creation that shareholders have rallied around.’
Jana has been fighting Agrium to persuade the company to spin off its retail arm, appoint new directors and carry out a series of policy changes to boost profitability. Agrium reported in November that third quarter profits plunged 56 percent due to downtime at its potash operations and one-off charges.
Jana also denies Agrium’s assertion made earlier this week that the company held three days of discussions with the hedge fund to reach a resolution but that talks broke down after Jana rejected a proposed settlement.
‘In advance of announcing these directors, Agrium reached out to Jana in order to determine whether there was a basis for resolution of the proxy battle,’ Agrium says in a note to investors. ‘The parties discussed settlement for three days premised upon Jana’s agreement to stand down from its pursuit of a break-up of Agrium, along with its other activist initiatives, in return for Jana naming one of its director nominees to the Agrium board of directors. After agreeing, at the last minute Jana reneged and insisted on two director nominees.’
Jana claims it did, indeed, agree to talks but on premises that turned out to be ‘false’. The hedge fund maintains it agreed to talks after Agrium said it would consider addressing performance issues raised by Jana but that ‘Agrium then refused to commit itself to addressing any of the performance issues raised by Jana, and also revealed the names of new directors who Jana believes are insufficient to address the Agrium board’s insufficiencies.’
