CALGARY - Jana Partners LLC is accusing Agrium Inc. of taking a "scorched earth approach" in resisting changes the activist hedge fund wants to see at the fertilizer firm, including the spinoff of its retail arm.

Agrium CEO Mike Wilson met with Jana founder and managing partner Barry Rosenstein in New York on Wednesday, but a letter Rosenstein fired off to Agrium's board of directors seemed to indicate it didn't go well.

"We have watched in disbelief over the last few days as the management of Agrium Inc. has taken a scorched earth approach to avoid any reasonable discussion of our proposals to unlock the true shareholder value potential of the company," Rosenstein wrote in the letter, which was also distributed to the media.

"This pattern of behaviour continued in our meeting with management and their advisers at our office today."

Agrium said it regularly meets with all its shareholders, and the confab Wednesday was arranged weeks ago.

"The only accurate statement in Jana's letter is that Agrium is not going to spin off its retail business and that Agrium is always open to looking at ways to improve operating performance," said company spokesman Richard Downey.

"Our independent board unanimously decided that a spinoff was not in the best interest of shareholders."

One sticking point has been what value to assign Agrium's retail segment on a standalone basis, since there are no publicly traded retailers to compare it to.

Jana has accused Agrium of making a last-minute switch in its list of comparable peers in order to bolster its argument that the retail arm would fetch a poor price if it were spun off.

In the letter, Rosenstein said for years, Agrium used a set of "comps" that traded at a more than nine times earnings before interest, taxes depreciation and amortization, but then switched them to a new set with an average multiple of seven times EBITDA.

"Agrium management is either now intentionally and disingenuously talking down the valuation of the company's assets in order to avoid a rational discussion about the value of a separation, or has knowingly engaged in over $4 billion in retail acquisitions since 2008 for which it has paid far too much," Rosenstein wrote.

"Either equates to the intentional destruction of shareholder value, destroys credibility, and would be a complete violation by the board and management of their duties to shareholders, and we believe is grounds for investigation into management’s past and present comments regarding its comparable company set (one has to be wrong) to regulators."

Downey said there's nothing untoward about the change. He said Agrium's financial adviser, Morgan Stanley, had suggested the company needed broaden its peer group to include more names than UAP, the big U.S. retailer Agrium acquired in 2008, had chosen and that Agrium had based its numbers.

Jana, which holds a four per cent stake in Agrium, wants the Calgary-based company to spin off its retail segment, through which it sells fertilizers and other products to farmers, from its fertilizer production and wholesale business.

The investment firm has also raised concerns with Agrium about costs, capital allocation and operating performance in the retail segment. As well, it wants to see more retail distribution expertise on the board.

Investors seemed to have a tepid response to the Agrium news on Tuesday. Shares in the company, which has been trading near its highs for the year, barely budged, closing up 40 cents to $95.93 on the Toronto Stock Exchange.

But on Wednesday, Agrium's stock closed up nearly two per cent to $97.71.

Agrium is not the only big Calgary company to come under pressure from a New York hedge fund in the past year.

Pershing Square Capital Management waged a months-long battle and eventually replaced the CEO of Canadian Pacific Railway Ltd. (TSX:CP).

Unlike CP Rail, which critics accused of underperforming, Agrium has been posting strong earnings growth and recently more than doubled its dividend.

Agrium announced a $900-million share buyback program earlier this month, a move Jana has praised.

News from © The Canadian Press, 2012