Agrium CEO slams activist investor Jana, says proposals "all wrong" | iNFOnews

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Agrium CEO slams activist investor Jana, says proposals "all wrong"

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January 28, 2013 - 7:14 AM

CALGARY - The CEO of fertilizer giant Agrium Inc. (TSX:AGU) is showing no signs of warming to an activist hedge fund's plans for improving the company, telling analysts Monday that Jana Partners LLC's ideas are "all wrong."

In feisty remarks to sell-side analysts in New York, Mike Wilson ridiculed Jana's notion of breaking up the company into separate retail and wholesale companies.

"I get questions like 'Mike, why don't you just embrace them, for God's sake? Why don't you make a compromise? Let's get this thing over with,'" he said

"Well, the answer is, their prime objective is to split our company. That is the wrong thing. That's huge value destruction. Their views on working capital, operating costs, operation rationalization, on governance — they're all wrong. They're flawed."

A corporate split isn't the only demand Jana has made since it first approached Agrium in May, but it is the proposal that has garnered the most attention.

Jana is now Agrium's largest shareholder, with a six per cent stake.

Among other things, Jana also wants Agrium to cut costs, allocate capital more effectively, improve governance and disclose more information about its retail business.

Wilson defended Agrium's integrated strategy, telling analysts it enables the company to make big acquisitions, relay key market information and keep a strong balance sheet.

He said Agrium would not have been able to buy agribusiness Viterra's retail arm — made available when Swiss-based Glencore bought Viterra last year — if not for its existing corporate structure.

"We've been trying to buy Viterra's retail business for at least five years — totally unsuccessful," said Wilson.

"But the fact that we have retail and the fact that we had wholesale managed to get us that deal. No one else in the world was offered that ag business. We were the only ones and that's because we have an integrated strategy."

Another benefit to keeping the company in one piece is that the retail segment can pass along market observations that help the wholesale business and vice versa.

For example, it's helpful for the retail segment to learn about a contract the wholesale side made to sell potash to China. Likewise, the wholesale segment could benefit from knowing what retailers are hearing from farmers.

And Wilson said Agrium is financially stronger now than it would be split up, with higher credit ratings and debt capacity allowing for more stability.

Jana has applauded recent Agrium steps to double its dividend and buy back $900 million in stock, but Wilson said he was "amazed" the fund took credit for those.

"We'll return excess capital. We won't do it because an activist is banging on the door."

Agrium shares rose 63 cents to $115.99 in morning trading on the Toronto Stock Exchange Monday, beating its 52-week high.

News from © The Canadian Press, 2013
The Canadian Press

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