Agrium, Jana continue to spar
Agrium Inc. quickly responded to a presentation—“Unlocking Agrium’s True Value Potential” by Jana Partners LLC Co-Founder Barry Rosenstein before the Value Investing Conference in New York Oct. 1.
“There is nothing new in statements by Jana today,” said Michael Wilson, Agrium president and CEO. “Agrium remains confident that shareholders will receive far greater value, with less risk, under the company’s current strategy.”
Agrium reiterated that it has met with Jana, the largest shareholder with just over 4 percent of shares, and with its other shareholders. It said there is overwhelming shareholder support to continue Agrium’s integrated strategy.
Jana did put a new number in the public arena — $50 per share. It believes there is a $50 per share value creation opportunity if Agrium follows its advice, including the spin-off of Retail. To get to the $50 per share, it says $15-$20 would come by addressing the conglomeration discount, by eliminating the sum of parts discount from improving retail disclosure and announcing a plan to separate Retail via a tax free spin transaction.
Another $20 plus per share would come from rationalizing costs, eliminating excess cost in Retail to realize inherent operating leverage and from reducing excessive unallocated corporate overhead. At least $10 per share would come from releasing excess working capital and from committing to a more aggressive and more consistent return of capital through increased dividends and buybacks. Additional value would be created by adding real distribution executives to the board of directors who can better define operational and strategic goals and properly incentivize management to achieve them.