JANA Partners Calls Recent Agrium (AGU) Comments 'Diversionary'

February 25, 2013 1:56 PM EST
JANA Partners LLC today responded to a new presentation released today by Agrium, Inc. (NYSE: AGU) in which Agrium rehashes for a second straight week its factually inaccurate and diversionary account of the recent settlement discussions between Agrium and JANA. These talks ended two weeks ago when JANA rejected Agrium's settlement offer because Agrium chose new directors who lack relevant industry experience and because Agrium refused to commit to fully exploring opportunities for substantial value creation in the "5 C's": Costs, Controls, Capital Allocation, Conglomerate Structure and Corporate Governance.

"We are sure that Agrium would love nothing more than to spend the remaining weeks before the shareholder vote debating its fabricated version of our settlement discussions rather than the substantive issues," said JANA Managing Partner Barry Rosenstein. "This would spare Agrium from addressing the market's overwhelmingly negative reaction to its new directors who were hand-picked just weeks before a shareholder vote and who lack the industry experience and independence necessary to help unlock Agrium's full value, and its refusal to engage on the issues." Rosenstein noted, however, that the relevant facts are indisputable:

* Agrium's entrenched response is entirely unrelated to shareholder value creation. JANA has invested more than $1 billion in Agrium and has a proven track record of working constructively with boards and management to achieve one goal: maximizing shareholder value. Rather than embrace the opportunity to create substantial value and JANA's highly-qualified and independent nominees, Agrium has fought to protect the status quo, despite years of relative undervaluation and underperformance. In fact, despite its supposed confidence in shareholder support, Agrium has resorted to a gimmicky attempt to cut off debate by moving up its annual meeting by over a month. As one analyst noted, "Friday after the close at the start of a holiday weekend isn't typically when company boards disclose things they are proud of" (Credit Agricole analyst quoted in today's Financial Times)
* Agrium's new directors lack relevant experience. Neither of Agrium's new directors has significant 'breaking bulk' distribution experience. Three of JANA's nominees bring a combined 75-year track record of value creation in distribution and all five will bring a much-needed enhanced focus on shareholder value creation.
* Agrium's new directors lack sufficient independence. Prior to picking its two new directors, Agrium's CEO publicly disclosed his loyalty test for new directors, primarily that they not question management's strategy or performance, thus upending modern notions of good corporate governance. One of these directors, former Viterra CEO Mayo Schmidt, received C$30 million when Agrium acquired Viterra's distribution business.
* Momentum for real change continues to grow. Agrium's new management-approved directors and entrenchment efforts were followed by a 12% decline in its stock price, well below its weighted average peer group, indicating strong dissatisfaction with the status quo.

"We are confident that Agrium shareholders can see through the diversionary tactics," Rosenstein concluded, "and that they will embrace the highly-qualified and independent nominees we have proposed who can put Agrium on the path to substantial new value creation."

Addendum: Corrected Chronology of Talks Between JANA and Agrium

It is not surprising that Agrium wants to shift the focus from shareholder rejection of its directors and the status quo back to its distortion-filled account. In fact, Agrium has been trying to sell its untruthful version of events to the media since our talks ended, and having failed to find any takers, has now resorted to self-publishing its own faulty work two weeks later. While we will continue to focus on the issues, for any shareholders who are interested, or for scholars of board entrenchment tactics, we offer the following corrected timeline.

* Friday, February 8th - Agrium's lawyers approached JANA offering a settlement whereby Agrium would appoint one director selected by JANA and two new directors chosen by Agrium who it claimed would address the board's lack of industry experience, but declined to identify these directors (Agrium would in fact refuse to disclose such identities for over 48 hours, until near the end of the talks).
* JANA responded in writing that it was willing to explore a settlement on these terms provided that Agrium's new directors prove to be acceptable to JANA and that Agrium commit to fully exploring in some manner the issues raised by JANA in this campaign in the areas of Costs, Capital Allocation, Controls, Conglomerate Structure (which JANA requested a new independent review of given the highly flawed structural review process conducted by Agrium) and Corporate Governance.
* Saturday, February 9th - Rather than agreeing to fully explore such issues, Agrium repeatedly demanded that JANA embrace propaganda written by Agrium praising its performance on the very issues that JANA has identified as areas for substantial improvement, and repeatedly threatened to end discussions unless JANA agreed to do so, which JANA never did.
* Sunday, February 10th – Agrium's CEO and JANA's Managing Partner agreed that the settlement structure offered by Agrium would be acceptable, if Agrium's new directors (whose identities had still not been disclosed at that point) proved acceptable and if Agrium agreed in some form to exploring the issues raised by JANA (neither of which occurred).
* JANA entered into drafting discussions with Agrium's counsel that evening on a settlement agreement and press release, in case Agrium's new directors proved acceptable (which they ultimately did not) and in case Agrium agreed to exploring the issues raised by JANA in some form (which it ultimately did not). The press release disclosed today by Agrium was drafted by Agrium itself and was never approved by JANA, and includes self-praise Agrium tried to put in our mouths. These legal documents were worked on by JANA to try to accommodate a self-imposed deadline set by Agrium for reaching agreement, and Agrium's attempt to use a press release it drafted itself and we never agreed to in order to evidence its false claims speaks volumes about the current board's integrity and the need for change.
* Monday, February 11th – After reviewing the qualifications of Mayo Schmidt and David Everitt, who Agrium refused to identify until after 7pm on Sunday night which was more than 48 hours after discussions began, and in light of Agrium's continued refusal to commit in any manner to exploring the areas for improvement identified by JANA, JANA informed Agrium that its settlement offer was insufficient and more would be required to reach agreement, at which points these settlement discussions ended.

It appears that Agrium was never serious about appointing highly-qualified independent directors who could critically review the status quo, or to committing to fully explore the myriad opportunities for substantial additional value creation at Agrium, and was simply looking for a way to avoid a proxy fight that we believe it will ultimately lose. That is Agrium's prerogative. It is time however to drop the diversionary tactics and move on to the substantive issues.

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