A New York hedge fund which holds 5% of Agrium Inc. (TSX: T.AGU, Stock Forum) says it has identified potential operating performance improvements which could generate billions of dollars worth of value for the Canadian fertilizer giant.
The potential improvements were identified in a press release issued this week by Jana Partners LLC, which is pitching a business strategy that would see the operational and wholesale side of Agrium split into two separate entities.
But so far, senior Agrium officials seem cool to the idea of splitting the company.
In a press release issued by Agrium on August 14, President and CEO, Michael Wilson said “Agrium’s board has carefully evaluated the idea of spinning off retail and has unanimously determined that it is contrary to the best interests of the company and its shareholders. Spinning off retail would expose Agrium shareholders to substantial risk with no sustainable benefit, and we will not be pursuing it.”
However, according to Jana, since Agrium acquired agricultural vendor UAP Holding Corp., in May 2008, the company’s shares have returned 13% on the TSX, versus 57% for pure play fertilizer company CF Industries Holdings (NYSE: CF, Stock Forum) and a 163% average return for the pure play retail companies selected by the company itself, belying the company’s arguments about the supposed benefits of its conglomerate structure.
Jana has stated that even though Agrium’s stock has risen, the company is underperforming in comparison.
Currently, Jana is working to inform Agrium’s shareholders of its business strategy.
Jana is a value-orientated investment advisor specializing in event-driven investing exclusively for qualified investors.
Agrium Inc. is a major retail supplier of agricultural products and services in North America, South America and Australia and a leading global wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America.
On Thursday, Agrium’s stock was up 1.22% and was trading at $98.90. The company has a market cap of $15.6 billion, based on 158 million shares outstanding. The 52-week high and low was $98.16 and $63.93 respectively.