Vote of confidence | Shareholders reject Jana’s board candidates
Agrium Inc. has won a proxy battle that could have torn apart North America’s largest fertilizer retailer.
Shareholders provided a vote of confidence to Agrium’s management and board, electing all 12 of Agrium’s director candidates at the company’s annual meeting last week.
They simultaneously rejected a slate of five candidates nominated by Jana Partners, the company’s largest shareholder, which is pushing for big changes at the Calgary company.
“The Agrium directors came out the winners in a tussle with a hedge fund from New York, but it was very close,” said Bob Schulz, a professor with the University of Calgary’s Haskayne School of Business.
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The 483 shareholders who voted at the annual meeting in person or by proxy held 115 million of Agrium’s 149 million outstanding common shares.
They were allowed to vote for up to 12 director candidates.
Barry Rosenstein, managing partner of Jana Partners, was the most successful of Jana’s slate of candidates, garnering slightly more than 53 million shares worth of votes.
The least successful Agrium nominee had a little fewer than 60 million shares voted in her favour.
Excluding Jana’s shares, Jana nominees on average received less than 25 percent of the votes cast.
“We thank our shareholders for their overwhelming support in this vote and throughout this extended proxy contest,” Agrium chair Victor Zaleschuk said in a news release.
“Approximately 80 percent of our top 50 actively managed institutional shareholders voted for Agrium’s nominees.”
Rosenstein alleges two of Jana’s candidates had enough votes to be elected to the board when voting closed April 5 but lost those seats over the weekend when votes were re-voked due to intense lobbying pressure from Agrium.
Jana also claims Agrium was offering up to 25 cents a share to convince shareholders to vote for its candidates.
“We intend to investigate the vote changes after the voting deadline, and of course the vote buying, and to pursue all appropriate remedies,” Rosenstein said in a statement he made at the annual meeting.
Walied Soliman, legal counsel for Agrium’s board of directors, ad-dressed Rosenstein’s criticisms at the close of the meeting, according to a transcript of the meeting prepared by Seeking Alpha.
He said there was no evidence to support Jana’s claims that it had two seats locked up.
“The loss was pure and simple, fair and square,” said Soliman.“We understand Mr. Rosenstein is upset but reject his attacks on the board and the integrity of this process.”
For the time being, Agrium appears to have successfully fended off a challenge from a disgruntled shareholder that owns 7.5 percent of the company.
It would have been easier for Jana to implement some of the changes it is seeking if the hedge fund had been successful in getting one of its directors elected to the 12-person board.
It would have also created an interesting dynamic around the board table.
“Suppose I said to you that I’ve got a group of chickens over here and we’ll put a fox in the henhouse. How would you feel if you were one of the chickens,” said Schulz. “The board would become very dysfunctional.”
One of the big changes Jana is pushing for is for Agrium to spin off the retail side of the business and focus on manufacturing and wholesaling fertilizer products.
Agrium has invested more than $4 billion in farm input outlets, starting with the 2008 purchase of UAP Holding Corp.
The company is attempting to add to that network with the purchase of 232 of Viterra’s crop input businesses. That deal is still subject to approval, including a review by Canada’s Competition Bureau.
The Viterra deal would give Agrium 42 percent of Saskatchewan’s agriculture retail business, which is of concern to provincial farm groups.
Schulz said hedge funds like Jana are not typically interested in the long-term viability of a company.
“They think that they can take the company, break it into parts and have the sum of the parts worth more than the whole,” he said.
Schulz believes that is a flawed approach in this case because Agrium’s business is highly integrated and there are financial benefits for a company that controls a product from manufacturing through retail.
He speculated that in the coming months Jana will sell its position in the company to institutional investors such as Alberta Investment Management Corp., the Ontario Teachers’ Pension Plan or the Canada Pension Plan.
However, Rosenstein said this is not the end of the story between Jana and Agrium.
“We are Agrium’s largest shareholder and you will find we are just as vocal and active outside of a proxy contest as we are within it,” he said.
“We will not hesitate to speak up should Agrium go back to its old ways, and we are not going away.”
Two prominent Canadian agriculture industry veterans were vying for a spot on Agrium’s board.
Former Canadian agriculture minister Lyle Vanclief, one of Jana’s five candidates, failed to get elected, garnering 22.7 million shares worth of votes, the lowest in the competition.
Mayo Schmidt, former president of Viterra, was elected with 60.1 million shares voted in his favour.
Schulz was stunned that Schmidt didn’t get more votes, considering he was head of Canada’s largest grain company, which owned the 232 Canadian crop input retail outlets Agrium is attempting to acquire.
“This was surprising to me,” he said.
