This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Jana Partners: Agrium Breakup Is Shale Boom Bet

(Agrium, Jana Partners story, updated with Agrium comment)

NEW YORK (TheStreet) -- Jana Partners, a hedge fund with an activist investing bent, is adding to its bet on a shale drilling boom and its case for a breakup of fertilizer giant Agrium (AGU) in the same breath.

Jana disclosed a $500 million-plus investment in Agrium in mid-August and said in a letter to the Calgary-based company's board that it should consider splitting its retail business from a much larger wholesale business, unlocking hidden value in the conglomerate.

Doubling down on the investment thesis, Jana chief executive Barry Rosenstein said at the Value Investing Congress on Monday that he will continue to push for a wholesale and retail unit split, noting that a shale drilling boom has significantly lowered the input costs for Agrium's nitrogen and fertilizer businesses on the wholesale side of the operations.

The hedge fund investor said Agrium's retail business could be worth $15 to $20 a share independently and that, in total, Agrium may be undervalued by $50 a share as a result of its conglomerate structure.

Agrium shares rose between 2% and 3% in late afternoon trading on Monday, adding to year-to-date gains nearing 60%. The company's shares hit a 52-week high in the early afternoon as the Jana Partners CEO was speaking at the conference, at above $107.

Rosenstein said as a result of lower natural gas input costs and the company's overall scale, "Agrium operates at a structural advantage" to its peers. He again pressed for a split of a retail business catering to food retailers and farmers from a more commodity-price sensitive wholesale nitrogen and fertilizer business to fully show the company's advantages. Agrium's retail business accounts for 30% of Agrium's forecast 2012 earnings before interest taxes depreciation and amortization [EBITDA], while its wholesale accounts for the remaining 70%.

On Aug. 14, Jana disclosed it held 6.5 million shares of Agrium valued at $575 million as of June 30, according to a filing with the Securities and Exchange Commission. With the disclosure, Jana unveiled the logic of splitting Agrium's retail business from wholesale; however, a separate statement from Agrium dismissed such an action.

Agrium president and CEO Michael Wilson said in a release, "There is nothing new in statements made by JANA today. Agrium remains confident that shareholders will receive far greater value, with less risk, under the company''s current strategy."

The Agrium release noted several meetings with Jana since they first contacted Agrium in late May, and the Agrium board's unanimous decision to not pursue a spinoff of the retail business, a decision the company says has overwhelming shareholder support

Nevertheless, Jana's investment thesis on Agrium is notable both for the fund's recent success in tapping a shale gas drilling boom, and in its success in advocating for the breakup of conglomerates like McGraw-Hill (MHP).

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,039.56 +60.43 0.36%
S&P 500 1,992.35 +5.84 0.29%
NASDAQ 4,532.1040 +5.6220 0.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs