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Jana Partners: Agrium Breakup Is Shale Boom Bet

In late March, the fund reported it had sold off a successful investment in refiner Marathon Petroleum (MPC - Get Report) after the company's stock gained significantly on a refining sector rally and its decision to IPO a pipeline unit that Jana said could achieve a higher value independently.

Jana was also one of the largest investors in pipeline and shale oil drilling giant El Paso, which was bought by Kinder Morgan (KMI - Get Report) in the largest acquisition of 2011. Both investments underscore the fund's familiarity with energy investments and corporate actions as it now tries to profit from second-order benefits from the shale drilling boom.

At the IMN Active-Passive Investor Summit on April 30, David DiDomenico, a partner at Jana, said that the fund targeted Marathon Petroleum because of the value in the company's logistics and midstream operations, highlighting the impact of shale oil and gas on margins. "In Marathon, what we saw was the perfect mix of assets that we wanted to invest in." DiDomenico said that the company's midstream business will profit from a U.S. energy boom based on shale discoveries, representing 35% of the company's earnings, roughly triple current estimates.

Jana made its investment in November on the heels of Enbridge Energy Partners' (EEP) decision to reverse the flow of the Seaway Pipeline in the U.S. after buying it from ConocoPhillips (COP). The dip in the spread between WTI crude and Brent crude as a result of the pipeline reversal and a drop in refiners gave Jana Partners a value entrance into Marathon Petroleum's stock in the low $30s, said DiDomenico, at the IMN conference in April.

Jana also found itself on the right end of a trade in Barnes & Noble (BKS) after unveiling a 12% stake in April. The bookseller announced in late April that it was spinning off its Nook business with Microsoft (MSFT), which was taking a 20% stake, a deal that valued the e-reader unit at $1.7 billion and helped to stabilize the bookseller's shares.

-- Written by Antoine Gara from New York.

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