NEW YORK, Oct. 16, 2012 /PRNewswire/ -- JANA Partners LLC today called on Agrium Inc. ("Agrium") (TSX / NYSE: AGU) to issue substantive responses to the structural and operating issues raised by JANA, and called the responses issued by Agrium to date incomplete and in many cases misleading. JANA, which is Agrium's largest shareholder, recently released a detailed analysis of the factors which have led to Agrium's undervaluation and underperformance, and steps to unlock Agrium's hidden value, including a larger and more consistent return of capital, improving disclosure, a working capital and operational cost reduction plan, rationalizing unallocated corporate overhead and separating Agrium's "Retail" and "Wholesale" businesses.
Today JANA released a new presentation (both presentations can be found at www.JanaAGUanalysis.com) detailing Agrium's responses to the issues JANA has raised. In this analysis, JANA notes that Agrium has sought to narrow the playing field by responding only to select issues, and its responses to even those limited issues have often been misleading or incomplete.
- Undervaluation and Underperformance: Misleading response - Agrium has sought to erase its historical share price underperformance using short-term results which have been impacted by JANA's engagement and other exigent factors. Agrium has also failed to offer any defense of its switch to new lower multiple comparable companies to value its Retail business after years of arguing for higher multiple comparables.
- Lack of Fit Between Retail and Wholesale Businesses: No substantive response – Instead, Agrium simply claims shareholder support for the status quo on this one issue. While JANA disputes this claim, JANA also expressed confidence that even shareholders who may currently support Agrium's structure will stop if Agrium fails to offer any synergies of its structure that can withstand scrutiny.
- High Cost of Current Structure: Misleading response - Agrium's responses fail to put its historical overhead cost growth in the proper perspective and sets an unacceptably low bar for cost management.
- Suboptimal Capitalization & Capital Allocation: Partial response - Agrium has improved its capital return profile following JANA's engagement, but has yet to commit to sustained improvement, and has not addressed the impact of its structure on capital allocation.
- Poor Retail Disclosure: No response.
- Board's Lack of Legitimate Retail Distribution Experience: No response.
- Failure to Manage Working Capital: Misleading and incomplete response - Agrium's responses are either easily refutable or lacking in sufficient detail to evaluate.
- Failure to Manage Retail Costs: Misleading response - Agrium has offered new disclosure giving a snapshot of its cost management, yet the broader trend of cost management relative to peers confirms JANA's point that unlike its peers Agrium's growth has failed to translate into operating leverage.
"Agrium has tried everything but making a compelling argument for the status quo," said JANA Managing Partner Barry Rosenstein. "While the company may dispute narrow elements of our analysis, nothing they have said refutes the overall picture of undervaluation and underperformance relative to Agrium's true potential. It's time to stop avoiding this discussion and embrace solutions to Agrium's long-term undervaluation and underperformance."
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