- Costs: While Agrium claims to have continuously improved margins, JANA notes that this claim is based on a narrow time period and flawed metrics. Looking more broadly to the start of Agrium's Retail acquisition strategy, margins have declined overall despite Agrium's significant growth in scale, indicating a substantial cost improvement opportunity. In addition, JANA addresses Agrium's points regarding its Retail footprint and demonstrates substantial remaining opportunity for optimization.
- Controls: While Agrium claims that Retail management has been properly incentivized based on relevant metrics, JANA notes that management incentives still prioritize growth by any means with an under-emphasis on profitability.
- Capital Allocation: While Agrium claims it has created substantial value through M&A based on select examples, JANA notes that overall Agrium is today generating only a 9% return on capital (pre-corporate) in Retail, despite attractive industry fundamentals, which barely meets Agrium's own minimum return hurdle and indicates substantial room for improvement. JANA also notes that Agrium uses a flawed analysis which understates the opportunity to generate value by reducing working capital while still growing EBITDA.
- Conglomerate Structure: While Agrium claims its conglomerate structure generates substantial value, JANA notes that the synergies cited by Agrium are unsubstantiated. JANA also notes that after first talking down Retail's value by switching its long-promoted comparable set, Agrium is now manipulating the value ascribed by the market to its Wholesale business to obscure Retail's undervaluation, further underscoring the need for an unbiased review of Agrium's structure.
- Corporate Governance: While Agrium claims that JANA's criticism of its corporate governance lapses represents a departure from JANA's initial analysis, JANA points out that these lapses in fact occurred after this initial analysis was presented to Agrium, and were part of a concerted effort by Agrium to avoid the debate on value started by JANA.
JANA Partners Sets The Record Straight
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