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JANA Partners Issues Open Letter To Shareholders

Stocks in this article: AGU

Refusal to Address Core IssuesWhen Agrium approached us seeking a settlement, we made clear that for any settlement to occur the board would need to commit to conducting a full review of the branch footprint of its distribution business ("Retail") and corporate overhead ( Costs) and a full review of Retail senior management performance objectives ( Controls), to communicate a targeted dividend payout ratio or some other mechanism to clarify ongoing capital return plans ( Capital Allocation) and to retain a new investment bank to perform a review of Agrium's structure ( Conglomerate Structure), in addition to adding highly-qualified and independent new directors rather than fighting off such change ( Corporate Governance).  Agrium however refused to commit to even the mildest versions of these concepts.

Appointing New Directors Who Lack Relevant Experience Neither of Agrium's chosen new directors addresses the board's lack of distribution experience, which is of crucial importance given the size of Agrium's Retail business. 

  • Mayo SchmidtWhile Mr. Schmidt served as CEO of Viterra Inc. before it was acquired by Glencore and Agrium, Viterra's distribution business accounted for less than 15% of EBITDA and served primarily to advance its grain handling business. Agrium has also noted significant opportunities for improvement at Viterra's distribution business, which calls into question Mr. Schmidt's abilities in areas like cost management.  We also note that like Agrium, Viterra struggled in basic areas of oversight and performance including Costs, given Viterra's consistently high annual growth rate in corporate overhead, and Capital Allocation, given that Viterra executed no share repurchases (instead issuing over $2 billion of equity) and initiated a small dividend only after coming under pressure from shareholders to do so.
  • David EverittMr. Everitt ran a unit at Deere & Co. that manufactured and sold capital equipment to a separate independently-owned and operated dealer network. While he has experience in agriculture and with manufacturing and supply chain issues, he brings no experience in managing true "breaking bulk" distribution of primarily third party manufactured products, which is a crucial gap given that Agrium's Retail business purchases the vast majority of its products from third party suppliers and breaks bulk to distribute to farmer customers.

By contrast, 3 of our 5 nominees bring more than 75 years of combined experience creating substantial value in true "breaking bulk" distribution and excellent track records of deploying capital with a true owner orientation.

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