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JANA Partners Calls On Agrium To Halt Vote Buying

NEW YORK, April 2, 2013 /PRNewswire/ -- Following yesterday's notice from JANA Partners that Agrium Inc. ("Agrium") (TSX / NYSE: AGU) is using shareholder money to pay brokers and investment advisers for votes for Agrium's directors, the response has been swift and decisive.
  • "Agrium's broker fee fails to pass the smell test." – The Globe & Mail, April 2, 2013
  • " 25 cents?  That's the going rate it seems to bribe shareholders … There just seems to be something sleazy about all of this." – BNN Business News Network, April 1, 2013
  • "I don't know if there's a clearer definition of buying a vote out there than what they are doing.  Paying 25 cents for a yes vote." - BNN Business News Network, April 1, 2013

While 24 hours later Agrium has given no justification or released any of the details of its vote buying plan, which is unprecedented, it has made a number of false statements in its defense.
  • "This is common in Canada." – False.  This tactic is sometimes used in M&A or other transactions that have been approved by an unconflicted board, not where a board is trying to influence the outcome of its own election.  We are aware of this happening in a contested board election exactly one other time, and in that case the full details of such arrangement were publicly disclosed.  Something that has happened once is not common, and no matter how many times something improper happens, it is still improper.
  • "This is no different than paying a proxy solicitor" – False.  Proxy solicitors identify themselves as working for the company and have no relationship with the shareholder.  In this case there has been no disclosure that brokers and financial advisors, who clients trust to give objective advice, are being paid for Agrium votes. Apparently Agrium had no plans to disclose these payments, thus deliberately misleading their shareholders.
  • " JANA signaled it had similar plans, and we did not want to be at a disadvantage." – False.  In fact it is entirely the other way around as Agrium first disclosed this as a possibility in its March 4 th proxy circular (using vague terms suggesting that it "may" employ this tactic without disclosing any details).  Our circular, reserving the right to do this, was filed on March 7 th.  In any event, unlike Agrium, we never pursued this option.
  • "We are just paying to reach hard to reach retail shareholders." – False.  Agrium is not paying to "reach" shareholders.  They are buying their vote for 25 cents a share, which could add up to more than $10 million dollars, making it one of the biggest expenses of the campaign for Agrium and a complete misuse of shareholder money.  Agrium is also only paying for votes if its entire slate of director nominees is elected.
  • "We are confident that we have shareholder support." – We leave it to shareholders to determine whether this is a credible statement in light of yesterday's revelations.

JANA today also called on all investment advisers and brokers who are approached by Agrium with its vote buying offer to consider whether, even if such tactics are legal in Canada (which we believe is questionable, and they are not legal in the US), they are consistent with the trust that their clients place in them.  

JANA also directed Canadian investment advisors and brokers to review the exemption from the Canadian proxy solicitation rules in National Instrument 51-102 which permits them to provide proxy voting advice to their clients.  That exemption clearly requires them to disclose "any significant relationship" with Agrium and one of the conditions to the exemption clearly prohibits them from receiving "any special commission or remuneration for giving the proxy voting advice" other than from shareholders. 

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