Jana Partners LLC, the New York activist hedge fund looking to install five directors to Agrium's board, says the move is the company's attempt at "vote buying."
However, Agrium calls Jana's accusations "baseless." It says enlisting the help of a dealer solicitation group is a common practice and there's nothing untoward about it.
In a memo to the group dated March 13, Agrium says it will pay members 25 cents for each share voted in favour of Agrium's existing board nominees, between a minimum of $100 and a maximum of $1,500 for each beneficial share owner.
The fees will not be paid if Agrium loses.
Jana says the fees are "inappropriate" and an "affront to basic notions of good governance."
The fund says it's one thing to use these arrangements when trying to drum up shareholder support for a move the board supports, such as a merger, but "it is entirely another matter for a self-interested board of directors to employ the tactic to influence the outcome of its own election."
Furthermore, Jana argues shareholders have been "kept in the dark" and should "immediately" ask their financial advisers or brokers whether they have been paid to recommend voting in favour of Agrium.
Agrium says dealer solicitation groups have been used in other Canadian cases, such as Telus Corp.'s (TSX:T) battle against Mason Capital over the telecom giant's share consolidation plan and EnerCare Inc.'s (TSX:ECI) fight with fund manager Octavian Advisors LP.
"This is an important election for Agrium shareholders and we want to ensure all shareholders are properly informed," an Agrium spokesman said.
Both Agrium and Jana said in their proxy circulars they may use dealer solicitation groups.
Jana partner Charles Penner said the fund considered using the tactic, but decided not to. He adds Agrium should have put out a statement announcing the agreement so that retail shareholders were in the loop.
The Jana proposal that has garnered the most attention has been to break off Agrium's retail business into a separate company. But, it also wants the company to cut costs, better manage capital and improve corporate governance.
Agrium says Jana's ideas would destroy value and that shareholders are better off if the company sticks with its current strategy.
A near-truce between the two sides fell apart in mid-February.
Agrium shares fell 1.25 cents to $97.81 on the Toronto Stock Exchange.