CALGARY - Agrium Inc. (TSX:AGU) and activist hedge fund Jana Partners LLC have both met with an influential proxy advisory firm to make their case for why shareholders should side with them at the fertilizer giant's April 9 annual general meeting.
ISS is expected to make its recommendation shortly on whether investors should stick with Agrium's current board of directors or vote in Jana's five nominees in the nasty proxy fight.
"This debate comes down to whether Agrium's board would benefit from the experience and focus on shareholder value that our nominees would deliver on behalf of all shareholders," Jana managing partner Barry Rosenstein said in a release Wednesday.
"We believe the answer is clearly yes, and we look forward to continuing to make our case for value-creating change."
In its proxy adviser presentation, Agrium says Jana's ideas would "destroy shareholder value."
"Jana has not met the burden of proving that board change is warranted. Jana's dissident nominees are not more likely than the incumbent directors to effect positive change."
The dissident slate includes Rosenstein, former Liberal agriculture minister Lyle Vanclief and three businessmen with the retail distribution experience Jana says is sorely lacking.
Agrium has appointed Mayo Schmidt, former CEO of recently acquired agriculture giant Viterra, and ex-John Deere & Co. executive David Everitt. Jana contends those directors don't have what it takes to fill the retail distribution gaps.
Efforts to call a truce fell apart in mid-February.
The Jana proposal that has garnered the most attention has been to split up Agrium's retail and wholesale businesses. It also wants Agrium to cut costs, improve corporate governance and better manage capital.
Agrium has likened Jana's slate to a "Trojan horse" misleading shareholders into breaking up the company. Jana says its ideas go beyond a corporate split and that Agrium shouldn't be harping so much on just that idea.
Agrium says a split would jeopardize its credit rating and reduce its financial capacity by about $750 million.
Jana has invested about $1.2 billion in Agrium since May of last year for a 7.5 per cent stake, making it the company's largest shareholder.
Two investors that have publicly announced they're siding with Agrium — British Columbia Investment Management Corp. and Letko, Brosseau & Associates — have said the board representation Jana is seeking is disproportionate to its ownership stake.
"Their business plan is so different from the one being pursued by management that we are concerned that any Jana board representation would be disruptive to Agrium's business," Letko, Brosseau said earlier this week.
Jana says that view "represents a misunderstanding of shareholder democracy."
"Agrium's board owns less than one per cent of Agrium's shares, and has nominated every current board member. There is nothing 'disproportionate' about that because shareholders elected those directors," it said.
"Saying that directors represent all shareholders if they are nominated by the board but only represent one shareholder if nominated by that shareholder creates an unfair obstacle to shareholder nominations and would unwisely limit the pool of board talent from which shareholders have to choose."
In lengthy slide-show presentations to proxy advisers, both companies pick apart how their opponent compares Agrium's performance to its peers and evaluates Agrium's stock performance since it entered the retail business.
Both sides accuse the other of torquing their methodology to back up their respective arguments.
Agrium says it has delivered a 467 per cent return to shareholders between late 2005, when it launched a hostile bid for farm retailer Royster Clark, and mid-February of this year.
Jana calls Agrium's time frame "disingenuous" and says the returns are 50 per cent lower when "appropriate adjustments" are used.
"Upon examination, Agrium's chosen measurement period is highly engineered and inappropriate for performance comparison," Jana says in its presentation.
Jana says Agrium should start measuring its stock performance from when the Royster Clark deal was completed in February 2006, when a natural gas price shock caused by hurricane Katrina was no longer dragging on its shares.
And it says Agrium's time frame wrongfully includes an uplift since mid-2012 that resulted from Jana's involvement. Agrium scoffs at the idea that Jana had anything to do with the improvement.
"Jana created a highly simplistic and contrived approach to suggest Agrium shares have underperformed," Agrium says in its presentation.
"Jana either does not understand how to value assets in our sector or it is intentionally trying to deceive shareholders."
Letko, Brosseau said it doesn't buy Jana's view on that issue, calling its "choice of periods to measure share price performance misleading as it ignores the improved stock markets since June 2012."