Agrium announced it would not spin off its retail distribution arm. The announcement came after pressure was placed on the company by U.S. hedge fund Jana Partners, which has been buying up Agrium shares since June. It is now the largest shareholder of Agrium with stock worth more than 5 percent of the Canadian fertilizer company.
The Wall Street Journal reported on Monday that Jana Partners had been pressuring Agrium to cut costs and suggested spinning off the retail arm would be beneficial. Agrium’s board of directors reviewed the idea and ultimately decided against it.
“Agrium’s Board has carefully evaluated the idea of spinning off Retail and has unanimously determined that it is contrary to the best interests of the company and its shareholders. Spinning off Retail would expose Agrium shareholders to substantial risk with no sustainable benefit, and we will not be pursuing it,” said Michael Wilson, Agrium’s president and CEO, in a statement.
In response to the hedge fund's proposal to spin off the retail branch, Agrium cut its estimate of the value of its farm-supply retail unit by at least 38 percent the same day Jana Partners LLC went public with its proposal.
Agrium has been building up its retail distribution arm. The company has more than 900 retail facilities in North America, more than 50 in South America and more than 250 in Australia.
The company has a deal with Glencore International Plc to buy 232 Canadian farm retail outlets and 17 Australian stores currently owned by Viterra Inc. This would make Agrium the largest farm retailer in Canada, but the deal is still awaiting regulatory approval.
Glencore is attempting to complete its takeover of Viterra this summer.