Agrium chairman says Jana's dissident board nominees are on a 'golden leash'

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A car passes the Agrium head office in Calgary, May 11, 2012. THE CANADIAN PRESS/Jeff McIntosh

CALGARY - The chairman of Agrium Inc. (TSX:AGU) says Jana Partners LLC is providing incentives to the nominees it wants installed on the fertilizer giant's board, undermining their independence and putting them on a "golden leash."

Agrium's current board and chief executive Mike Wilson have been outspoken critics of Jana, a New York-based fund that is Agrium's biggest shareholder with a 7.5 per cent stake.

In a letter to investors, Agrium chairman Victor Zaleschuk says "it is important to note that Jana’s dissident nominees have agreed to accept special incentive payments from Jana for serving on Agrium’s board."

Zaleschuk says in the letter, which accompanies a management proxy circular filed by Calgary-based Agrium, that the incentives are structured to support short-term actions even "at the expense of greater long-term value."

"This kind of 'golden leash' arrangement is unheard of in Canada and raises serious questions about the independence of Jana’s nominees, and their ability to act in the best interests of all shareholders," Zaleschuk said.

The letter and proxy filing were made in preparation for Agrium's annual general meeting in Calgary on April 9, when shareholders will have a chance to vote.

Jana described the letter as "another diversionary tactic" from a board that knows it's losing shareholder support.

The fund said that its nominees would only "stand to gain to the extent that all shareholders gain" and that they meet the standards of independence set by Canadian law, the New York Stock Exchange and Agrium's own governance guidelines.

"Agrium has known this since we first disclosed our director nominees four months ago but is raising it now out of desperation," it said.

"It is also preposterous that a board chairman that has purchased literally zero shares personally in almost seven years and a board that overall has invested so little personally in their own stock, and has acted accordingly, would seek to make an issue out of director alignment with shareholders," Jana said in a statement emailed to The Canadian Press.

Jana also said Agrium's new appeal doesn't address the board's "total failure" to unlock Agrium's true potential value.

"If these are Agrium's best arguments, we feel even more confident that real change is coming, and we look forward to releasing our own proxy to shareholders shortly," Jana said.

The Jana proposal that has garnered the most attention has been to split up Agrium's retail business from its wholesale business. Agrium said Monday that Jana has proposed to spin off Agrium's potash business, too. Jana also wants to cut costs, allocate capital more effectively and improve corporate governance and has criticized Agrium for focusing only fighting on the spinoff element.

"Jana's campaign isn't about corporate governance, operating performance or board experience," Zaleschuk counters in his letter.

"It is a Trojan Horse tactic aimed at securing board seats that Jana can then use to further its agenda of breaking up Agrium. To that end, Jana has promoted an ever-changing but consistently flawed analysis of Agrium's track record, business and board."

Zaleschuk said the facts do not support Jana's claims.

"You are invested in a company that has delivered a 467 per cent shareholder return (as of Feb. 13) since embarking on its current integrated strategy – a strategy that continues to create record results and significant and sustainable value," said Zaleschuk.

"Jana wants to abandon that strategy, break the company into three small pieces, and take other actions that will destroy shareholder value."

In a slide-show presentation, Agrium also goes after the companies in which three of Jana's nominees were involved: UAP, which was acquired by Agrium in 2008, Brenntag and MSC Industrial. It points out weaknesses on each of those company's boards, including a lack of independent directors with distribution experience.

Jana has said UAP's David Bullock, Brenntag's Stephen Clark and MSC's Mitchell Jacobson would fill the retail distribution experience gaps on Agrium's board. It also wants to appoint Jana managing partner Barry Rosenstein and former Liberal agriculture minister Lyle Vanclief.

Agrium has appointed former Viterra CEO Mayo Schmidt and former John Deere executive David Everitt to its board.

In its proxy circular, Agrium said it picked the two men after an "extensive search" that began in March 2012 — two months before Jana made its initial approach. A representative for Agrium said board succession planning was something Agrium was always planning on doing, with or without Jana's involvement.

Last month, Agrium gave Jana the opportunity to appoint one of its own directors, in addition to Schmidt and Everitt, in an effort to end what has become a bitter proxy fight. Both sides have offered differing accounts of what caused talks to break down.

Agrium shares were down more than two per cent at $104.81 on the Toronto Stock Exchange on Monday afternoon.