An anonymous director of Jana reports
JANA PARTNERS REJECTS AGRIUM'S SETTLEMENT OFFER AND STATUS QUO DIRECTORS
Jana Partners LLC has released the following statement in response to the announcement by Agrium Inc. that it will appoint new directors to its board (all dollar amounts refer to U.S. dollars):
For over six years Agrium rejected the need for industry experience on the board, and its chief executive officer was quoted just days ago saying that there were "no shortcomings" related to its retail business on the board and that industry experience was not a prerequisite for board service. Then, in response to growing shareholder pressure, Agrium acknowledged the need for such experience and said it would look for such directors, but also set forth a litmus test that such directors would not question management's prior performance or strategy, or in other words would agree to abdicate a director's primary function.
Today, Agrium has completed that narrow search and announced two new directors who apparently meet management's criteria for board service by embracing an unquestioned status quo, despite the clear opportunities for value creation that shareholders have rallied around. In short, Agrium continues to want to have it both ways, to keep acknowledging the points we have raised -- first capital allocation and disclosure, and now the need for relevant experience on the board -- without having to embrace actual change. Agrium also continues to refuse to acknowledge the need for independent voices on its board who will pro-actively seek out such shareholder-friendly improvements, rather than waiting until they are forced to do so by shareholders, and who will work constructively with, not for, management. Jana is highly confident that shareholders will see through Agrium's latest hollow attempt to fight off real value-maximizing change.
Jana also commented upon false allegations made by Agrium in its release with respect to recent discussions between Jana and Agrium. In recent days, Agrium approached Jana seeking a settlement, and indicated that the company had identified new director candidates who would address the Agrium board's deficiencies in experience and that Agrium would commit to addressing the performance issues raised by Jana. In reliance on these representations, Jana engaged in good-faith discussions with Agrium regarding a mutually agreeable resolution. However, Agrium then refused to commit itself to addressing any of the performance issues identified by Jana and also revealed the names of new directors who Jana believes are insufficient to address the Agrium board's deficiencies. As a result, Jana informed Agrium that the initial proposed resolution was unsatisfactory and discussions terminated.
Biographical information for Jana's candidates
Mr. Bullock was the chief financial officer of Graham Packaging Inc., a global supplier of plastic packaging, from 2009 to 2011, where he led the company from private ownership under Blackstone to a public listing and its ultimate sale to Reynolds Group at a substantial premium to its initial public offering price.
Prior to Graham Packaging, Mr. Bullock was chief financial officer (2003 to 2007) and chief operating officer (2007 to 2008) of United Agri Products Inc., which, prior to its acquisition by Agrium, was the largest independent distributor of agricultural input products in the United States and Canada with approximately 350 stores. At United Agri Products, Mr. Bullock was responsible for improving the business, including the creation and implementation of its supply chain and logistics strategy, and implementation of its core operating systems and controls. United Agri Products was cited by Agrium's financial adviser, Morgan Stanley, as the best comparable peer for Agrium's retail business (see Agrium's Aug. 20, 2012, investor update, page 9).
Mr. Bullock was a key member of the management team that created substantial value by separating United Agri Products from agricultural conglomerate ConAgra Foods Inc. in an acquisition by Apollo Management and then turning United Agri Products around through substantial operating improvements. Mr. Bullock also oversaw the subsequent public offering of United Agri and its eventual sale to Agrium at a substantial premium to its IPO price. The successful turnaround of United Agri has made it one of the top-performing investments in Apollo's history. Prior to United Agri, Mr. Bullock held management positions with FMC Corp. Mr. Bullock has a BS from Lehigh University and an MBA from Cornell University.
According to Jana, during Mr. Bullock's tenure at United Agri from 2002 to 2008, the company experienced significant operating profit growth and margin expansion, driving EBITDA (earnings before interest, taxes, depreciation and amortization) growth of more than 16 per cent per year.
Mr. Clark is a member of the supervisory board of Brenntag AG. Mr. Clark had previously served as chief executive officer from 2006 to 2011 and as president of Brenntag North America from 1990 to 2006. Mr. Clark managed Brenntag during its private ownership by two different private equity investors (Bain Capital and BC Partners) and then led the company through a successful public offering in 2010. Brenntag is the global market leader in distribution for industrial and specialty chemicals with over $12-billion in total sales and an enterprise value of more than $8-billion. Brenntag was cited by Agrium's financial adviser as a relevant distribution peer for Agrium's retail business (see Agrium's Aug. 20, 2012, investor update, page 10). Mr. Clark is a graduate of Pennsylvania State University.
According to Jana, during Mr. Clark's tenure as chief executive officer from 2006 to 2011, Brenntag grew EBITDA by more than 15 per cent per year and the company experienced significant margin expansion despite a challenging macroeconomic environment, and since the company's IPO Brenntag shareholders have realized a total annual return of 25 per cent per year through Nov. 16, 2012, versus a 3-per-cent annual return for the STOXX 600 Index over the comparable period.
Mr. Jacobson is chairman of the board and one of the principal shareholders of MSC Industrial Direct Co. Inc. Mr. Jacobson previously served as chief executive officer of MSC from its formation as a public company in October, 1995, to November, 2005, and has since served as its chairman and remained its largest shareholder. MSC today has a $4-billion market capitalization, and is one of the largest distributors of a broad range of metalworking and maintenance, repair, and operating products, with over 600,000 unique stock-keeping units and over 100 branches in the United States. MSC was also cited by Agrium's financial adviser as a relevant distribution peer for Agrium's retail business (Agrium's Aug. 20, 2012, investor update presentation, page 10, footnote 1).
In addition to his experience with MSC, Mr. Jacobson is an investor and board member of privately held HD Supply Inc., a leading industrial distributor for professional customers in the infrastructure, maintenance, repair, and improvement and specialty construction markets with approximately $8-billion in annual sales. He is a member of the board of trustees for both New York University and the New York University School of Law, and is a member of the investment committee of the New York University School of Law Foundation. He serves as a trustee for New York-Presbyterian Hospital and is a member of the hospital's investment committee, as well as co-chair of the hedge fund subcommittee and a member of both the asset allocation and private investments subcommittees. Mr. Jacobson is a graduate of Brandeis University and the New York University School of Law.
According to Jana, under Mr. Jacobson's leadership, MSC has grown operating profit more than 12-fold since its IPO through August, 2012, representing compound annual growth of 16 per cent, in the process realizing operating leverage and margin expansion, and over this 17-year time period MSC's shareholders have realized a total annual return of 12 per cent per year through Nov. 16, 2012, versus a 7-per-cent annual return for the S&P 500 Index over the comparable period.
Lyle Vanclief, PC, PAG (Dist)
Mr. Vanclief was formerly the Minister of Agriculture and Agri-Food Canada (1997 to 2003) and a member of Parliament (1988 to 2004). In his role as minister, Mr. Vanclief had responsibility for a $140-billion industry and oversaw a ministry with 12,000 employees. His responsibilities as minister included stewardship of various Canadian federal agencies, including the Canadian Food Inspection Agency, Farm Credit Canada, the Canadian Dairy Commission, the Canadian Grain Commission and the National Farm Products Council.
Prior to his government service, Mr. Vanclief spent 22 years as an entrepreneur in the agriculture industry, during which time he built Willowlee Farms Ltd. into a diversified fruit, vegetable, grains, oilseeds and livestock operation in Prince Edward county, Ontario. Mr. Vanclief currently serves on the board of Bioniche Life Sciences Inc. Mr. Vanclief is a graduate of the University of Guelph in crop science, a professional agrologist, a fellow of the Agricultural Institute of Canada, a graduate of the directors education program at the Rotman School of Management (University of Toronto) and is an institute-certified director with the professional designation ICD.D. Currently he provides agricultural and agri-food consulting. Mr. Vanclief was inducted into the Canadian Agricultural Hall of Fame in 2010.
Mr. Rosenstein is the founder and managing partner of Jana Partners, an investment adviser with approximately $4.5-billion in investments and commitments, founded in 2001, and registered with the United States Securities and Exchange Commission. Jana is a recognized leader in creating value through shareholder activism, and has on numerous occasions successfully challenged boards and management to focus on creating shareholder value, including with respect to Marathon Petroleum, TNT, McGraw Hill, El Paso, Charles River, CNET, Kerr-McGee Corp., Artesyn Technologies, Houston Exploration Company, InterCept and SourceCorp. Mr. Rosenstein has served on several public boards, including the boards of Convergys Corp. and Copart Inc.
Prior to establishing Jana, Mr. Rosenstein was the founder and managing partner of Sagaponack Partners, a private equity fund. Mr. Rosenstein began his career as an investment banker specializing in mergers and acquisitions with Merrill Lynch in New York, and was also a principal in charge of corporate takeovers for Asher Edelman's Plaza Securities Corp. Mr. Rosenstein graduated from Lehigh University (1981) Phi Beta Kappa and earned an MBA from the University of Pennsylvania's Wharton School of Business (1984). Mr. Rosenstein is a trustee of Brown University, the U.S. Olympic Foundation and the 92nd Street Y in New York, and a board member of Make the Road New York.
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