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JANA Partners sells its stake in FMC Corporation

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FMC position sold by JANA

Barry Rosenstein’s JANA Partners exited a stake in FMC Corp. (FMC) during the third quarter, which ended in September. The stake accounted for 2.83% of the fund’s 2Q portfolio.

FMC

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FMC overview

FMC serves agricultural, consumer, and industrial markets worldwide. The diversified chemical company operates in three distinct business segments:

  1. The FMC Agricultural Solutions segment serves the agrochemicals industry and sells insecticides, herbicides, and fungicides. This segment develops and manufactures a portfolio of crop protection, professional pest control, lawn, and garden products. In 2013, the segment represented about 55% of the company’s consolidated revenues.
  2. The FMC Health and Nutrition segment focuses on food, pharmaceutical ingredients, nutraceuticals, personal care, and similar markets. This segment sells its products to customers in non-cyclical end markets. In 2013, the segment represented 20% of FMC’s consolidated revenues.
  3. The FMC Minerals segment manufactures a wide range of inorganic materials, including soda ash and lithium. The glass and detergent industries use soda ash, while lithium figures in energy storage, specialty polymer processes, and pharmaceutical synthesis. FMC said that the adoption of electric vehicles and other applications has driven the underlying market demand for lithium in the energy storage market.

FMC acquires Cheminova in September

In September, FMC announced plans to buy the Denmark-based pesticide maker Cheminova A/S for $1.8 billion, including $340 million in debt. Cheminova, a wholly owned subsidiary of Auriga Industries A/S, is a multinational crop protection company. In a statement, FMC said Cheminova has a “highly complementary product portfolio and geographic footprint.” FMC anticipates that the transaction will expand its Agricultural Solutions portfolio to “strengthen . . .  access in key agricultural end markets” significantly.

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Drops plans to separate into two public companies

In March, FMC announced the intention to split itself  into two independent companies: New FMC and FMC Minerals. The former would consist of FMC’s Agricultural Solutions and Health and Nutrition segments, while the latter would comprise FMC’s Minerals segment. The company later added that FMC Lithium will be retained as a separate operating segment.

In September, FMC altered its separation plans in order to pursue the sale of its Alkali Chemicals business. The company said it expects to finish this sale by mid-2015. FMC will use the proceeds from the sale to reduce debt that is related to the Cheminova acquisition.

FMC’s 3Q14 results miss estimates

Third-quarter revenue of $1 billion grew 6% over the same period in 2013. The company reported net income of $56.3 million or $0.42 per diluted share compared to net income of $17.9 million or $0.13 per diluted share in the third quarter of 2013. Excluding charges, adjusted earnings were $0.95 per diluted share, an increase of 16% from the prior-year quarter.

FMC said, “Agricultural markets were impacted by multiple factors around the world, a softening of demand in China affected parts of our Health and Nutrition portfolio, and Argentina continued to weigh on Lithium’s results.” The company added that commodity prices fell, “creating greater uncertainty around farmer planting intentions in Brazil today and for North America in 2015.”

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Minerals segment revenue grew 11%. FMC reported that “both Alkali Chemicals and Lithium remain very strong with production volumes at record levels. Combined with higher average soda ash pricing versus 2013, these increased production volumes provide a strong foundation for full-year 2014 earnings to exceed 2013 by over 20%.”

JANA’s other 3Q positions

JANA Partners added new positions in Amgen Inc. (AMGN), Dollar General Corporation, Rackspace Hosting Inc. (RAX), and Valeant Pharmaceuticals. The top increased positions included eBay (EBAY), PetSmart Inc., and Hertz Global Holdings (HTZ). JANA sold stakes in Mallinckrodt Pharmaceuticals as well.

The next part of this series will highlight JANA’s new position in eBay.

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