7 Nov

Why ValueAct Capital discloses 5.7% stake in Agrium

WRITTEN BY Samantha Nielson

ValueAct Capital’s stake in Agrium

Shares in Agrium (AGU) rallied at the end of October after activist investor Jeffrey Ubben’s ValueAct Capital disclosed a 5.7% stake in the company. A 13D filing was made on October 24. The filing stated that the hedge fund acquired 8.19 million Agrium shares.

The fund said that the stake was acquired for “investment purposes.” However, news reports speculated that ValueAct will play more than a passive role in Agrium. In this series, we’ll evaluate ValueAct’s interest in Agrium. We’ll also highlight updates from the the Canadian fertilizer producer’s latest 3Q14 results.

Why ValueAct Capital discloses 5.7% stake in Agrium

Company overview

Agrium is a major retail supplier of agricultural products and services in North and South America. It’s a leading global producer and marketer of agricultural nutrients and industrial products. It produces and markets three primary groups of nutrients:

  1. nitrogen,
  2. phosphate and
  3. potash

It also produces controlled-release fertilizers and micronutrients.

Agrium’s wholesale segment produces, markets, and distributes nitrogen, phosphate, and potash for agricultural and industrial customers around the world.

Agrium Retail is the largest global retailer of crop input products and services. It provides growers with nutrients, seed, crop protection products, and advisory and application services. Agrium’s retail unit accounted for 43% of adjusted earnings before interest, tax, depreciation, and amortization (or EBITDA) in 2013. Retail is its largest segment.

Potash Corporation of Saskatchewan (POT)—or PotashCorp, Mosaic (MOS), and CF Industries (CF) are some of Agrium’s peers in the wholesale business. However, these competitors don’t have a retail business. Agrium also has exposure to the VanEck Vectors Agribusiness ETF (MOO). It has a 4.4% share.

ValueAct’s activist targets

ValueAct is based in San Francisco. It manages more than $14 billion on behalf of several institutional and individual investors. The fund was founded in 2000 by Jeffrey Ubben and George Hamel, Jr. One of its notable targets is Microsoft.

ValueAct revealed its $2 billion position in Microsoft last year. It was instrumental in CEO Steve Ballmer’s exit. Mason Morfit, president of ValueAct Capital, was appointed to Microsoft’s board of directors in March. The fund has also nominated directors in Adobe Systems Inc. and Motorola Solutions Inc.

Other known targets include Valeant Pharmaceuticals International Inc. and Sara Lee Corp. The fund is long-term oriented. It works with the company’s management and board to bring about change from the inside.

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