The standoff between Agrium Inc. and hedge fund Jana Partners is drawing more attention after a change in the valuation of the fertilizer giant's retail business came to light Wednesday.
An earlier Streetwise post reviewed the thoughts of some analysts on the issue of splitting up the retail and wholesale divisions of the fertilizer company – and whether that action would serve shareholders' best interests.
Wednesday afternoon, Mark Connelly, an analyst at investment banking firm CLSA, added to the conversation by expressing interest in Agrium's revised calculation of what multiple the retail business would trade at (as reported earlier by Bloomberg). "Agrium seems to be talking down the value of the retail business, even as it moves to expand it," he said in a note. "That suggests that the prices Agrium has paid – for UAP, Landmark and perhaps even Viterra, may have been too high."
He also noted that while Agrium has so far dismissed Jana's proposed retail split, he hopes the attention brought to the matter "will encourage management to be more open in its disclosure of that unit's performance and strategy in the year ahead."
In a report from Aug. 7 – before Jana's split suggestion went public – Don Carson, a senior analyst at Susquehanna International Group, factored the retail business in his sum-of-the-parts analysis at a multiple of 10.2. That's well above the less-than-eight times EBITDA that Agrium recently said the retail division might trade at if broken off.
He also includes "acquisition risk pertaining to Agrium's aggressive strategy to grow its retail distribution business" as one of the risks to his positive rating.