As a new filing with the Securities and Exchange Commission showed, Jeff Ubben‘s ValueAct has initiated an activist stake in Agrium Inc. (USA) (NYSE:AGU). The investor reported holding over 8.19 million shares of the company, which represent roughly 5.7% of the company. Moreover, a couple of days ago, ValueAct kept acquiring more shares of Allison Transmission Holdings Inc (NYSE:ALSN) raising its stake to around 19.13 million shares after purchasing 275,000 shares at an average price of $27.17 per unit.
Agrium Inc. (USA) (NYSE:AGU) is a $13 billion producer of agricultural products, whose stock picked up by around 1.5% since the beginning of the year. However, on the back of ValueAct’s disclosing its position, the stock jumped by 7% on Friday. Starboard expressed its intention to monitor the company’s activity in the future and might engage in discussions with the management, board of directors, other shareholders and other parties regarding the company’s shareholder value. In this way, there is a reason for investors to be optimistic about the company’s prospects after Jeffrey Ubben stepped up and added the company to ValueAct’s equity portfolio. ValueAct is one of the best performing hedge funds with returns over 29% for 2013.
At the end of September, Mr. Ubben was added to the board of directors of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and ValueAct raised its position to the company to 18.93 million shares, which represent 5.6% of the company. Valeant has been widely discussed recently amid its intention to acquire Allergan, Inc. (NYSE:AGN) together with billionaire and activist investor Bill Ackman‘s Pershing Square.
At the beginning of October, Agrium Inc. (USA) (NYSE:AGU) reported that it expects its earnings from continuing operations to be between $0.45 and $0.55 per share and earnings for the fourth quarter to be in line with the last year’s result.
However, what is more interesting about Agrium is that it is not the first time when an activist investor is targeting Agrium Inc. (USA) (NYSE:AGU). Last year, Barry Rosenstein’s JANA Partners launched an aggresive proxy fight with the company. Back in the first quarter of 2013, Agrium was the largest holding of JANA Partners and the fund was the largest shareholder, owning around 7.5% of the company. Mr. Rosenstein’s fund accused Agrium of constant underperformance in comparison with its peers and proposed five candidates to the company’s board. JANA Partners’ activism had some successes and in October 2013, JANA cut its stake down to 2.7% of the company and said that it is pleased by the progress that the company had made.
However, Agrium Inc. (USA) (NYSE:AGU) has been still underperforming in terms of stock returns in comparison to some of its peers such as Potash Corp./Saskatchewan (USA) (NYSE:POT) and has only slightly outperformed Monsanto Company (NYSE:MON). This is why ValueAct’s activist move might give the company the boost that it needs in case that Jeff Ubben decide to pursue the company’s management to undertake some measures.
Aside from ValueAct, other investors among those that we track own less significant positions in Agrium. D. E. Shaw‘s D E Shaw reported ownership of 1.58 million shares as of the end of June, down by 7% on the quarter. Jim Simons‘ Renaissance Technologies upped its position by over 650% on the quarter to 114,00 shares as of the end of June. Both Shaw and Simons commited small portions of their equity portfolios to purchasing shares of Agrium Inc. (USA) (NYSE:AGU). However, knowing that many passive investors prefer to get into a company after an activist investor stepped up, we might see an increase of hedge fund activity surrounding the stock.
Regarding Allison Transmission Holdings Inc (NYSE:ALSN), ValueAct has been buying shares for several weeks now. Back at the beginning of October, the fund reported acquiring 550,000 shares of the company. A week later, the fund disclosed purchasing another 275,000 shares of Allison Transmission Holdings Inc (NYSE:ALSN).
In this way, with ValueAct disclosing a new stake in Agrium Inc. (USA) (NYSE:AGU) and the market reacting positively on the news, the stock should represent a sweet spot for smaller investors, who can get some of the action on the back of ValueAct’s activism. Moreover, the investor’s constant raising its exposure to Allison Transmission Holdings Inc (NYSE:ALSN) should also be a signal for other investors to consider adding the stock to their portfolios.