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Agrium CEO Michael Wilson.TODD KOROL/Reuters

Canadian fertilizer company Agrium Inc. has failed to prove that it should keep its two main divisions together, and also needs to cut costs and use capital more effectively, activist shareholder Jana Partners said on Thursday.

Jana, the largest Agrium investor with 6 per cent of shares, was rebutting a presentation the company made to sell-side analysts on Jan. 28.

"Nothing in Agrium's responses refutes the overall picture of a company that has historically been undervalued and underperformed its peer-weighted average, and that can unlock that value by addressing fundamental issues with the help of our highly qualified nominees," said Jana managing partner Barry Rosenstein.

Agrium could not immediately be reached for comment.

Jana has nominated five candidates to Agrium's 11-member board, setting up a proxy battle at the company's annual meeting in May or potentially sooner.

The New York hedge fund wants Agrium to spin off its farm retail division, the largest in the United States, which sells seed, fertilizer and chemicals to farmers. Jana argues that the retail arm is undervalued within an integrated structure with Agrium's wholesale division that mines potash and phosphate and makes nitrogen fertilizer.

Agrium has said that keeping retail and wholesale operations within one company produces synergies. The retail stores' direct contact with farmers, for example, helps its wholesale side make decisions on fertilizer production.

But Jana said those synergies are unproven and that Agrium has tried to hide how undervalued the retail division is within the company's share price, suggesting to the hedge fund the need for an unbiased review of the integrated structure.