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Agrium's headquarters is pictured in Calgary, on Wednesday, May 7, 2014. Potash Corp. of Saskatchewan and Agrium have agreed to merge in a deal that would create a global agricultural giant worth an estimated US$36 billion.Larry MacDougal/The Canadian Press

The $36-billion (U.S.) combination of Agrium Inc. and Potash Corp. of Saskatchewan Inc. has been touted as a "merger of equals," but shareholders of each company are still scratching their heads about how they might benefit. The deal offers no premium, but a promised half billion dollars in combined savings at a time when companies are looking to cut costs as potash prices remain depressed due to global oversupply.

Shares in each company have fallen about 6 per cent since the merger was officially announced on Sept. 12, suggesting market skepticism. At least one Agrium shareholder says the company could face a backlash from investors since the deal exposes them to more volatile fertilizer markets.

"I think the market is speaking on behalf of everyone," John Goldsmith, deputy head of equities at Toronto-based Montrusco Bolton Investments Inc., an Agrium shareholder, told Bloomberg News.

He said Agrium shareholders will only benefit if the potash market recovers and warns that the merger may not get the needed votes from two-thirds of shareholders if executives can't better explain the savings and the benefits.

"The more the stock gets weak, there will be a huge backlash from Agrium shareholders," he said.

There has also been speculation that the proposed merger could be broken up by competing offers, as agriculture companies take advantage of lower valuations now that potash prices have plunged to around $250 a tonne, down from nearly $900 in 2009.

However, the possibility of competing offers isn't being reflected in recent stock activity. Foreign buyers may also be turned off by mining giant BHP Billiton Ltd.'s failed takeover of Potash Corp. in 2010, which was blocked by Ottawa as not being beneficial for the country.

How should investors play these stocks as the proposed merger, not slated to close until mid-2017, goes through regulator, court and shareholder approvals?

Analysts are taking sides as to which shareholders have more to gain if the merger goes through, or fails, while some portfolio managers suggest exiting the sector altogether given the dismal commodity price outlook.

"We would sell and do other things. … There are safer ways to make money," says Bill Harris, partner and portfolio manager at Avenue Investment Management. His firm owned Potash Corp. for about three months then sold it about a month ago.

Agrium is also an expensive stock, he said.

"When you put the two of them together, it doesn't make them better," Mr. Harris said. "Because it is such a special company it will get a higher valuation … but that's not necessarily good from an investment point of view."

AltaCorp Capital Inc. analyst Peter Prattas favours Agrium over Potash Corp., saying the stock would suffer less if the merger fell through.

Mr. Prattas also sees more growth in Agrium shares before the merger goes through and increased his price target on the firm to $101 from $95. He has an "outperform" rating (equivalent to a buy) on Agrium and a "sector perform" (similar to hold) on Potash. Mr. Prattas increased his target on Potash Corp. to $17.50 from $16. TD Securities Inc. analyst Greg Barnes has a hold on both stocks and says Potash Corp. shareholders should see their dividend increase with the merger, after suffering two cuts this year. The dividend will be unchanged for Agrium shareholders, he said.

BMO Nesbitt Burns Inc. analyst Joel Jackson downgraded Agrium to "market perform," saying the proposed merger gives the company significantly more potash exposure, "and we're bearish on the commodity."

"We expect the stock to trade sideways through the [proposed new company] approval process and believe an AGU thesis is now muddled," he said in a note, referring to the Agrium's stock symbol.

"Beyond the synergy potential (which we still struggle with), the overall deal rationale seems to be to create a Canadian ag/fertilizer champion (third-largest Canadian resource company)." According to Mr. Jackson, Agrium management will run the company and Potash Corp. is "essentially diversifying and 'cashing out.'"

Norman Levine, managing director of Portfolio Management Corp., has shied away from agriculture stocks for years because of the volatility and has no plans to get in any time soon.

"If you want to have exposure to the agricultural commodity area, this will probably be a decent company to own in the future. But if you're not … there's no need to do it. Take the money and run," Mr. Levine says. "The glory days of commodities, which were based on China and Chinese demand, are gone."