* All Agrium board candidates win election
* Jana says votes for its candidates revoked after deadline
* Agrium shares fall around 3 percent (Recasts with CEO's comments, details)
By Scott Haggett
CALGARY, Alberta, April 9 (Reuters) - Fertilizer company Agrium Inc fended off a bid by its biggest shareholder, Jana Partners LLC, to break up the company as a bitter proxy battle ended on Tuesday with Agrium winning a clean sweep in a board election that Jana dismissed as tainted.
Agrium said the vote was "fair and square".
Shares of Agrium, the world's third largest nitrogen producer and the largest farm retailer in the United States, fell nearly 3 percent in New York and Toronto after the results of the Canadian company's board election were known.
"They obviously chose the wrong target," said Agrium Chief Executive Mike Wilson after the company told its annual meeting in Calgary, Alberta, that shareholders had elected all 12 of its candidates and none of the five nominated by Jana.
"Our performance has been very strong and our shareholders backed us up," Wilson said.
As well as favoring a split of the company's wholesale fertilizer and retail businesses, Jana, which owns 7.5 percent of Agrium, wanted it to cut costs in retail, return cash to shareholders and improve disclosure. Agrium said keeping its wholesale production of potash, nitrogen and phosphate fertilizer and its retail business under one roof adds value.
Both sides frequently accused each other of dirty tricks during their five-month proxy battle.
Jana's defeat comes less than a year after fellow U.S. investor Pershing Square shook up the board and management of Canadian Pacific Railway Ltd in a public battle of a type that's still rare in Canadian boardrooms.
But unlike stock market laggard CP, Agrium's stock gained 49 percent in 2012, and it posted record full-year earnings.
Agrium's retail segment, which Jana wants to spin off to create greater shareholder return, accounts for more than two-thirds of its total sales and over one-third of EBITDA (earnings before interest, taxes, depreciation and amortization).
Jana's managing partner, Barry Rosenstein, said the hedge fund had garnered enough votes as of Friday's deadline to elect one or more of its candidates. But Rosenstein said he learned on Monday that enough Jana votes had been revoked to change the election's outcome.
"I congratulate you," he said. "You were a board that proved that if you played dirty enough, violate all precepts of corporate governance, fair play, ethical behavior and democracy, you can still lose a campaign, but then barely manufacture a victory after the voting is supposed to be over."
Jana spokesman Charles Penner said the hedge fund may challenge the revoked votes and other issues in court.
An Agrium spokesman said, "the loss was pure and simple, fair and square." Wilson said there were revoked votes on both sides after the deadline, but not in significant numbers.
Jana is "not going away," Rosenstein said.
Rosenstein, Jana's most popular candidate, got about 6.5 million fewer votes than Susan Henry, the Agrium candidate with the fewest votes, based on preliminary results.
Agrium, which has a market cap of about $14.6 billion, has grown sevenfold in market cap in the last decade. It acquired U.S. farm retailers Royster Clark and United Agri Products in 2006 and 2008, and Australia's AWB Landmark in 2010.
Agrium shares fell 2.7 percent in New York to $95.04 and 2.8 percent to C$96.53 in Toronto.
Agrium's New York-listed stock rose as much as 20 percent - touching a record high of $115.31 - in late January after news broke on Aug. 13 that Jana was pushing for change, but the stock has since given back all of those gains.
"Part of the weakness in the share price is due to the weakness in the nitrogen business," said analyst Mark Gulley of BGC Financial. "It is fundamental. I think a lot of it may have little to do with this proxy battle, and a lot to do with the fact that estimates are too high and have to come down."
Many investors, analysts and proxy advisory firms took sides ahead of the vote, although Agrium is so widely held that it was never certain how the vote would go.
Agrium received endorsements from proxy advisors Glass Lewis and two others, and from shareholders such as Letko, Brosseau & Associates, British Columbia Investment Management Corp, Canada Pension Plan Investment Board, and Alberta Investment Management Corp.
Jana won the backing of the proxy advisor Institutional Shareholders Services and, according to sources, shareholders Neuberger Berman and Third Point.
The two sides were close to a negotiated settlement in February that would have given Jana one seat. But talks broke down.
$1=$1.02 Canadian Writing and additional reporting by Rod Nickel in Winnipeg, Manitoba and Euan Rocha in Toronto; Editing by Gerald E. McCormick,; Peter Galloway and Janet Guttsman