* Jana also aiming at new appointee Mayo Schmidt * Agrium says Jana masking plans to break up company * Agrium shares down in early trading By Rod Nickel March 7 (Reuters) - Activist hedge fund shareholder Jana Partners will take aim at mostly long-serving Agrium Inc directors, in a proxy contest over whether to break up the Canadian fertilizer company and change how it runs its farm retail network. Jana's five candidates for the 12-member board will seek to replace former Agrium chairman Frank Proto, a 20-year board member, Susan Henry, who has been a director for 11 years, five-year director Derek Pannell and eight-year director Russell Horner. Jana is also targeting former Viterra Chief Executive Mayo Schmidt, whom Agrium appointed nearly one month ago. "These five directors embody the lack of relevant distribution experience, passivity in the face of underperformance, lack of shareholder alignment, and entrenchment tactics of Agrium's board that have caused Agrium to underperform," managing partner Barry Rosenstein said on Thursday in Jana's proxy circular to Agrium shareholders. Agrium said that Jana is downplaying to shareholders its aim to spin off its retail division, which sells seed, chemicals and fertilizer to farmers, from its fertilizer wholesale business. Agrium also said earlier this week that Jana's candidates for the board have agreed to accept payments from the hedge fund for serving on Agrium's board, raising questions about their independence. "Jana has resorted to attempts to deceive our shareholders because its ever-changing arguments have gained no traction," Agrium chairman Victor Zaleschuk said on Thursday. "Jana's dissident slate of 'golden leash' nominees has been commissioned to break up the company and terminate an integrated strategy that has delivered substantial and sustainable value to shareholders." Agrium shareholders will vote on April 9 for the board of directors at the company's annual meeting in Calgary, Alberta. Shareholders can vote for as many or as few candidates as they want, but can vote only from Agrium's or Jana's proxy card - they can't mix and match, a source close to the company said. There is no requirement that a shareholder vote for the entire slate of either side. Jana owns 7.5 percent of Agrium, making it the largest shareholder. Agrium shares dipped 1 percent in Toronto and 0.7 percent in New York in morning trading. BMO Capital Markets analyst Joel Jackson said he expects a settlement to the dispute before a vote takes place, likely involving some Jana representation on the board. "Investor fatigue has settled in, in our view, and we have seen little hedge fund/arb interest in this dispute," Jackson wrote in a note to clients. Jana's other concerns include costs of the retail operation, Agrium's use of capital and what it terms a lack of relevant board experience for the retail operation.