(Adds details, background on proposed merger)
By John Tilak and Rod Nickel
TORONTO/WINNIPEG, Oct 27 (Reuters) - The shareholders of Agrium Inc AGU.TO and Potash Corp of Saskatchewan Inc POT.TO are set to overwhelmingly approve a merger of the two Canadian fertilizer producers, according to a source familiar with the situation, despite initial skepticism from Agrium investors.
About 99 percent of the votes from both groups of shareholders are in favor of the transaction, said the source, who spoke on condition of anonymity as the matter is not public. About half of the votes have come in, the source said.
The merger requires two-thirds support of votes cast by shareholders of each company.
On Nov. 3, shareholders of Agrium and Potash will vote in separate meetings in Calgary, Alberta and Saskatoon, Saskatchewan, respectively, to approve the deal. month, Potash and Agrium agreed to join forces in an all-stock deal that will allow Potash shareholders to own 52 percent of the new company, with the rest going to Agrium shareholders. Agrium investors said at the time they were uneasy about the deal because it would give them greater exposure to the slumping crop nutrient potash. Agrium shares fell when the deal was announced.
Potash Corp Chief Executive Jochen Tilk said on Thursday that early votes were "overwhelmingly in favor of the merger." advisory firms Institutional Shareholder Services and Glass Lewis are supporting the merger.
The deal, combining the world's largest fertilizer capacity of Potash Corp with Agrium`s farm retail business, the biggest in North America, still faces regulatory scrutiny in Canada and the United States. Closing is expected in mid-2017.
In North America, the new company will control about two-thirds of potash capacity and nearly one-third of phosphate and nitrogen capacity.