Canadian Provinces Push Ottawa to Block Potash Bid

Friday, 29 Oct 2010 05:40 PM

 

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Potash Corp.'s home province is ratcheting up pressure on the Canadian government to block BHP Billiton's hostile approach, while the company still insists that rival bids could emerge.

Saskatchewan, where fertilizer producer Potash Corp. is based, wants Ottawa to reject the Anglo-American mining giant's $39 billion offer, the largest takeover bid of 2010.

It says a deal would rob Canada of a key strategic resource, as well as cutting jobs, Saskatchewan's tax take and its royalty payments, and the provinces of Alberta, Manitoba, New Brunswick and Quebec also oppose the bid.

Alberta, Manitoba and Saskatchewan alone account for 48 of the 142 seats the ruling Conservatives hold in the House of Commons, and the minority government needs those seats to stay in power.

"How do you overcome the strategic concern? ... This is more important going forward for the country than maybe it ever has been because the world is prizing food security and energy security," Saskatchewan Premier Brad Wall said in Toronto on Friday.

"Isn't it time that we maybe got a little bit circumspect about deals that involve this size of a reserve and this size of a company? I guess that's our position."

Potash Corp. is the world's biggest producer of its namesake crop nutrient, demand for which is soaring as food prices climb and demand for fertilizers rise. It has flatly rejected BHP's $130 a share offer as inadequate.

Potash Corp. stock was up just over 2 percent at $145.75 on the New York Stock Exchange. The shares spiraled above BHP's the offer price in August, when BHP launched its bid, and have stayed above that level, signaling that investors expect a higher offer to emerge.

POLITICAL CHALLENGE

The issue of whether to approve the offer has become a huge political challenge for the federal Conservative government, which must decide by midnight on Nov. 3 whether to approve or block it.

If it blocks the bid, it risks damaging Canada's reputation as a country that's open to foreign investment.

But accepting it might drive voters in Saskatchewan and in other provinces to other parties, jeopardizing the Conservatives' chances of staying in power after a federal election widely expected in the first half of 2011.

"Whatever we decide, when we decide, we owe a full explanation to Canada and Canadians and to the international investment community as well," federal Industry Minister Tony Clement told reporters.

A decision would come "sometime between a minute from now and midnight Nov. 3," he added, in comments that appeared to make it highly unlikely that the government would extend the deadline for its decision.

He refused to comment on reports that a decision to oppose the bid had already been made. Prime Minister Stephen Harper has said market-friendly solutions tend to be good for Canada.

The left-wing New Democratic Party, the smallest opposition party in Parliament, said it would present a motion demanding that legislators formally oppose the BHP bid.

Polls put the Conservatives just 6 percentage points in front of the Liberals, their main rivals, and they would lose seats if an election were held now.

The Liberals also oppose the BHP offer.

"This is one of the principal nutrients required for food production around the world and will be required for generations to come," said Ralph Goodale, the Liberal's deputy leader and its only member of parliament in Saskatchewan.

"If one transaction can take that out of Canadian hands forever, that's a pretty strategic, pretty serious consideration."

Canadian government approval is far from the final stage in the process, and the Saskatchewan Financial Services Commission is due to hold hearings on Nov 8 and 9 on a whether to overturn Potash shareholder rights plan.

In a filing to the commission, Potash Corp. said on Friday it had spoken with 15 strategic, financial and state-sponsored potential bidders and investors.

But it's a tough market, and a white knight would need more time to raise financing, it said.

That slightly strengthened a message that the company has beamed out many times already, and at least one leading Canadian investment banker remained skeptical.

"We're still waiting for them to show up," said the banker, who asked not to be identified.

© 2014 Thomson/Reuters. All rights reserved.

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