Potash bid rests with feds

Premier Brad Wall will not make a pit stop in Ottawa this week to speak with federal politicians about BHP Billiton’s $38.6-billion hostile takeover bid for Potash Corp. of Saskatchewan Inc.

He is confident the province’s position on the takeover — a resounding "no" — is fully understood and will receive due consideration by the federal government, according to a statement prepared for the media.

The Prime Minister’s Office has told the province the federal government will not receive further representations on the matter. No one from the provincial government would speak on the issue Sunday.

That news came alongside conflicting reports Sunday on whether BHP Billiton was planning to raise its $130-per-share offer by 10 per cent. The Sunday Times, a London newspaper, cited sources saying BHP Billiton would sweeten the bid, but another source told Postmedia News the company’s priority was getting Canada’s approval for the current bid.

BHP Billiton launched its bid in August, but PotashCorp’s stock has consistently changed hands well above the bid price, signalling there are expectations of a better price.

The shares closed Friday at $145.09 US on the New York Stock Exchange and at $147.50 on the Toronto Stock Exchange.

Federal Industry Minister Tony Clement is expected to decide Wednesday whether to block the Australian mining company’s bid for PotashCorp.

‘TOUGH ONE TO CALL’

Canada has approved 1,637 corporate takeovers since 1985 and rejected one.

"If you kill the bid, you’re going to see Canadian companies penalized when they try to buy companies abroad," said Sadiq Adatia, who oversees about $12 billion of assets, including PotashCorp shares, as chief investment officer at Russell Investments Canada in Toronto. "This isn’t a one-deal decision."

Saskatchewan has been joined in its resistance to the proposal by Quebec, Alberta, Manitoba and federal opposition MPs.

"It’s fairly unusual to have a provincial government being so vociferous in opposition," said Sandra Walker, a lawyer with Fraser Milner Casgrain in Toronto who specializes in approvals from foreign investment and competition regulators. "It’s a tough one to call."

PotashCorp, the world’s biggest producer of its namesake fertilizer, has 2,103 employees in Saskatchewan.

The Conservatives hold 13 of 14 seats in Saskatchewan and any loss here would take Harper further away from a parliamentary majority, which has eluded him twice before. The party holds 142 of the 308 seats in the House of Commons, 12 short of a majority.

"The politics of this — remember that we’re always in a pre-election phase — make it very difficult for the government to disagree with a popular premier," John Manley, the head of the Canadian Council of Chief Executives and industry minister from 1993 to 2000, said in an interview.

There’s a 30 per cent chance BHP’s bid will be approved, Manley said. Additional concessions won’t satisfy Wall because the premier wants to keep control of the resource, he said, and should the government block the offer, it will "ring-fence" the decision by explaining that it’s a unique case.

BHP Billiton says it will make Saskatchewan home to its head office for potash operations, continue developing its Jansen potash project in the province, maintain current employment levels and propose a Canadian nominee for election to its board. The company has taken out full-page advertisements in The StarPhoenix saying: "We Keep Our Promises."

PotashCorp has rejected the $130-a-share offer as too low and said it’s seeking other bids.

Should it proceed, the PotashCorp deal would be the largest takeover of a Canadian company after Vivendi SA’s $46.1-billion purchase of distiller Seagram Co. Ltd in 2000, according to data compiled by Bloomberg.

Under the Investment Canada Act, the government can block any transaction valued at $299 million or more if it finds the deal doesn’t provide "net benefits" to the country, based on factors such as economic activity, employment and productivity. Canada has reviewed and approved 1,637 applications under the act between June 30, 1985, the year the legislation was enacted, and Sept. 30 this year, according to government data.

OPEN MARKETS

PotashCorp is "seen as a Canadian champion and as a result it has political connotations to it that other issues wouldn’t have," Canadian Chamber of Commerce President Perrin Beatty said in an interview.

The government’s "predisposition will be to have open markets and to encourage investment, and the proponents of blocking the sale are going to have to demonstrate that there is a transcending national interest," said Beatty, a former cabinet minister under Progressive Conservative Prime Ministers Joe Clark and Brian Mulroney between 1979 and 1993.

Energy and Resources Minister Bill Boyd has expressed concerns that BHP Billiton might break up Canpotex Ltd., the fertilizer marketing company jointly owned by PotashCorp, Mosaic and Agrium. Because of its royalty formula, the province would stand to lose $3 billion if BHP increases production and lowers potash prices, he says.

Janice MacKinnon, a former Saskatchewan finance minister, said she sees a 60 per cent probability Harper will block the acquisition. He will lose parliamentary seats in Saskatchewan if he approves the deal, she said.

"It’s going to be very difficult for him to say, ‘The province owns the resource, the province thinks this, but I’m going to overturn the province and I’m going to accept the political fallout,’ " said MacKinnon, who is now a professor at the University of Saskatchewan.