OTTAWA — Ottawa’s review of the Investment Canada Act needs to bring clarity to the process so businesses will know how foreign takeover rules will apply in future, critics said Monday after BHP walked away from its hostile bid to by Potash Corp. of Saskatchewan.
Deputy Liberal Leader Ralph Goodale said that without changes to the review process there will be lingering uncertainty and doubt about the standards for approval.
“That’s not good for business, it’s not good for the economy, it’s not good for the Canadian public interest,” said Goodale, who had campaigned against the BHP deal as the lone opposition MP from Saskatchewan.
“I think we need to bring greater clarity, greater precision into the whole process.”
Federal Industry Minister Tony Clement has said there may be ways to improve the review process when it comes to major foreign investments and that in coming days he will be explaining how he interprets factors under the act.
One suggestion by the government’s Competition Policy Review Panel has been to change the threshold for disallowing a deal from not being of net benefit to Canada to “contrary to Canada’s national interest.”
Louis Gagnon, an associate finance professor at Queen’s University, said businesses want clarity about how the rules apply, but that might not be possible.
“At the end of the day you want enough room to manoeuvre, you have to leave the door open and keep some flexibility in the system,” Gagnon said.
The retreat by BHP, the world’s biggest mining company, came less than two weeks after Ottawa rejected its nearly US$40-billion offer for PotashCorp (TSX:POT) as not having a net benefit for Canada.
The offer was rejected under provisions of the Investment Canada Act, which requires that major takeovers have a net benefit to Canada.
PotashCorp had fought the US$130-per-share bid throughout, saying it was “wholly inadequate” and seriously undervalued the company.
PotashCorp shares closed down $2.77, or just under two per cent, at C$138.60 on the Toronto Stock Exchange on Monday, still above the BHP offer price, as analysts pointed to strong demand for fertilizer as farmers around the world look to improve their crops.
Scotia Capital analyst Sam Kanes remained bullish on the sector.
“We continue to recommend overweighting all fertilizer stocks for now as the cycle is less than four months old,” Kanes said of the latest upswing.
In Regina, Saskatchewan Premier Brad Wall said he was pleased that even though BHP has walked away from PotashCorp, it has said it remains interested in developing its Jansen potash project in the province.
“We welcome the investment in any new mine ... it was the takeover and the reserves that were in play that were a concern,” Wall said at the launch of a new three-year campaign to attract investment to the province.
Wall noted the campaign was in the works before BHP launched its hostile bid, but said he was pleased with the timing of the launch.
In its offer to Ottawa, BHP had committed to spend $450 million on exploration and development over the next five years in addition to spending on its Jansen potash project in Saskatchewan.
An additional US$370 million would have been spent on infrastructure funds in Saskatchewan and New Brunswick. BHP Billiton also promised to apply for a listing on the Toronto Stock Exchange and relocate 200 jobs from outside of Canada to Saskatchewan and Vancouver.
The company also offered at $250-million performance bond to ensure it kept its promises.