Industry Minister rejects PotashCorp takeover bid

Ottawa has rejected a nearly US$40-billion takeover bid by BHP Billiton to buy PotashCorp.

OTTAWA — Ottawa has rejected a nearly US$40-billion takeover bid by BHP Billiton to buy PotashCorp., a deal that would have been the biggest takeover in Canadian history.

Industry Minister Tony Clement announced the decision early Wednesday evening after reviewing the blockbuster transaction to see if it would be of “net benefit” to Canada under the Investment Canada Act.

“BHP Billiton’s bid does not present a likely net benefit to Canada,” Clement told reporters in the foyer of the House of Commons.

“When done right reviewable foreign direct investment is a key factor in the success of our economy. Canada needs to be open for business and we welcome any opportunity for investment that does provide a benefit to Canadians.”

Clement gave the company another month to change its bid, but the company may just walk away from the offer.

The rejection is rare and appears to undermine the federal government’s policies to boost trade and open up the Canadian economy to more foreign investment.

But in recent years, the takeovers of Canada’s steel industry and y iconic miners such as Alcan, Inco and Falconbridge by foreigners has angered many Canadians and raised the political temperature about foreign investment.

At least five provinces, led by Saskatchewan, opposed the BHP Billiton bid and pressed Clement to kill a deal they say would have given control over half the world’s potash supplies to the global miner.

Potash Corp. of Saskatchewan (TSX:POT). a former Saskatchewan Crown corporation, is the world’s biggest producer of potash, a key component used in fertilizer.

BHP has attempted to woo Saskatchewan, saying that it would make the province the headquarters of its global potash operations and ensure the provincial government coffers aren’t hurt by the takeover.

The refusal to approve the deal was win for Saskatchewan Premier Brad Wall who came out strongly against the deal.

BHP has offered US$38.6-billion or $130 per share for the Canadian company.

PotashCorp disclosed in a recent regulatory filing that it has spoken to 15 different “financial and state-sponsored potential bidders or investors” about making a competing bid for the company.

“The PotashCorp board believes that there is a real and substantial probability that alternatives to the BHP offer will emerge that will increase shareholder choice and enhance shareholder value,” the company said in a filing with Saskatchewan’s securities regulator.

Potential bidders have been rumoured to include China’s state-owned Sinochem and a consortium of Canadian pension funds.

Wall has raised concerns that BHP’s plans to run PotashCorp’s operations at full capacity would hurt expansion plans by other players in the industry, including Mosaic Co. (NYSE:MOS) and Agrium Inc. (TSX:AGU), potentially costing up to 750 jobs.

The premier has also said he believes Saskatchewan could lose between C$3 billion and $6 billion in revenue from taxes and royalties if BHP’s bid is successful.