Canada province set to make Potash recommendation

By Rod Nickel

REGINA, Saskatchewan (BestGrowthStock) – The leader of the Canadian province that is home to Potash Corp (POT.TO: ) is expected to formally recommend on Thursday that Canada block a $39 billion bid by BHP Billiton (BHP.AX: ) to buy the world’s largest fertilizer supplier.

While the stance taken by Saskatchewan Premier Brad Wall is likely have a strong influence on whether the federal government accepts or rejects the bid, Prime Minister Stephen Harper will face conflicting political pressures that could complicate the ultimate decision, due November 3.

Wall has promised to announce his government’s position on the hostile bid by the Anglo-Australian miner during a speech in the provincial capital of Regina.

In recent days Wall and other officials have made it clear that they are concerned that a BHP takeover of Potash Corp would cost Saskatchewan billions of dollars in lost revenue.

After his afternoon announcement, the focus of the two-month-old takeover battle will shift to Ottawa.

If Wall’s speech goes as expected, the federal government will have to decide whether to stand by its supporters in the prairie province and accept the recommendation to block the bid. But Prime Minister Stephen Harper will also feel pressure to stay true to the pro-business philosophy his minority government has championed and allow the bid to proceed

That could prove costly to the federal government in terms of political capital. It could also cost Saskatchewan dearly.

The province estimates that it will lose about C$3 billion ($2.9 billion) in revenues over the next 10 years if the deal goes through because of the royalty payments are structured.

“In order for this takeover to be neutral in our view, the people of this province would need to see C$3 billion come from somewhere. And that’s a net neutral, that’s not even a net benefit,” Wall said earlier this week.

Under the Investment Canada Act, the federal government can only allow a takeover bid by a foreign company to proceed if it deems that a deal would bring a “net benefit” to Canada.

On Tuesday, sources told Reuters that BHP had failed to meet Saskatchewan’s demand for extra cash upfront and that talks between both sides had broken down.

Even so, BHP Chief Executive Marius Kloppers said in London on Thursday he was confident the sides would overcome Saskatchewan’s revenue concerns.

Wall will address businessmen in Regina at about 12:20 p.m. (1820g) to present the official Saskatchewan stance — reached after a series of intense meetings with his party caucus and cabinet since BHP revealed its bid in late August.

Ottawa has said it will pay attention to Saskatchewan’s views on this deal, as a takeover could have far-reaching consequences for provincial revenues.

That said, Harper downplayed Potash Corp’s Canadian roots on Wednesday, calling it an American-controlled company. His remark suggested to some that Harper may not be particularly concerned by BHP’s Anglo-Australian entity.

The bulk of Canada’s production of potash, a key crop nutrient, is located within the Canadian province, where Potash Corp was once owned by the state.

In rejecting BHP’s $130-a-share bid, Potash Corp has repeatedly said it expects competing offers to emerge, though none have materialized.

Potash Corp shares traded marginally lower at $142.25 on the New York Stock Exchange near midmorning on Thursday but the stock is still well about BHP’s offer price, suggesting investors the miner may have to sweeten its offer to carry the day.

($1=$1.02 Canadian)

(Writing by Pav Jordan; Editing by Frank McGurty)

Canada province set to make Potash recommendation