Province urges Canada to block BHP’s Potash bid

By Rod Nickel

REGINA, Saskatchewan (BestGrowthStock) – The Canadian province that’s home to Potash Corp (POT.TO: ) on Thursday declared its opposition to BHP Billiton’s bid to buy the fertilizer supplier, setting the stage for a politically charged final decision by the federal government.

Saskatchewan will urge Ottawa to block the $39 billion attempt to take over Potash, one of Canada’s largest resource companies, because a successful bid by the Anglo-Australian miner would hurt the province in terms of jobs and revenues.

“In the interests of jobs for Saskatchewan families, in the interest of the quality of life that we prize that is funded by revenues to the government, in the interest of the place of our province and our country in the world, we must say no to this hostile takeover,” Saskatchewan Premier Brad Wall said in a speech in the provincial capital of Regina.

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.

“It’s our government’s belief that the people of Saskatchewan deserve nothing less than a potash industry unequivocally managed, operated and marketed for the benefit of Canada and Saskatchewan,” said Wall, considered a political ally of the ruling federal Conservatives.

Saskatchewan estimates 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.

If Ottawa allows a takeover to proceed, Wall said, Saskatchewan would make tax changes applicable to BHP that could generate an extra C$3 billion for the province, compensating it for revenue it might otherwise lose.

“This is just another roadblock,” said Soleil Securities analyst Mark Gulley. “To me BHP is prepared to invest only so much in this property.”

The focus of the two-month-old takeover battle now shifts to Ottawa, where 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 come under pressure to stay true to the pro-business philosophy his minority government has championed and allow the bid to proceed.

Industry Minister Tony Clement said soon after Wall’s speech that the Canadian government would take all points of view into consideration.

“I’m neither a headwaiter to the premier of Saskatchewan, nor am I a butler to the president of BHP,” said Clement, whose department is conducting the official review of the bid under the Investment Canada Act. The deadline for a ruling is November 3.

“We have also noted the bidder’s position on these issues and the positions of many other Canadians besides. We will take all of that into consideration prior to making a determination.”.

Since BHP revealed its offer two months ago, Ottawa has said it would pay close attention to Saskatchewan’s views in light of a takeover’s impact on 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 the prime minister 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.

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

In rejecting BHP’s $130-a-share bid, Potash Corp has repeatedly said it expects competing offers to emerge, though none have materialized. The takeover offer is the largest in any industry this year.

Potash Corp shares traded nearly flat at $142.51 on the New York Stock Exchange in late afternoon 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)

(Reporting by Rod Nickel; Writing by Pav Jordan; Editing by Frank McGurty)

Province urges Canada to block BHP’s Potash bid