Ottawa rejects Billiton’s PotashCorp play, for now

The major miner aiming to buy up Canadian fertilizer giant PotashCorp now has a month to try and change the federal government’s mind about the “net benefit” of such a takeover.

Federal Industry Minister Tony Clement, up against the deadline to make his determination on Anglo-Australian mining giant BHP Billiton’s US$38.6 billion hostile bid, announced late Wednesday that “at this time,” he is “not satisfied that the proposed transaction is likely to be of net benefit to Canada.”

Billiton, which bills itself as the world’s largest diversified natural resources company, launched its US$130-per-share bid for PotashCorp in mid-August.

Corporate rumour mills have since aired the names of various other possible suitors, and the Saskatchewan-based fertilizer firm’s share prices now consistently trade well above the US$140 mark. Billiton’s bid, however, remains the only firm offer to date.

Billiton, in a separate release Wednesday, said Clement has given the firm at least 30 days to make “further representations and undertakings” to his ministry with respect to its bid.

At the end of that time period, the mining firm said, Clement is to notify Billiton as to whether he is or isn’t satisfied that the offer is a net gain for Canada.

Canada, Clement emphasized in his statement Wednesday, has a “long-standing reputation for welcoming foreign investment” and “remains committed to maintaining an open climate for investment.”

Billiton added Wednesday it will now review its options, will continue to co-operate with Industry Canada officials, and is nonetheless “disappointed, but continues to believe that the offer is of net benefit to Saskatchewan, New Brunswick and Canada.”

(Apart from its potash holdings in Saskatchewan, PotashCorp also operates a mine at Sussex, N.B. and port terminal and warehouse facilities at St. John.)

Clement on Wednesday said he “came to this decision after a careful and rigorous review of the proposed transaction.”

He can’t discuss specifics of the ongoing case, he said, but “I can assure Canadians, however, that I will provide an explanation of the reasons behind my final decision at the time that decision is made.”

“Prospects”

PotashCorp, meanwhile, said in a separate release Wednesday that Clement’s announcement “does nothing to change our view that the BHP Billiton $130 per share offer is wholly inadequate.”

The company again reiterated its board “strongly believes that (Billiton’s) offer fails to reflect both the value of PotashCorp’s premier position in a strategically vital industry and the company’s future growth prospects.”

PotashCorp in August also set up a “poison pill” policy on its shares to block any bidder from completing an uninvited takeover.

If or when triggered by an unasked-for purchase of over 20 per cent of its shares, PotashCorp would automatically flood the market by offering cut-price shares to every shareholder other than the unsolicited bidder, diluting the value of that bidder’s stake.

The poison pill does allow for a takeover through a “permitted bid” or a negotiated deal, but PotashCorp has said Billiton chose not to make a permitted bid.

Political opposition to Billiton’s proposal has also been fierce, spearheaded by Saskatchewan Premier Brad Wall with backing from Alberta Premier Ed Stelmach, among others.

“Like Alberta’s energy resources, the vast potash reserves of Saskatchewan belong to the people of that province and Premier Wall is acting in their best interests,” Stelmach said last week.

Among several other assurances in recent weeks, Billiton has already promised it would set up its global potash headquarters in Saskatoon, where PotashCorp is headquartered.

And Billiton, in a move that was seen as a potential game-changer in Saskatchewan’s potash sector months before the PotashCorp bid, has also earmarked about $1 billion in a potash mining project of its own at Jansen, Sask., about 65 km southeast of Humboldt.

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