BHP’s bid for Potash Corp. blocked (November 03, 2010)

Vancouver – The Canadian Government has rejected BHP Billiton’s (BHP-N) US$39 billion hostile takeover bid for Potash Corp. of Saskatchewan (POT-T, POT-N).

Industry Minister Tony Clement made the announcement after market close in Ottawa, stating that the deal did not represent a net benefit to Canada.

The Minister did, however, leave open the possibility of an improved bid from BHP, saying a final decision will not be made for another 30 days.

In a brief press release, BHP Billiton responded by stating it was “disappointed, but continues to believe that the offer is of net benefit to Saskatchewan, New Brunswick and Canada.” The company further stated that it will review its options and continue to cooperate with Industry Canada and the Minister.

Saskatchewan Premier Brad Wall has been a vocal opponent of the deal, arguing the province stands to lose control of a strategic resource, as well as billions of dollars in royalty and tax revenue. The province is currently responsible for roughly 53% of world potash production.

New Brunswick Premier David Alward has also raised concerns about the deal, which could threaten the development of Potash Corp’s US$1.6-billion Picadilly mine in the province. The Governments of Alberta, Quebec and Manitoba have also voiced opposition.

Were the deal to fall through, it would be another significant setback for BHP’s expansion plans. In October a proposed joint venture with Rio Tinto to develop both companies’ Western Australian iron ore assets was blocked by regulators, while a hostile bid to acquire Rio Tinto itself collapsed two years ago at a write-down cost of US$285 million.

For its part, Potash Corp. has maintained that the US$130 per share offer is too low and has been actively seeking other offers, though none have yet materialized.

The Industry Minister’s decision marks only the second time a foreign take-over bid was rejected since the Investment Canada Act was established in 1985, with the other being a high-tech firm.

In recent years Canada has seen a number of high-profile foreign take-overs of major mining companies, including Inco, Alcan, Dofasco, Falconbridge, Algoma Steel and Stelco.