Canada Blocks Potash Takeover
Move to reject BHP's attempt is not the final word on the deal, as other suitors surface.
Bryce Knorr
Published: Nov 3, 2010
The Canadian government has apparently rejected, at least for now, the attempt by BHP Billiton to take over the Potash Corporation of Saskatchewan, the latest move in a battle for control over a major chunk of the world's supply of the crucial fertilizer.
Industry Minister Tony Clement announced the decision, made under the country's Investment Canada Act that requires foreign takeovers to provide a "net benefit" to the country, based on a host of criteria ranging from jobs to exports. Under the law Billiton can present more information to buffer its case, which could delay any final ruling by 30 days.
BHP, based in Australia, in August announced plans to buy Potash Corp for $39 billion, a price the company rebuffed as too low. In the meantime, various "white knights" have been floated as suitors to potentially buy or invest in Potash Corp, including Chinese and Russian fertilizer companies.
Billiton's timing was a just a little bit off, as grain prices soared after the bid surfaced, sending international fertilizer markets sharply higher and increasing the value of companies and their assets. Potash Corp announced price increases in September and October, which added $125 to the price of its potash.
Provincial governments in Canada argued against the deal, but the move today came as something of a surprise because the conservative government is generally seen as pro-business and foreign investment.
Backers of the deal suggested Billiton's move might increase competition in the potash market, because the firm indicated it would move to a system of full production. Other companies typically cut back their mines when prices and demand are weak, as happened during the 2009 collapse from all-time high prices.
In the wake of the takeover attempt, Canpotex, the exporting arm of the three big Canadian producers, announced new multi-year marketing agreements with companies in both China and India.
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