MERGER: Investment Canada gives conditional okay for BHP Billiton takeover of PotashCorp

Word has leaked out that Investment Canada has given conditional approval for the takeover of Potash Corp. of ...

Word has leaked out that Investment Canada has given conditional approval for the takeover of Potash Corp. of Saskatchewan by Australian mining giant BHP Billiton. BHP made a bid worth C$40 billion in August for the world's largest potash producer.

Since then the rhetoric has flown fast and furious. Saskatchewan Premier Brad Wall is vociferously opposed, saying that the province would lose billions in tax revenues. PotashCorp is the sixth largest company on the Toronto Stock Exchange, and to drop its listing may have longer term repercussions for the TSX. First Nations have taken up the call by insisting they be consulted on the merger. The Conference Board reported that the takeover is not beneficial to Canada.

Evidently, Investment Canada believes the deal does represent a net benefit to this country. The full decision was not available at press time, but some news outlets are reporting that there are strings attached, including relocation of the PotashCorp executives to Saskatoon. A watchdog with the authority to levy penalties would be appointed to monitor BHP promises to increase jobs and investment in Canada.

There are many supporters of the deal. They note that by blocking it, the government would be sending the message that Canada is closed to foreign investment. That could have negative effects on deals involving Canadian miners working in foreign lands. BHP has been seeking support through a vigorous advertising campaign in major Canadian newspapers.

BHP's original offer was US$130 per share, and that has not changed despite PotashCorp's second highest quarterly earnings in its history. With PotashCorp shares trading in New York in the US$145 range, the shareholders will have to decide if the offer is sufficient or wait and hope that BHP increases its offer.

With Investment Canada's okay, it is up to Prime Minister Stephen Harper to ink the papers allowing the merger to proceed. Doing so will risk the support of western Conservatives. Not doing so may send the message that foreign investment is not welcome in Canada. His deadline is Wednesday, Nov. 3.


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