The takeover of Canada's Potash Corp. of Saskatchewan by Australian mining giant BHP Billiton is not going forward without a fight (or two). Both companies have gone to court - PotashCorp to stop the deal and BHP to keep it on track. Now another stakeholder has waded into the legal fray.
A group of First Nations' chiefs plans to file a court injunction to stop the takeover. They claim that their interests and concerns in the matter have been overlooked. Chief Perry Bellegarde of the Little Black Bear First Nation in southeast Saskatchewan said on Tuesday, "We need to be involved in a respectful, meaningful, substantive way, and we're not involved. It's increasingly frustrating that we've got to look at legal means in order to be heard."
I support the chiefs' decision for two reasons. It is unthinkable that Aboriginal peoples would not be consulted. There is no reason to exclude them because this deal involves operating mines rather than those in the exploration stage. And I will admit to having a bias in that I would like to see PotashCorp remain in Canadian hands. The last two takeovers of Canadian miners by foreign companies (Falconbridge by Xstrata and Inco by Vale) have done little to make me want to jump on the foreign ownership bandwagon.
In most takeover fights, money talks, and BHP has the money. To counter the $130 per share offer, PotashCorp. has issued its "Pledge to Saskatchewan." The Canadian company promises to keep its corporate headquarters in Saskatchewan, to fully support Canpotex, to support its own continued profit-maximization strategies, to develop a strong Aboriginal workforce, to support community programs, to purchase locally, and to complete its previously announced expansions.
When it is a question of wallets or words, the wallets usually dictate the winning side. It is not unheard of for shareholders to turn down a takeover offer, but it is rare.
The means to derail BHP's bid may have to come in the form of a higher bid from someone else. Perhaps Sinochem would be willing to join the fray. The Chinese certainly have the money to invest and have already done so several times in the Canadian resource sector. The downside is that control of PotashCorp would fall to foreign owners. This idea has been floating around for a couple weeks, and the Chinese still have not said they want to own PotashCorp.
Reports are also saying the Ontario Teachers' Pension Plan is interested in making a counter-offer. The fund was a previous investor in Canada's coal sector as a partner with Sherritt. I would like to think this scenario is the most likely because control would remain in Canadian hands. The Plan has said nothing officially yet.
So, industry watchers will have to wait a little longer to see what happens. Unless it is extended again, BHP's offer expires at the end of the day Nov. 18, 2010.