Much is being said about BHP Billiton's hostile $39-billion takeover offer for Potash Corp. of Saskatchewan. Most of the negative comments come from Canadians who are loathe to relinquish control of another world-leading mining company. The positive are coming from BHP executives who are cooly pressing forward.
Canadian resistance is understandable. The takeover of Falconbridge, Alcan and Inco are still fresh in our minds. As are the broken promises and year-long strike at what were Inco's Sudbury operations, but now belong to a Brazilian owner. The province of Saskatchewan can ill afford to lose the potash royalties that make up 20% of its 2009-10 budget. Delisting PotashCorp, the sixth largest company on the TSX, would not be a positive event for the exchange.
A foreign takeover of a major Canadian industry will require review by the federal government, a group that has proven to be a rubber stamp for offshore interests. NDP leader Jack Layton has called for a public review instead.
Two-thirds of the world's potash resources lie in our Prairie Evaporites. Canadians rely heavily on fertilizer for the health of their food industry. To loose pricing and production control over potash is not in our interests.
Perhaps the federal government could be persuaded to declare potash a "strategic resource," and block foreign ownership on that basis.
PotashCorp's board has formally rejected the BHP Billiton $130-share offer. That has led to speculation about a competing bid. PotashCorp is being coy, saying only that there are "discussions." Perhaps with the Chinese? Both Vale and Rio Tinto have publicly said neither of them is involved. There aren't very many mining companies big enough to swallow the world's largest potash producer.
Meanwhile, BHP is fattening its war chest. The company reported $20 billion in earnings before interest and taxes for the fiscal year ended June 30, 2010. And it has secured loans totalling $45 million for the Potash deal. BHP says it won't proceed wit the PotashCorp deal "at any price," but analysts have said the right price for PotashCorp shares is in the $165-$180 range.
In a lighter vein, while we await further developments in the BHP-PotashCorp story, readers who missed it in March might enjoy seeing comedian Rick Mercer's underground visit to PotashCorp's Allan mine. The video is on YouTube, www.YouTube.com/watch?v=ZKQmsr5m_uY. It is lively and interesting.