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.
Comments
D Merber
We have already lost several companies and their deposits to foreign investors – Inco, Falconbridge, and the list will grow. Brad Wall pointed out that Australia still maintains control over their resources and still attracts numerous investors world wide. I don’t see it as a weakness in owning our own resources.
Just talk to the people who work for these companies (Canadians that is) and get their perspective on what it’s like to work for a foreign owned company in their own country. I haven’t heard a lot of good things about foreign management in the attitude to workers. If your workers aren’t happy then your productivity suffers.
We in the exploration and mining industry have worked hard to find and develop these deposits. Let’s not give away the fruits of our labour for a few dollars “today”. It’s too bad that the mining industry is such an unknown among the majority of Canadians, unless there’s some kind of environmental or human disaster. It quietly contributes so much to the Canadian economy by so few people. It would be a shame to see the future of our children and children’s children sold off because it looked like a good business decision “today”.
Chris Armstrong
RIGHT ON, D. MERBER! What is this baloney regarding Canada being seen as not friendly to foreign investment? I graduated in ’59/’60 as a geological engineer, and have worked in Canada’s mining industry since then (including now). Canada probably has been one of the most open economies for foreign investment in natural resources in the world! Oh, just because we are concerned about selling pretty much an entire resource industry to BHP for their subsequent exploitation and manipulation of the industry on their terms, this is deemed “unfriendly”. How stupid can we get? BHP’s performance and reputation in “the Gulf” is something of which Canada and Canadians should be extremely wary! Brad Wall’s analysis of the situation, I believe, is the correct one. Canadian miners at ALL levels are among the best in the world: we do NOT want BHP (or any other foreign company) to own our Potash Industry, thank you very much, regardless of what the great brains at Investment Canada have to say.