In the attempted takeover of Potash Corp. of Saskatchewan Inc. by BHP Billiton Ltd., the absence of a national Canadian securities regulator places a heavy burden on the small securities division of the Saskatchewan Financial Services Commission, which will probably have to assess the "poison pill" that Potash's board has enacted in response to BHP Billiton's bid - a series of events with manifold international ramifications.
The plan published in July by the Canadian Securities Transition Office, headed by Douglas Hyndman, found that the 13 existing securities regulators of Canada have work forces that add up to nearly 800 people, of whom only 20 are at the SFSC, not much more than the three employees in Prince Edward Island and four in Nunavut.
It is a good thing that Potash's head office is still in Saskatoon - not far from the vast amount of small-p potash in the province of Saskatchewan. Major Canadian companies, such as the world's leading fertilizer producer, should not have to be based in one of Canada's three or four largest cities. There should, however, be a regulatory structure that is commensurate. A staff of 20, excellent as they may be, is unlikely to suffice for such a multifaceted conundrum as the future of Potash Corp. - for which other, equally complex bids from other international companies could well be in the works.
The government of Saskatchewan is participating in the transitional work of the CSTO, but remains non-committal on which side it will take - if any - in the constitutional litigation about the draft federal bill for the Canadian Securities Regulatory Authority.
As a member of an umbrella group, the Canadian Securities Administrators, the SFSC has adopted a national policy on "defensive tactics" in takeover bids, which clearly includes measures such as what Potash Corp. calls a shareholders rights plan, as announced last week, better known in the alliterative vernacular as a poison pill: stock options for existing shareholders at a substantial discount, which may serve to shelter the current management.
The CSA policy is quite general, and Saskatchewan's modest regulator, now under the eyes of the international business world, is likely to have to figure out on its own whether Potash Corp.'s defensive tactics are abusive. If there were already a large national regulator, it would of course be flawed, but it would have much more knowledge and experience to draw upon for a decision with major economic consequences.
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