Prime Minister Stephen Harper has signalled that he doesn't see Potash Corp. of Saskatchewan as a national corporate champion in need of protection from a foreign takeover, saying it's already American controlled.
As Saskatchewan's Premier and opposition critics demanded Ottawa act to protect Canada's resource sector from further foreign domination, Mr. Harper told the House of Commons on Wednesday the fight for Potash Corp. is over "a proposal for an American-controlled company to be taken over by an Australian-controlled company."
The statement was seen as an indication the Prime Minister will not block BHP Billiton Ltd.'s plan to acquire Potash Corp. for $38.6-billion (U.S.), as long as BHP can persuade the government that, on balance, it would benefit the country by adding jobs and investment.
However, Potash Corp. is not U.S. controlled. Canadian shareholders own about 49 per cent, while foreign shareholders hold 51 per cent, including 38 per cent held by Americans, according to a Conference Board of Canada report done for the government of Saskatchewan.
Mr. Harper's willingness to cast the company as already American owned indicates a "lean towards letting BHP" take over Potash Corp., said a former Conservative government official.
"We are most definitely a Canadian company," said Potash Corp. spokesman Bill Johnson. While some of the company's executives, including its CEO, are based in Chicago, the majority of its directors and employees are in Canada, the company noted. Potash Corp. recently made a "pledge to Saskatchewan" to relocate a handful of its senior management staff to Saskatoon from Chicago. BHP is promising to relocate its potash division's headquarters to the province.
Mr. Harper is walking through a political minefield after Saskatchewan Premier Brad Wall urged Ottawa to turn down BHP Billiton's offer for the former Saskatchewan Crown corporation. Mr. Wall said he has no faith in Ottawa's ability to extract enforceable promises for additional investment or job creation from BHP.
Opposition parties in Ottawa echoed the Premier's position, with Liberal deputy leader Ralph Goodale - the party's only Saskatchewan MP - urging the Prime Minister to "just say no" to the BHP deal. New Democratic Party Leader Jack Layton also demanded the government reject the takeover.
The Prime Minister - whose minority government holds 13 of 14 seats in Saskatchewan - said Investment Canada would take into account the province's views on the takeover, but appeared to reject the notion that Potash Corp. is a "Canadian champion," as opposition MPs have described it.
"As is required by law, the government will listen to all sides on the matter and the government will render a decision according to whether the transaction is a net benefit to Canada," Mr. Harper told the Commons.
PMO spokesman Dimitri Soudas said the Prime Minister was merely attempting to dispel the false impression that Potash Corp. remains a Canadian-controlled company, and was not commenting on the strategic value of the company to Canada. He said the company is "foreign controlled."
The company's head office is in Saskatoon, but nine of Potash Corp's 15 top executives, including chief executive William Doyle, are American and work from executive offices in Chicago. Eight of 12 board members are Canadians, including its chairman, Calgary businessman Dallas Howe.
Regardless of Canadian ownership levels, Investment Canada must review a takeover that involves domestic assets worth more than $300-million.
In Regina, Mr. Wall said the takeover would not represent a good deal for Saskatchewan or Canada. "As of today, I still don't see how this takeover is a net benefit," Mr. Wall told reporters Wednesday. The Premier took a tough line that suggested his support could not be won through BHP undertakings made to Investment Canada, the typical approach used to win Ottawa's approval of controversial foreign takeovers.
"These are promises and in every single takeover of a natural resources company in our country of late, promises have been made and promises are broken and Investment Canada has been letting the companies off the hook," Mr. Wall said.
BHP argues its proposal will address Saskatchewan's tax concerns, but also bring the company back closer to its Canadian roots through its vow to make Saskatchewan home to its global potash headquarters, repatriate head office jobs from Chicago to the province and boost community spending.
"We feel this is a company that has perhaps drifted slightly from its Saskatchewan roots to Chicago," Andrew Mackenzie, chief executive officer of BHP's non-ferrous metals group and the executive behind the company's $38.6-billion (U.S.) offer, said in an interview from Saskatoon on Wednesday. "We are absolutely prepared to re-establish these roots and we have a strong commitment to local management of resources."
BHP is also promising to address Saskatchewan's concerns that it could lose up to $3-billion in revenues in royalties and taxes if the bid succeeds.
"We can make that whole problem, as they see it, go away," said Mr. Mackenzie. "This is a relatively small province and it's a big industry in that province and these are large sums of money, so I completely get the concerns that they would have and, on that basis, I am prepared to guarantee that we will structure this deal so that taxes will be paid as though the deal never happened."
Saskatchewan is asking for the money up front that it could lose, and more, to leave its citizens better off.
However, BHP said any special transactions would upset "sound rules of international finance" to which companies in the province and Canada also adhere. Instead, BHP said the company will create more wealth in the province down the road just by operating there.
Saskatchewan is also looking for a commitment from BHP to remain in Canpotex, the potash marketing cartel that announced on Wednesday a three-year deal to sell $2.2-billion (U.S.) worth of the potash - which is a key ingredient in fertilizer - to China.
Should Saskatchewan's opposition stand, Mr. Harper will face the dilemma: Either approve a deal that is reviled by a conservative provincial government and one of the Prime Minister's staunchest allies among the premiers. Or kill the proposal, and send a signal that Canada is not willing to approve controversial foreign takeovers even as it attempts to attract foreign investment.
Several Canadian companies, including Regina-based agrifood giant Viterra Inc. and uranium producer Cameco Corp. of Saskatoon have made controversial investments in Australia. And Ottawa's rejection of the BHP deal could spark a backlash from that country.
Indeed, BHP is co-sponsor of a Canada-Australia business forum to be held in Sydney next month, with the stated aim of increasing bilateral trade and investment ties.
University of Toronto professor Janice Stein - who will be addressing that forum - said Mr. Harper has positioned his government as "open for business" but would face a difficult political choice if BHP can't satisfy Mr. Wall's demands.
The promise of openness "is a real commitment but it is never unqualified," Prof. Stein said. "It would be extremely difficult for any federal government to go against the wishes of a province, particularly in the case of Saskatchewan where potash is overwhelmingly located in one province."