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No 'Canadian chill' seen in Potash Corp. decision Add to ...

Canada's decision to halt the proposed takeover of Potash Corp. of Saskatchewan Inc. by BHP Billiton Ltd. shouldn't lead to big repercussions for Canadian companies unless the government makes a habit of turning down transactions, financiers and executives say.

The decision initially raised the concern that other countries might erect barriers to Canadian companies, and that Canadian companies might have trouble attracting investment from abroad.

The idea of a "Canadian chill" was a topic for debate Thursday on CNBC. Columnists from Reuters Breakingviews and The New York Times suggested that the decision could come with costs. The Times' influential deal reporter, Andrew Ross Sorkin, opined that the perception of Canada as a tougher place to buy companies could be a negative "but only on the margins around big commodity businesses, which increasingly are looking like national strategic resources."

However, Canada is not alone in ruling certain companies off limits, and as long as the decision to stop the acquisition does not signal a broader protectionist shift, the effects should be muted, said some prominent business leaders in Canada and abroad.

"Everybody recognizes that governments have the right to step in when they see their national interests being threatened," said Frank Aquila, a partner in the mergers and acquisitions practice of law firm Sullivan & Cromwell in New York. He was surprised, however, that Canada would exercise that choice with Potash Corp.

"I do not think that, based solely on this one decision, companies will be rethinking their approach to future investment in Canada," he said.

Calgary financier Brett Wilson, who made a career of financing oil companies, agreed: "We will not be shunned. We are resource-rich. Investors will come."

The hopes for minimal backlash seem to be founded on the belief that Potash Corp. is a special case because of its size and importance, and that other countries would not have allowed such a sale, either.

Stephen Jarislowsky, a leading Canadian investor who campaigned against the deal, said no one should read the decision as a declaration that Canada is not open for business from other foreign companies.

"There isn't a country in the world that would let this company go," said Mr. Jarislowsky, chairman and CEO of investment firm Jarislowsky Fraser Ltd. He said it is critical to keep Potash Corp. in Canadian hands, controlled by a Canadian board of directors.

The federal government will likely look to foster that perception, said Sandra Walker, a lawyer with Fraser Milner Casgrain LLP in Toronto who specializes in the Investment Canada Act.

"Will this happen again? It could. But I don't think it will happen frequently. There will be an attempt to distinguish this case from other cases, because clearly the government does not want to look as if it is pulling away the welcome mat from foreign investors," Ms. Walker said.

Michael Sabia, head of the giant pension plan Caisse de dépôt et placement du Québec, said decisions to block some deals should not have a major impact on the ability of Canadian companies to do business abroad.

"Canada has been a very open market and I think some other markets are less open and therefore it would be difficult for me to see that this would have negative implications for the access of Canadian investors in other markets," said Mr. Sabia, who declined to comment on Potash Corp. specifically.

One question is whether the perception that some Canadian companies will be viewed as takeover-proof will weigh on their stock prices. If they were to trade at a discount to foreign rivals, that could affect their ability to compete for acquisitions and capital.

Brian Imrie, a partner at KPMG in Toronto who advises on deals, said it shouldn't affect most Canadian resource stocks because most don't have such unique circumstances. "Boards and executives should expect no difference [in stock prices]" he said.

Not all corporate leaders were as sanguine. Peter Brown, chairman of Toronto-based Canaccord Financial Inc. and one of Canada's most experienced mining bankers, said Ottawa's decision to block the deal is "very harmful."

"Peoples' political ambitions are interfering with fundamental economic principles that are quite important to Canada," he said. "We want the reputation for being a free trader and a world trader. We've got to grow up and act like it."

With files from reporters Gordon Pitts, Janet McFarland, Joanna Slater, Jeff Gray and Bertrand Marotte.

 
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