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(David Stobbe/ Reuters/David Stobbe/ Reuters)
(David Stobbe/ Reuters/David Stobbe/ Reuters)

Potash Corp. makes pledges to sell government on possible rival bid Add to ...

Potash Corp. of Saskatchewan Inc. is using economic incentives to help preen the company for political approval of a takeover bid that it remains adamant is coming to rival BHP Billiton Ltd. 's hostile offer.

The Saskatoon-based company is offering to relocate a handful of executive jobs to Saskatchewan from the United States, beef up community spending, and maintain the province's potash royalty scheme by tying any buyer to the Canpotex marketing arm.

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The "pledge to Saskatchewan" made Wednesday comes alongside the company's plea to the province and Ottawa to keep an open mind and "provide a level playing field" for a rival offer to BHP's $38.6-billion (U.S.) bid.

"We believe it is critically important for both the provincial and federal governments to understand that the interests of Potash Corp. shareholders and the citizens of Saskatchewan and Canada will be best served if alternatives are allowed to emerge," Potash Corp. chief executive Bill Doyle said in a letter to shareholders. "We believe that a robust process, in which multiple alternatives are considered, is the best way to ensure the best possible outcome for our stakeholders."

The communications come as doubts linger that Potash Corp. will be able to find a rival bidder with either the financing or political approval to beat BHP's bid.

Potash Corp. said it's evaluating "several alternatives" for the company, but sources have told The Globe and Mail that many investors who have looked at investing in the company, even as part of a consortium, see a bid as too rich.

There's also a political challenge for any foreign buyer to prove the takeover of one of the country's last major mining companies would be of "net benefit" to the country.

Sources have told The Globe that Chinese chemical conglomerate Sinochem Group, considered a lead contender for a rival bid, won't proceed with a bid unless it receives positive assurances from the Canadian government a consortium offer led by a Chinese state-backed enterprise will be fairly considered and not dismissed outright by Ottawa.

There has been concern that a state-owned company, with a goal of securing potash for its own people, would drive down the price of potash which would in turn mean less royalty revenues for the province.

In an interview with The Globe last week, Mr. Doyle said any potential bidders he has been talking with are willing to remain a part of the Canpotex marketing arm that sells potash produced in Saskatchewan to markets outside North America. They would also agree to buy potash from Canpotex at arms-length and maintain capital spending programs.

In its "pledge" to the province, Potash Corp. also said it would relocate a small number of executive jobs to the province from Chicago, in particular three jobs in legal, human resources and investor relations. A company spokesman said more jobs could move in future.

The province already has legislation that requires its head office remain in Saskatchewan, but the company has taken some heat for having some of its roles, including that of Mr. Doyle, based in Chicago. BHP has vowed to move all "relevant" potash jobs from Chicago back to the province as part of its bid, including the CEO.

Saskatchewan Premier Brad Wall said Wednesday he would like to see Potash Corp. increase its presence in the province. He's also "encouraged" by the incentives both Potash Corp. and BHP are offering the province as part of the takeover battle.

BHP said Wednesday that Potash Corp.'s proposal to transfer jobs to Saskatchewan from Chicago is "clearly" in response to its public commitments.

Follow on Twitter: @BrendaBouw

 
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