BHP Billiton says it will go to extraordinary lengths to win over a deeply skeptical Saskatchewan government and populace as it strives for federal approval of its takeover offer for Potash Corp.
The Australian mining giant may add extra commitments demanded by the Canadian government to provide benefits for Canada from the deal, and promises to set up an arm's-length advisory panel to ensure the company keeps its promises.
BHP is already prepared to make a series of commitments, including moving the executive offices back to the province from Chicago, pursuing future investment plans, and structuring the deal to avoid major tax losses for the province.
BHP "would be happy to disclose" additional commitments it makes to Ottawa if it succeeds in winning Investment Canada approval for the Potash Corp. takeover, a company spokesman said. By law, the federal government is prohibited from releasing undertakings made by foreign investors, but companies themselves are free to do so. It's not known what Investment Canada would require, but additional commitments may involve job or investment demands, or marketing and transportation pledges.
But Saskatchewan Premier Brad Wall insists that promises made to Investment Canada cannot be trusted or enforced, and has publicly pointed to the case of U.S. Steel Corp., which Ottawa is now suing for failing to meet commitments after its takeover of Hamilton-based Stelco.
BHP understands the concerns the province has about broken promises, said Andrew Mackenzie, who heads the division that includes its potash operations. He added the company will set up public mechanisms that would ensure it remains true to its commitments for the potash operations in Canada. That would include setting up a special Saskatchewan advisory board, whose prime function would be to hold BHP to account on its commitments.
However, BHP said it will not ask for an extension of the Investment Canada review deadline, which expires Nov. 3.
In the face of Mr. Wall's adamant rejection of the BHP bid, Investment Canada is continuing its review to determine whether the takeover would represent a "net benefit" to the country.
Federal Industry Minister Tony Clement says the government will make its own determination, taking into account, but not being bound by, the views of either Saskatchewan or BHP. But sources say the Harper government is inclined to support the bid if the company can present a compelling case that it meets the net benefit test by addressing most - if not all - of Saskatchewan's concerns.
Ralph Goodale, deputy leader of the federal Liberals, added his voice to Mr. Wall's criticism of Investment Canada, complaining that the commitments made during investment reviews remain confidential, and that subsequent breaches are virtually unenforceable.
In the Commons on Friday, Mr. Goodale accused Prime Minister Stephen Harper of undermining the review process by describing Potash Corp. as an "American-controlled" company, a comment that was widely interpreted as seeking to diminish its status as a national corporate champion and, hence, make it easier to justify a takeover.
In his speech on Thursday, Mr. Wall dismissed the federal review process, saying Canadian corporate history is filled with cases in which foreign companies made promises in order to conclude an acquisition here, only to backtrack later citing changing market conditions.
Recent examples include Xstrata PLC's acquisition of Falconbridge; Vale SA's takeover of Inco; and Rio Tinto Group's deal for Alcan. In each cases, Mr. Wall noted, jobs were cut despite rosy promises from the foreign acquirer. The federal government is currently suing Pittsburgh-based U.S. Steel for allegedly breaking Investment Canada undertakings when it shut down operations at Hamilton's Stelco.