Saskatchewan Premier Brad Wall said his government won't back BHP Billiton Ltd.'s bid for Potash Corp. of Saskatchewan Inc. signalling the province doesn't trust the miner to keep its promises.
"As of today, I still don't see how this takeover is a net benefit," Mr. Wall told reporters in Regina Wednesday.
"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."
"There are just too many risks for taxpayers going forward if these undertakings don't materialize," Mr. Wall said, citing changing market conditions that have caused other foreign takeover promises to fall through.
"We are not going to bet the future of this province, the future of this important industry and jobs for Saskatchewan people on commitments that may not materialize."
Prime Minister Stephen Harper appeared to bump up against Mr. Wall's nationalist stand by calling the former provincial Crown corporation "an American-controlled company to be taken over by an Australian-controlled company."
He said the government will "review the matter" as is required as part of the "net benefit" test under the Investment Canada Act. Investment Canada is expected to decide by Nov. 3 whether to approve the bid, although that deadline could be extended.
While Saskatchewan doesn't have the power to veto the deal, its opinion will be part of the Investment Canada decision-making process.
Mr. Wall said the province will make its final decision at a cabinet meeting Wednesday, but that, "As of this morning . . . I don't see a net benefit to Canada or Saskatchewan at this particular takeover as it is proposed or any slight adjustments that have been proposed. I don't see it."
That is despite BHP saying it is open to negotiating further with the province to resolve its concerns.
"We can make that whole problem, as they see it, go away," said 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.
However, BHP said it cannot make the $1-billion (Canadian) upfront payments the province is requesting as a guarantee. BHP said that goes against its business principles, but that the taxes the company would pay would eventually add up to that amount or more if its bid is successful.
The government of Saskatchewan has been increasingly critical of BHP's bid for Potash Corp. in recent weeks, particularly after a Conference Board of Canada report it commissioned showed the province stands to lose at least $2-billion in tax and royalty revenues over the next decade. The province said this week that amount is closer to $3-billion when factoring in additional revenue BHP will write off in interest costs from money it borrows to finance the Potash Corp. takeover.
Saskatchewan's rejection of BHP's unsolicited offer, however, is not being widely interpreted as a sign the takeover attempt is dead. In negotiations with the province, BHP was willing to offer a $370-million payment into a proposed infrastructure fund in Saskatchewan that would help offset provincial tax revenue losses if the offer succeeds.
Government officials are understood to be seeking at least $1-billion from BHP in combination with other measures to counter potential lost revenue. That means that BHP could presumably meet Saskatchewan's demands by offering another $630-million. In the context of the Australian mining giant's $38.6-billion (U.S.) bid, that works out to about $2 more per share, on top of the $130 per share BHP has offered for Potash Corp.
BHP still has a few weeks before its offer expires on Nov. 18 and could presumably reengage in negotiations with the province.
If a deal were to be reached that satisfies Saskatchewan, the fate of the bid would rest with the federal government, which has to approve all major Canadian takeovers under the Investment Canada Act.
In Ottawa, Mr. Harper is facing growing pressure to reject the bid, as both the Liberal and New Democrats have come out against the BHP offer.
"Absent convincing evidence of a new benefit to Saskatchewan and to Canada, we simply cannot support BHP's takeover for the Potash Corp. of Saskatchewan," said Liberal deputy leader Ralph Goodale, the party's sole MP from the province.
"No other country would allow the fire sale of its key national champions. So why should Canada?"
Industry Minister Tony Clement refused to comment following a Conservative caucus meeting other than to say that the government will take into account Saskatchewan's interests as Investment Canada reviews the takeover bid.
"Our position is that we are reviewing the bid and we continue to do so in a serious manner," Mr. Clement said. "It is important that whatever bid is accepted, if it is accepted, would pass the net-benefit to Canada test."
He said the government is expected to rule under the Investment Canada process by Nov. 3.
With nine MPs from Saskatchewan, the Harper government faces a potential political backlash if it approves the deal over the objections of Mr. Wall. But Mr. Clement said he isn't feeling any pressure from his caucus colleagues.
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|POT-N Potash Corp. of Saskatchewan||36.47||
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|BHP-N BHP Billiton Limited||73.23||
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