Stephen Harper has blocked one of the most controversial foreign takeovers in Canadian history, a remarkable about-face for an avowed free trader that sends confusing signals on this country's enthusiasm for outside investment.
Industry Minister Tony Clement announced late Wednesday that the Harper government has rejected Australia-based BHP Billiton Ltd.'s $38.6-billion (U.S.) hostile bid for Potash Corp. of Saskatchewan - a decision made in the face of a fiercely populist backlash against the deal.
"Some decisions can only be taken once and there is no turning back ever - such is the case today," Mr. Clement said.
The Conservatives said the deal did not offer an overall benefit to Canadians, adding that by law they cannot explain the rationale until the process is completely wound down in 30 days.
Wednesday's rejection muddies the Canadian government's repeated message that it is open for business and Mr. Harper will be under considerable pressure to clarify what constitutes beneficial foreign investment. It was only days ago that BHP appeared confident it had met Canada's "net benefit" test for foreign takeovers, only to be denied.
Miles Nadal, CEO of multinational MDC Partners Inc., said Ottawa's decision will increase uncertainty among international investors. "People need consistency and predictability to have confidence in the capital system ... I think [the announcement's]really bad for international investors' view of Canada as a free market, capitalist environment."
This is the second foreign takeover the Conservatives have blocked since taking office in 2006. Prior to that, federal governments had rejected no such deals in more than two decades.
The industry minister insisted the Tories remain open to foreign investment and free markets, as long as they are consistent with Canada's long-term economic interest.
Mr. Harper has embraced foreign investment as a cornerstone of his government's economic policy but Wednesday's decision allows him to avoid a nasty war with Saskatchewan and deflect opposition criticism that he is selling out the country. The Tories have been worried blessing the BHP deal would cost them seats in Saskatchewan, a key Conservative stronghold.
Saskatchewan Premier Brad Wall has argued the Saskatoon-based fertilizer company is a strategic asset for Canada because it controls a large share of the world's potash reserves and production.
The Harper government has left the door slightly ajar for BHP to come back with a sweetened offer within 30 days - as required under the law.
Government officials said privately, though, they were merely following the rules in the Investment Canada Act and not deliberately inviting BHP back to the table - suggesting the company would have a tough time reversing the ruling.
BHP Wednesday night appeared eager to try again, saying they're willing to raise the bar even higher in terms of their offer in order to win approval from Ottawa.
But Mr. Wall, who led the charge against the deal, suggested there was little the Australian multinational could offer to change his mind.
"We've said all along this is not a bargaining position. So there is no price on 'no' for Saskatchewan," he told reporters.
Mr. Clement's announcement is a significant back-down for Mr. Harper.
It was only weeks ago the Prime Minister dismissed the controversy over the BHP deal as merely "a proposal for an American-controlled company to be taken over by an Australian-controlled company."
But as the bitter debate over the BHP offer played out, Potash Corp. was transformed in the public eye from a relatively obscure business venture into a Canadian corporate jewel in a globally strategic industry.
While international investors may be confused by Canada's decision, many corporate executives applauded it, arguing Canada has for too long been a "boy scout" in international markets while other countries protect their key domestic industries.
"Australia does it, South African does it ... even the United States does it with oil companies," said Pierre Lassonde, chairman of Franco-Nevada Corp. "It won't matter to the world save to say, 'Canada has a spine'- finally."
Murray Edwards, vice-chairman of oil company Canadian Natural Resources Ltd., said blocking the Potash deal was the right decision.
"There's lots of foreign capital in Canada invested on a daily basis and it'll continue to be invested," Mr. Edwards said. "This was an exceptional case."
With reports from Simon Houpt in Toronto and Brenda Bouw, David Ebner and Andy Hoffman in Vancouver
If you have a marriage and you don't argue, then you are not normal. If Canada welcomes all foreign investment and never closes the door on any, then it would not be normal.
Richard Kohler, a former Canadian consul general in Sydney and director of the Canadian Australian Chamber of Commerce
It's not like a technology you can move away and produce somewhere else.
Frank Stronach, chairman of Magna International Inc.
Not only is the BHP bid sidelined by this decision, but any other potential foreign bid in the shadows, is sidelined ... Shareholders of PotashCorp are the main losers in this decision, at least in the short term.
Chris Damas, analyst with BCMI Research, Barrie, Ont.
Although Potash's share price may decline in the very short term due to selling pressure from hedge funds, we would expect the price to rapidly recover to current levels ... Potash could even trade 10- to 15-per-cent higher.
Stephane Mardel, CEO of United First Partners, London
It is a setback, but we will just have to wait and see whether the impasse can be breached in the next 30 days ... It is difficult to ascertain what BHP is prepared to offer and what the Canadian government is prepared to accept.
Tim Schroeders, portfolio manager, Pengana Capital, Melbourne