The minute that Viterra announced it had received “expressions of interest,” comparisons to BHP Billiton’s contentious bid for Potash Corp. of Saskatchewan were cooked up.
And in the week since, the media hasn’t helped to distinguish many differences. In the news business, we love bitter takeover battles, especially when governments get involved, just as much as we love heated election cycles.
But the truth is that whatever transpires for Viterra will be different from what took place during BHP’s bid for Potash.
What we need to remember is that what happened with Potash was an extremely rare confluence of events. Looking back, bankers from both sides of the table agree that it was extremely odd to see things play out the way that they did.
Because so many people are forgetting that, it’s helpful to remember why the Potash situation was so unique.
First and foremost, elections were an issue in 2010. When the Potash bid was reviewed, Saskatchewan premier Brad Wall knew he’d have to face the public within a year and Stephen Harper’s conservatives only had a minority government. Both have since been re-elected with stable majority governments, and they are dying to remind the public of their conservative stripes. They hate that they had to get all nationalist last time around, and stepping out of the way on Viterra would prove that their borders are still open to foreign bidders.
Provincial royalties are also out of the equation this time around. If Potash had been taken over, there was a fear that Saskatchewan would lose some of the lucrative royalties it earns if BHP dismantled Canpotex. Viterra, on the other hand, doesn’t pay royalties, so Brad Wall has less skin in the game.
On top of that, Viterra’s business model is much different from Potash Corp.’s. For the most part, Viterra operates grain elevators and exports crops, whereas Potash digs minerals out of Canadian soil. This time around there is less a feeling of giving up control over something that few other countries have.
Then there is the issue of BHP’s bravado. When it bid for Potash, Marius Koppers waltzed into Canada and didn’t play the government cards right because his team assumed that the conservative parties he’d be dealing with were open to foreign takeovers. Contrast that with what’s happening around Viterra. Formal bids haven’t even been made, as far as we know, and there is already chatter about ‘Canadianizing’ the deal so that it will pass any federal review with flying colours.
No doubt, all of this speculative, and the situation can quickly change. When BHP first bid for Potash Corp., Brad Wall didn’t have many reservations. Then his constituents started crying foul, forcing him to give that press conference that will be remembered for years. But right now, the two deals look very, very different.