A pile processed potash at the Mosaic Potash Colonsay mine storage facility in Colonsay, Sask.DAVID STOBBE
The Saskatchewan government is signalling it won't support BHP Billiton Ltd.'s $38.6-billion (U.S.) bid for Potash Corp. of Saskatchewan Inc. unless the company offers more benefits to help offset the billions of dollars the province stands to lose.
A Conference Board of Canada takeover review, commissioned by Saskatchewan, said the impact of BHP's bid on tax and royalty revenues could cost the province $2-billion (Canadian) over the next 10 years, and up to $5.7-billion if the Australian miner runs both existing and new mines at full capacity.
That has the Saskatchewan government talking tough about whether to recommend the bid to Ottawa, which is examining the deal and must determine it benefits Canada in order to approve it.
"Two-billion is a lot of money. That alone is enough to give us reason to pause. Six-billion would be, I suspect to a lot of people, hair-raising," Saskatchewan's Energy and Resources Minister Bill Boyd told reporters in Regina on Monday.
"We want to be clear, that the Government of Saskatchewan is very interested in investment into our province. This is a different thing. … It's a takeover, it's not a $40-billion investment in Saskatchewan."
The province's reaction shows it is looking for BHP to up the ante on benefits.
"If BHP is looking at it and saying 'Obviously this may not be the net benefit the province is looking for,' maybe that prompts them to do something," Mr. Boyd said. He wouldn't say what BHP could offer that might lessen the province's concerns.
BHP has promised to maintain jobs in the province and make Saskatchewan home to its global potash headquarters. It has also vowed to make community investments and bring Potash Corp. head office jobs to Saskatchewan from Chicago. That hasn't been enough to win over the province, which has become more vocal about its concerns about the bid leading up to the Nov. 18 deadline.
Saskatchewan spent $75,000 for the conference board review of the economic impact of a takeover of Potash Corp., the world's largest potash producer and one of the province's largest taxpayers. The review will help the province decide whether to support BHP's bid, or any possible counteroffer. While Saskatchewan doesn't have the power to stop a bid, its view will influence Ottawa as it considers whether the takeover has a "net benefit" to Canada under the Investment Canada Act.
On Monday, Industry Minister Tony Clement extended the Investment Canada review of the BHP bid for Potash Corp. by 30 days to Nov. 3, stating, "I will take the time necessary to do a thorough review of this investment proposal."
Saskatchewan officials believe their opinion will weigh heavily on Ottawa's decision. "As far as I know, Saskatchewan is still a part of Canada. Any loss to Saskatchewan should be considered a loss to Canada," Mr. Boyd said. "If there is not a net benefit but a net loss, we would hope and we would expect that the federal government would agree with us."
While the report does outline some opportunities for the province to raise revenues, Mr. Boyd said they are "small" compared with the risk. The conference board report also says the bid will have little or no net effect on employment in the industry, from the province's point of view.
A BHP spokesman said the company is reviewing the report and declined to comment further.
While the province's response to the report was largely critical, some investors saw the report as a plus for BHP's bid.
"We believe that the net impact of the report ... essentially gives the green light to the BHP bid and effectively douses the aspirations of any bid emanating from a sovereign state investment group like Sinochem," said Dahlman Rose & Co. analyst Charles Neivert.