Canada Blocks BHP Billiton’s Bid for PotashCorp

With prospects of a takeover by BHP Billiton fading rapidly due to strong Canadian government opposition,
PotashCorp can turn full attention back to an ambitious expansion program that includes a 2-million-mt/y
replacement mine, new process wet mill and expanded compaction plant at the Piccadilly property (top) in New
Brunswick, Canada; and a 2.7-million-mt/y expansion at Rocanville in Saskatchewan that calls for a new service
shaft (bottom), conversion of an existing service shaft to a production shaft equipped with 46-mt-skips; a new wet
mill; and additional compaction capacity. (Photos courtesy of PotashCorp).
Canada’s Minister of Industry Tony Clement announced on November 3, 2010, he had notified BHP Billiton that the company’s proposed unsolicited acquisition of Potash Corporation of Saskatchewan (PotashCorp) for about $40 billion in cash was not likely “to be of net benefit to Canada” and that BHP Billiton had 30 days to make any additional representations and submit any undertakings. “At the end of that period, I will make a final decision,” Clement said.

Clement also said he was prohibited by the confidentiality provisions of the Investment Canada Act from discussing the specifics of the case but the reasons for the final decision would be given when the decision is announced.

A brief BHP Billiton statement expressed disappointment at the Minister’s decision and said the company would continue to cooperate with the ministry, while also reviewing its options. As of November 8, a consensus of market analyst and media reports suggested BHP Billiton was unlikely to find concessions that would be acceptable both to the company and to the Canadian government.

BHP Billiton announced its offer for PotashCorp, the world’s largest fertilizer producer, in August 2010 (E&MJ, September 2010, p. 4). PotashCorp management mounted an ongoing campaign against the offer as “wholly inadequate” because it failed “to reflect both the value of PotashCorp’s premier position in a strategically vital industry and the company’s future growth prospects.” The size of the offer would not have been an issue addressed by the government.

Saskatchewan Premier Brad Wall also raised vociferous opposition to the proposed acquisition.

If BHP Billiton’s bid for PotashCorp ultimately fails, it will be the third recent proposed major transaction by the company that has been knocked down by regulators. Most recently, BHP Billiton and Rio Tinto were blocked in their effort to form a joint venture based on their iron ore assets in Western Australia (see story above). Prior to that, regulators blocked a bid by BHP Billiton to acquire all of Rio Tinto, initially proposed in November 2007, formally offered in February 2008, and allowed to lapse in November 2008.

As featured in Womp 2010 Vol 09 -