Industry minister not satisfied, gives BHP 30 days to provide more info

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After much speculation as to what the Government of Canada would do about a potential BHP Billiton/PotashCorp deal, after the markets closed on Nov. 3 Canada’s Minister of Industry Tony Clement issued a statement saying he was not satisfied with the deal, but was giving BHP thirty days to provide more information.

“I can confirm that I have sent a notice to BHP Billiton indicating that, at this time, I am not satisfied that the proposed transaction is likely to be of net benefit to Canada,” said Clement in a statement.

“I came to this decision after a careful and rigorous review of the proposed transaction. BHP Billiton has 30 days to make any additional representations and submit any undertakings.

“At the end of that period, I will make a final decision.

“The confidentiality provisions of the Investment Canada Act prohibit me from discussing specifics of an ongoing case.

“I can assure Canadians, however, that I will provide an explanation of the reasons behind my final decision at the time that decision is made, in accordance with the provisions of the Act.

“Canada has a long-standing reputation for welcoming foreign investment. The Government of Canada remains committed to maintaining an open climate for investment.”

Earlier speculation had been that the Conservative government of Prime Minister Stephen Harper was conflicted. On the one hand, Canada has been open to foreign investment and Harper had been quoted as saying the BHP/PotashCorp deal was “a proposal for an American-controlled company to be taken over by an Australian-controlled company.”

On the other hand, Saskatchewan Premier Brad Wall has said no to BHP and has urged the national government to do likewise. Add to this that Saskatchewan sends 13 Conservatives to parliament, and the province’s weight becomes much more persuasive to the national government.

BHP, PotashCorp respond

BHP responded, saying it was disappointed, but that it continues to believe that the offer is of net benefit to Saskatchewan, New Brunswick, and Canada. BHP said it will continue to cooperate with the Minister and the Investment Review Division of Industry Canada and will review its options.

PotashCorp said Clement’s statement does nothing to change PotashCorp’s view that the BHP $130-per-share offer is wholly inadequate. It said the PotashCorp board of directors still strongly believes that the offer fails to reflect both the value of PotashCorp’s premier position in a strategically vital industry and the company’s future growth prospects.

More bidders coming out of the woodwork

Speculation about what the Government of Canada would do was not the only buzz out there last week. In addition, there were reports that Russian companies might also enter the bidding for PotashCorp. Widely reported later in the week was that phosphate producer PhosAgro might enter a bid. Reuters quoted PhosAgro saying that it was in intensive talks with the Russian government and foreign banks, and would announce its next move after Nov. 15.

In the meantime, the Canadian press reports that Toronto-based merchant bank Forbes & Manhattan has been working on behalf of a Saskatchewan First Nations consortium, calling itself the Indigenous Potash Group, to round up $25 billion to put toward a bid for PotashCorp. Potential investors include those mentioned before ?Çô Canadian pension funds, the Chinese, and Brazilians.