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.

The Nov. 2 midterm elections, branded as the largest party turnover in 70 years, will likely result in a change of course for legislators on several key issues facing the fertilizer and agri-chemical industries, including energy policy and chemical facility security regulations.

The election saw Republicans gain control of the House, while Democrats held a slim majority in the Senate. As a result, House Minority Leader John Boehner (R-Ohio) will take over the Speaker of the House post from Democrat Nancy Pelosi (D-Calif.). Senate Majority Leader Harry Reid (D-Nev.), who survived a bitter and close race with Republican challenger Sharron Angle, pledged to work with the Republican-controlled House to “get things done.”

“There is not much to say that hasn’t already been said in all the post-election commentary,” said Kathy Mathers, vice president of public affairs for The Fertilizer Institute (TFI). Mathers told Green Markets there “certainly will be many new faces in Congress,” noting that roughly 50 percent of the Democrats on the House Agriculture Committee did not win re-election.

Richard Gupton, vice president of legislative policy and counsel for the Agricultural Retailers Association (ARA), said the election results overall are a “net positive” for the industry. “There were some major policy proposals over the last 21 months that were not helpful for the industry,” Gupton said, referring to the push for cap-and-trade provisions in energy policy, and the inclusion of inherently safer technologies (IST) and citizen suits provisions in chemical facility security legislation.

In the wake of Tuesday’s election results, President Obama signaled on Nov. 3 that he was prepared to “look for other means” besides cap and trade to reduce carbon emissions from manufacturing and power plants, vehicles, and other sources. “Cap and trade was just one way of skinning the cat,” he said.

Gupton said HR. 2868, the contentious House bill that included IST language and citizen suits provisions in its reauthorization of Chemical Facility Anti-Terrorism Standards (CFATS), is now “basically DOA.” He said he expects instead a more straightforward reauthorization of existing CFATS regulations, something that ARA and other chemical industry trade groups have pushed for.

Like Mathers, Gupton observed that 14 Democrats on the House Agriculture Committee did not win re-election, so “there will be a major infusion of new people on that committee, and they will be writing the new Farm Bill.”

Rep. Collin Peterson (D-Minn.), head of the House Agriculture Committee and ARA’s 2009 Legislator of the Year, lost his bid for re-election, Gupton noted. Rep. Frank Lucas (R-Okla.) will likely replace Peterson as head of that committee, a leadership change that ethanol producers were celebrating last week.

Gupton said the industry lost another ally in the defeat of Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.). Michigan Senator Debbie Stabenow is next in line to take over that position. In addition, Gupton said at least 22 of the 47 Democrat members of the fiscally conservative Blue Dog Coalition many of whom are from farm states came up short in their re-election bids on Tuesday.

Gupton said ARA was “not shedding too many tears” over the surprise defeat of Rep. Jim Oberstar (D-Minn.), who was chairman of the House Committee on Transportation and Infrastructure and an opponent of the industry-supported Hours of Service (HOS) exemption. Gupton said Rep. John Mica (R-Fla.) will take over as chair of that committee, which he described as a “positive sign.”

As for TFI, Mathers said the organization is “laser focused” on the possibility of several key issues being brought up in the upcoming lame duck session of Congress. One of these is the Chesapeake Clean Water and Ecosystems Restoration Act (S. 1816), which TFI says would
fundamentally change aspects of the Clean Water Act and set water policy precedents that would impact watersheds throughout the U.S. (GM Nov. 1, p. 12).

Gupton agreed that “there are things to be vigilant about,” but said he would be “shocked” if legislators tried to push S. 1816 through during the lame duck session, especially given the decisive midterm election results and the contentious nature of the bill.

Agrium Inc. reported net earnings of $57 million ($.37 diluted earnings per share) for the third quarter ending Sept. 30, 2010, compared with the year-ago $26 million ($.16 per share). The 2010 third-quarter results included a pre-tax expense of $85 million ($.39 per share) on stock-based compensation, and pre-tax gains of $10 million ($.05 per share) on natural gas and other hedge positions. Excluding these items, net earnings would have been $111 million ($.70 per share).

Third-quarter sales were $2.06 billion, up from the year-ago sales of $1.89 billion.

“We believe the outlook for Agrium’s products and businesses are as good as they have ever been, supported by excellent fundamentals for the agricultural and crop input markets,” said Mike Wilson, Agrium president and CEO. “While EBITDA from our retail operations this quarter was almost double last year’s level and wholesale’s rose by more than 60 percent, we expect the improvements in the crop input markets to become even more evident in the fourth quarter of 2010. Furthermore, we anticipate the strength in crop input demand and prices to continue into the spring of 2011, benefiting all three of our strategic business units.”

Agrium is providing guidance for the fourth quarter of 2010 of $1.00-$1.30 diluted earnings per share, excluding estimated hedging gains or losses and stock-based compensation expense in the fourth quarter.

Third-quarter retail net earnings (EBIT) were $75 million on sales of $1.24 billion, up from the year-ago $31 million on sales of $1.23 billion.

Third-quarter wholesale net earnings were $135 million on sales of $799 million, up from the year-ago $83 million and $658 million. Potash saw the biggest change from year-ago levels with sales volumes of 388,000 mt (205,000 mt domestic, 183,000 international) moving at an average price of $327/mt ($379/mt domestic, $270/mt international), compared to the year-ago 273,000 mt (135,000 mt domestic, 138,000 mt international) and $399/mt ($488/mt domestic, $312/mt international).

For the third quarter, advanced technology had a $4 million loss on sales of $92 million, compared to zero earnings on $60 million in sales for the year-ago quarter.

Nine-month earnings were $556 million ($3.53 per share) on sales of $8.3 billion, up from the year-ago $336 million ($2.13 per share) and sales of $7.8 billion.

Nine-month retail income was $363 million on sales of $5.64 billion, up from the year-ago $220 million on sales of $5.4 billion.

Nine-month wholesale income was $560 million on sales of $2.63 billion, up from the year-ago $355 million and $2.3 billion. Potash saw the biggest change from year-ago levels, with volumes of 1.45 million mt (883,000 mt domestic, 568,000 mt international) moving at an average price of $342/mt ($390/mt domestic, $267/mt international) compared to the year-ago 410,000 mt (188,000 mt domestic, 222,000 international) and $483/mt ($558/mt domestic, $418/mt international).

Nine-month advanced technology income was $10 million on sales of $293 million, up from the year-ago $9 million and $209 million, respectively.

Miles Farm Supply deal to close soon

Agrium confirmed that it recently completed an asset purchase agreement with Miles Farm Supply, Owensboro, Kentucky (GM Oct. 25, p. 1), and said the deal is expected to close shortly. The deal will add some 19 outlets, mainly in Kentucky, with $165 million in annual revenue. Agrium told analysts that Miles’ wholesale business would bring the Miles revenues up to $235 million.

In total, Agrium said it has added some 88 retail outlets this year, with that figure including Miles and some 24 picked up in Argentina earlier this year (GM June 21, p. 1), as well as an additional 45 independent retail locations across the U.S. and Canada added this year. The combined annualized retail net sales in 2010 from these new retail branches is approximately $440 million.

In other acquisition news, Agrium expects its purchase of AWB Ltd. in Australia (GM Aug. 23, p. 1) to conclude in early December.