Saskatchewan won’t back BHP bid for Potash Corp.: source Tuesday, October 19, 2010 Brenda Bouw
Vancouver — The government of Saskatchewan will not support BHP Billiton Ltd.’s $38.6-billion (U.S.) bid for Potash Corp. of Saskatchewan Inc., according to sources.
The province’s decision, expected to be made public later this week, comes after the Australian miner balked at certain conditions including a one-time $1-billion special tax and hundreds of millions of dollars worth of infrastructure funding, said one source, who didn’t want to be named.
Saskatchewan has been saying for weeks that it wasn’t prepared to back BHP’s bid without more economic benefits, indicating the deal as it is doesn’t leave its citizens any better off than before the offer was made in August.
Officials at both BHP and the province couldn’t be immediately reached for comment.
The province’s stance is expected to have a big influence on whether Ottawa supports the offer. Investment Canada is set to rule by Nov. 3 on whether BHP’s offer is of net benefit to Canada
Saskatchewan doesn’t have the power to veto the deal, but Prime Minister Stephen Harper has said the federal agency will consult with the province in making its determination.
While Ottawa has passed many foreign takeover deals in the past, there is heightened scrutiny with this deal. Not only is Saskatoon-based Potash Corp. one of the country's last major mining companies, but its commodity is considered crucial to international food security, amid concerns of a global food shortage.
There has also been a backlash about previous foreign takeovers after the new owners broke promises about investment and job guarantees.
Melbourne-based 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.
But that hasn't been enough for the province, particularly after a Conference Board of Canada report it commissioned showed BHP’s bid could cost Saskatchewan at least $2-billion (Canadian) in lost tax and royalty revenues over the next 10 years. The number jumps to $5.7-billion if the Australian miner runs at full capacity both existing mines and new projects it has planned.
BHP responded saying some of those lost taxes would be made up down the road, but the province still isn't swayed.
“I think the people of Saskatchewan are looking for net benefits now, not at some later date,” Saskatchewan Energy and Resources Minister Bill Boyd said in a recent interview with The Globe and Mail.
The province is also concerned about BHP’s desire to pull out of Canpotex, the powerful arm that markets Saskatchewan’s potash to global markets. Saskatchewan believes BHP would drive down potash prices as a result of such a move, and in turn lower the lucrative royalties it collects from the commodity.
Saskatchewan is home to more than half of the world’s potash reserves and the province is considering the economic impact if future predictions are correct that potash prices are set to soar as demand for the fertilizer ingredient soars.