Saskatchewan's premier urged Canada's federal government on Thursday to reject BHP Billiton's bid for Potash Corp., saying it's not in the strategic interest of Saskatchewan or Canada.
Anglo-Australian BHP Billiton Ltd. launched a hostile $38.6 billion takeover bid in August for the world's largest fertilizer company after Potash directors rejected its offer.
Saskatchewan Premier Brad Wall outright rejected the bid in a speech that could prove fatal to what would have been the largest takeover in the world this year.
Canada's federal government can block a foreign takeover if it's not a "net benefit" to Canada. The federal government has asked for input from the provincial Saskatchewan government.
Wall said Canadian mining companies are at risk of becoming endangered and he doesn't see a net benefit to his province or Canada.
"It is a strategic resource and we should act like it. The country should act like it," Wall said in his speech.
Wall later disputed the notion he made the decision because of Saskatchewan's reputation as Canada's most left-of-center province.
"This is different. This is not a normal market transaction or a normal takeover. There hasn't been a takeover in the history of takeovers, that we're aware of, that involves almost a third of the world's supply of something as strategic as potash," he said.
Wall noted that Potash Corp. produces more than 25 percent of the world's supply of potash. Potash, a key fertilizer ingredient, is critical to international food security.
Saskatchewan has over half the world's reserves of potash and Potash Corp. is one of the province's largest revenue-generating companies, accounting for 15 percent of its budget as recently as two years ago. The provincial government collects royalties from the resource.
Canadian Prime Minister Stephen Harper seemed to be at odds with Wall on Wednesday when he described the deal in Parliament as "proposal for an American-controlled company to be taken over by an Australian-controlled company."
Potash Corp.'s headquarters is listed as being in Saskatchewan, but the chief executive and many top executives are American and live and work in Chicago.
Wall disputed Harper's contention on Thursday, saying 49 percent of the shares are Canadian and eight of its 12 board members are Canadian.
Harper wasn't in Parliament on Thursday, but Transport Minister John Baird noted that the Conservative government blocked a U.S. company's takeover of the space and satellite division of MacDonald, Dettwiler and Associates Ltd., Canada's leading space technology firm, in 2008. It was the first time Canada has rejected a foreign takeover outright since the Canada Investment Act took effect in 1989.
"We have a good record on this and we'll continue to stand up for Canada and do the right thing," Baird said.
Industry Minister Tony Clement said he has not made a decision on the bid and said he won't let Wall's strong words sway him in either direction.
"I am neither a headwaiter to the premier of Saskatchewan, nor am I butler to the president of BHP," Clement said.
Wall said the province can't block the sale but said if the federal government forces approval of the deal they'll look at taxing the company "to the tune of between $3 billion and $6 billion dollars to make sure the revenue of the province is protected."
Among other concerns Wall is worried BHP would take advantage of tax breaks. His government had been in negotiations with BHP over compensation, but those talks broke down.
Wall also suggested he's not interested in having further discussions with BHP.
"We are going to leave it at no," he said after the speech. "I am not sure there needs to be any more dialogue."
Andrew Mackenzie, BHP's Chief Executive, Non-Ferrous, said he's by no means given up on the takeover. He said BHP can make Potash Corp. more profitable than the current management and in turn more lucrative for the province. He said he believes he can bring Wall and the federal government onside.
"He's looking for the best company to operate these assets on behalf of the people of Saskatchewan. What he said was the resources belong to the people of Saskatchewan, not to BHP Billiton, which I completely agree with," Mackenzie said.
"I think we are much closer than people are suggesting."
The federal government is due to announce a decision by Nov. 3. Canada's main opposition parties are against the deal.
Canadian opposition lawmaker Ralph Goodale, who represents a Saskatchewan district in Ottawa, has said he'd be shocked if the federal government didn't support the province.
BHP Billiton, the world's largest mining company, is hoping to profit from what it expects will be rising fertilizer demand in China and India.
As the world's population grows, more food is needed and more fertilizer to grow crops. Demand for potash, a potassium compound also used in industry, is getting a boost from rising demand from emerging giants China and India _ the main markets for potash, along with the U.S. and Brazil.
A foreign takeover of the company would come just as Saskatchewan is starting to boom after suffering low growth and population loss for decades. Potash is the province's most prized resource, and there are also concerns in Canada about foreign takeovers after previous resource deals led to broken promises about job guarantees and investment.
"We are well positioned in the province and in Canada to be a major player and I think we should take that chance," Wall said.
Potash Corp. thanked the province in a statement and said they share the province's bright outlook for the company and the industry. The statement reiterated that shareholders should reject BHP's bid.
Potash has called BHP's $130 a share offer wholly inadequate. Shares of Potash Corp. closed up 66 cents to $143.09 on the New York Stock Exchange. Potash shares had soared to more than $230 just before the global recession hit in 2008.
Potash Corp. is a former government-owned company that was created after the government nationalized many smaller U.S. potash companies based in Saskatchewan.