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OTTAWA (Reuters) - Canada said on Tuesday it would conduct a rigorous review of any foreign takeover of Potash Corp as the Conservatives seek to avoid the kind of political backlash such deals have triggered in the past.
Anglo-Australian miner BHP Billiton this week launched an unsolicited $38.6 billion bid to acquire Potash Corp of Saskatchewan, the world's biggest fertilizer producer.
Potash rejected the offer on Tuesday as "grossly inadequate" but Chief Executive Bill Doyle said the company is not opposed to a sale, effectively telegraphing that the assets are in play.
Under Canadian law, BHP would have to prove the deal would be of net benefit to Canada, a loosely defined test that gives the federal industry minister powers to negotiate commitments over jobs and head offices, for example.
"The government is aware of this proposed transaction and will monitor the situation closely to determine how the Investment Canada Act applies," said Erik Waddell, spokesman for Industry Minister Tony Clement.
"The review process is rigorous, involving consultations with affected provinces/territories and other government departments as required," he wrote in an email.
Prime Minister Stephen Harper, who heads a minority government, has come under attack for approving big takeovers by companies that later laid off Canadian workers. But the initial political reaction to the BHP Billiton offer was muted.
Liberal lawmaker Marc Garneau simply said any large deal should abide by the existing foreign investment rules. The left-leaning New Democrats demanded the government oblige global players like BHP Billiton to invest in new technology and safeguard local jobs.
The sale of iconic Canadian companies has brought Harper headaches in the past and with the opposition Liberals gaining on him in the polls, any misstep could cost him support.
Still, neither party has enough support to win a majority if an election were held now so there is little appetite for picking fights unless they are campaign winners.
The government took U.S. Steel to court last July for breaking production and employment promises made when it bought Canadian steelmaker Stelco in 2007. Chronic labor disputes at Canadian mines that Brazil's Vale took over when it bought Canadian miner Inco in 2006 have also raised concerns about the wisdom of selling key resource assets.
"Harper hasn't helped in the past. The Vale Inco takeover was disastrous for our community here but we have to make sure that we keep the jobs," said Claude Gravelle, an NDP lawmaker who represents one of the mining regions affected by the Inco takeover.
Political analysts said the sale of Potash would have more political impact in the sparsely populated Prairie province of Saskatchewan, where the company is based, than it would nationally.
The government of Saskatchewan, for its part, said it sees no reason to ask Ottawa to block a deal and that it sees the possibility of benefits from a Potash takeover.
"The government of Saskatchewan would support whatever market forces are at play here," the province's energy and resources minister, Bill Boyd, told Reuters.
Saskatchewan depends heavily on royalties from potash production in the province, but Boyd said they probably would not be put in jeopardy if Potash Corp were put under new ownership. By law, Potash Corp or its successor must keep its head office in Saskatchewan, he said.
Additional reporting by Rod Nickel in Winnipeg and Alastair Sharp in Toronto; editing by Peter Galloway