Canada blocks BHP's Potash bid, stuns investors

Wed Nov 3, 2010 7:40pm EDT
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By David Ljunggren and Louise Egan

OTTAWA (Reuters) - Canada blocked BHP Billiton's> blockbuster $39 billion bid for Potash Corp on Wednesday and offered only the slimmest of chances that the offer could be modified or revived.

Following government guidelines, Industry Minister Tony Clement gave the Anglo-Australian miner 30 days to come up with additional proposals that might make its offer for the world's largest fertilizer producer more palatable to Canada.

But given weeks of negotiations between BHP and Ottawa about how the mining giant should shape its offer, the biggest takeover bid of 2010, a new proposal seems unlikely at best.

"Some decisions can only be taken once and there is no turning back ever - such as the case today," Clement said as he announced his surprise decision, news that sent Potash Corp shares down some 5 percent in after-the-bell trade.

"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."

Potash Corp repeated its view that the $130-a-share offer was "wholly inadequate," and analysts said the shares were unlikely to tumble back to the pre-offer levels around $112, given a rising market and strong fundamentals in the fertilizer market. Even without any bid at all, the company's shares are expected to rise in the medium term.

BHP, whose shares opened 3.2 percent higher in Australia, said it was disappointed with the decision and was reviewing its options.

BHP launched its bid for Saskatchewan-based in August, seeking an entry into the lucrative fertilizer sector. But the Potash stock consistently traded above the offer price, indicating that investors thought a higher offer would come.   Continued...

<p>Potash Corp's head office in Saskatoon is pictured on November 3, 1010. REUTERS/David Stobbe</p>