November 3, 2010 / 10:34 PM / 7 years ago

Instant view: Canada blocks BHP's bid for Potash Corp

OTTAWA (Reuters) - Following are reactions to Canada’s decision to block BHP Billiton’s $39 billion bid to take over Potash Corp, the world’s largest fertilizer supplier.

JOHN STEPHENSON, SENIOR VICE PRESIDENT AT FIRST ASSET

INVESTMENT MANAGEMENT INC:

“I‘m surprised. I think it comes as a shock to the market. I think most people watching this would’ve thought it would’ve gone the other way. I think it goes in the face ... of the direction of the government of Canada for the last number of years, which is we’re open for business. Clearly, we’re sending a signal that no, we’re not.”

BOB GORMAN, CHIEF PORTFOLIO STRATEGIST AT TD WATERHOUSE:

“Essentially he (Clement) has given BHP 30 days to sweeten the bid ... Saskatchewan has concerns that they are going to see their provincial finances very adversely affected by the BHP deal. There are other issues as well. But it seems to me that’s front and center. In the next few weeks, BHP is going to put, in front of all concern, some sort of proposal that will alleviate those concerns.”

“This does not mean this deal is dead. It means as originally proposed it is dead. Now, can BHP sweeten the pot sufficiently to address the concerns that are on the table?”

“They’ve (BHP) given this quite of bit of thought, it seems to me. By all accounts, they have been weighing some sort of bid for some time. I doubt they would be dissuaded at this stage. Whether or not they can put forward a deal that will both satisfy the needs of Saskatchewan and the federal government, while still being good for BHP shareholder, is open to question. But I would fully anticipate that they would come back with another offer.”

“I‘m not sure it will have much of a short term impact on the (Potash share) price because I think if you had the deal scuttled once and for all you could expect some downward movement in the stock ... Maybe you see some reaction. I don’t think it will be dramatic because I think the market will anticipate BHP coming back with a deal.”

STANLEY HARTT, INVESTMENT BANKER WHO WAS CHIEF OF STAFF TO

CANADIAN PRIME MINISTER BRIAN MULRONEY FROM 1989 TO 1990.

On BNN

“They (BHP Billiton) know what they have to do. The question is do they have the resources to do it. I mean, can they come up with the hard cash that increases the cost to them. They are already in trouble with their analyst community.”

“I don’t think the increased bid is going to be increased to the shareholders, I think its going to be some deal with Brad Wall or no deal at all.”

CAMERON PEACOCK, MARKET ANALYST, IG MARKETS

”We were a little bit surprised. Obviously Saskatchewan were very anti the transaction and managed to convince the Canadian government to block it. They do a net-benefit test and have opined that it is not in the net benefit of Canada. Any large company transforming transactions like this Potash transaction you can see in the future and just always going to get blocked on regulatory grounds. It must be pretty frustrating for BHP.

”It will be interesting to see what BHP does from here. (BHP CEO) Marius Kloppers is going to be pretty frustrated. BHP is of a size now where just about anything it wants to do of any substance is going to get blocked on regulatory grounds because it is so big. You look at the takeover for Rio a couple of years ago, the joint venture with Rio, and now this transaction. Pretty much the only thing it can do are small bolt-on acquisitions that would be pretty meaningless to BHP itself because it’s so big.

“BHP are always under pressure to do something. They are trying to do it, but they just keep getting blocked on regulatory grounds because they are so big and have such dominant positions in most of the markets in which they trade. It might be that because of their size they are precluded from going down that M&A path. They might have to return capital. A lot of shareholders were against the transaction and said it is not as earnings accretive as a share buyback or capital return would be. If they are out of bullets, and the 30-day appeal is still rejected, then they might do a capital return and everyone might be happy. Potash shares are down, I think the Canadian dollar has taken a bit if a hit as well. (BHP shares) are difficult to call.”

MICHAEL IGNATIEFF, LEADER OF OPPOSITION LIBERAL PARTY

”This government has been dragged kicking and screaming by the government of Saskatchewan, by the leadership provided by Ralph Goodale on this issue, by Canadians across the country who think potash is a strategic resource, and it just is wrong for Canada to lose control of such a crucial commodity, to lose control of the head office, the jobs, the control that Canada has and Saskatchewan has over this critical resource.

“So they have been dragged kicking and screaming toward what we hope is a clear ‘no’ on this deal. I say I hope, because there are 30 more days. Our position is the door should be shut firmly on this deal. Minister Clement is leaving I think the door a little bit ajar here, perhaps hoping for another reaction from BHP Billiton.”

EDLAIN RODRIGUEZ, ANALYST, GLEACHER & CO

”The arbitrage traders are all going to come out of the stock, and you are going to see investors focused on fundamentals stepping in and I think that is going to support the stock pretty quickly.

“I don’t think this decision is a shock. Once this was rejected by Saskatchewan the odds definitely grew that you might get a decision like this.”

PETER CHILTON, INVESTMENT ANALYST, CONSTELLATION CAPITAL

MANAGEMENT

”It isn’t a final decision. I think they (BHP) would be extremely unlikely to give up. They’ll have to look at things like investment in Canada, taxes and royalties, and address all the concerns of the national government and the provincial government. There’s been a lot of to‘ing and fro‘ing of information about BHP, some of it scurrilous, so BHP would have to address all those issues and their intentions on Jansen.

“It’s not exactly dead in the water. If it was dead in the water, there’d be some people who think this is the end of growth for BHP, if it can’t find things to do. It’s going to become a slower growth company, some people might say.”

LAURENCE BOOTH, FINANCE PROFESSOR, UNIVERSITY OF TORONTO

ROTMAN SCHOOL OF MANAGEMENT

“It’s difficult to understand in terms of economics why it’s happening. Politically, it’s easy to understand, so I would say this is clearly a political decision, it’s not an economic decision.”

JIM GILLIES, PROFESSOR EMERITUS, YORK UNIVERSITY‘S SCHULICH

SCHOOL OF BUSINESS

“I‘m very very happy. I thought it would have been a great mistake because the Saskatchewan company would have been a subsidiary and the major policy decisions are always made at head office. Keeping the head office in Canada is more than a nationalistic sort of thing.”

RICHARD STEINBERG, HEAD OF M&A, FASKEN MARTENEAU

”The government is probably a little disappointed that BHP Billiton was not able to bridge the gap between what it was willing to offer and what the Saskatchewan government was willing to accept. I think it’s a pushback and it’s telling BHP Billiton, ‘Go cut a deal with Saskatchewan, so we can get Saskatchewan on side, and we can get this thing done.’

”It’s a point of leverage and it’s keeping the ball up in the air still. It’s a point of leverage now that the government of Canada has put back on to BHP Billiton to say, ‘You’ve got to give up more here before we’re going to accept this transaction.

”The government has to show ... that they are not going to just roll over on a foreign acquisition that has taken on such political importance. What we didn’t know was what further ground BHP Billiton was willing to go to satisfy the government of Canada on these various undertakings.

TIM SCHROEDERS, PORTFOLIO MANAGER, PENGANA CAPITAL, MELBOURNE

“It is a setback but we will just have to wait and see whether the impasse can be breached in the next 30 days. It depends on what the sticking points are and I am not clear at this stage. It is difficult to ascertain what BHP is prepared to offer and what the Canadian government is prepared to accept.”

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