November 1, 2010 / 5:08 AM / 7 years ago

BHP Potash bid said to win key Canada government backing

OTTAWA/TORONTO (Reuters) - Canadian officials are recommending a cautious “yes” to BHP’s bid for Potash Corp, a newspaper said on Monday, but the Prime Minister’s office dismissed the paper’s assertion that the prime minister himself would have the final say.

<p>Rocanville Potash Corp underground production supervisor Dave Esslinger displays a sample of potash 1000 metres (3280 feet) below surface at the potash mine in Saskatchewan September 30, 2010. REUTERS/David Stobbe</p>

Canada’s National Post, quoting insiders from the ruling Conservative Party, said Investment Canada officials recommended that Ottawa let the world’s largest miner proceed with its $39 billion hostile offer for Potash. It said Prime Minister Stephen Harper would decide on Tuesday.

Potash Corp stock rose in after-hours trade.

But Harper’s office said the story was wrong because Industry Minister Tony Clement, not the prime minister, would have the final say in whether to allow the takeover. The decision is due by midnight on November 3 (0400 GMT on November 4).

“The entire story is wrong. Why? Because there is one fundamental error in it. It says the decision is on the prime minister’s desk. That is false. ... This is a decision taken by the industry minister,” Harper’s chief spokesman Dimitri Soudas told Reuters.

A “yes” ruling is likely to push the takeover process forward while forcing BHP to decide whether to raise its $130-a-share hostile offer for the world’s largest fertilizer supplier.

It would also alienate allies of Harper’s minority Conservative government after they lobbied the federal government to block the bid.

A spokesman for Clement said the National Post story was factually inaccurate. BHP declined comment.

By law, Ottawa must decide whether the bid would bring a net benefit to Canada as it makes its decision.

Shares of Potash Corp rose 1.6 percent to $149 a share in after-market activity, building on a climb of 1 percent during the New York trading session.

Since BHP announced its $130-a-share bid in late August, Potash stock has held well above the offer price, which Potash has rejected as inadequate. Investors have signaled their expectations that a higher bid would eventually materialize.

The National Post said Investment Canada, part of Clement’s ministry, has recommended that a government-appointed monitor be set up to enforce the takeover terms, which would include billions of dollars in infrastructure investments.

Such monitoring may blunt criticism that foreign companies in the past failed to live up to conditions placed on them when taking over Canadian companies, it added.

Opposition to a BHP takeover also comes from other provinces, as well as from opposition parties in Parliament.

BHP has not ruled out raising its offer, but a source familiar with the situation told Reuters that it was not likely to do so while the company awaits Ottawa’s decision and there is no competing bid.

“There is only one offer on the table,” the person added.

London’s Sunday Times said this weekend that BHP would raise its offer by 10 percent.

A “no” decision from Canada would almost certainly derail the BHP bid and knock Potash Corp shares down -- at least temporarily -- by quashing speculation that BHP might raise its offer or a rival bid will surface.

That said, analysts see Potash rebounding in the coming weeks on strong market fundamentals regardless of the bid’s outcome.

Additional reporting by Raji Menon, Eric Onstad and David Ljunggren; Editing by Janet Guttsman and Frank McGurty

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