Potash decision expected today

Industry Minister Tony Clement will make a decision on the government’s power to block the sale of Potash Corp by Australia-based BHP Billiton later today when markets are closed in Canada and Australia – between 4:30pm and 7pm EST.

From discussions that I’ve had over the past week, I’ve learned that it is expected that the Minister will likely not block the takeover, however, if the takeover goes ahead, strict conditions of sale will be in place which may include promises to invest in infrastructure funds, heritage funds and the like.

Politically, this puts a few federal Conservative MPs in a shaky spot as 85% of their fellow Saskatchwans have expressed concern over the foreign takeover. Conservative-leaning Premier Brad Wall has already read the tea leaves and has come out strongly against the deal.

The decision comes on the heels of a bit of a scatter approach by Industry Canada under this federal Conservative administration when it comes to foreign influence in the Canadian marketplace. Radarsat-2 was blocked for sale by former Industry Minister Jim Prentice, citing the national interest, yet the Amazon and Wind Mobile decisions have suggested a openness to foreign investment in the highly regulated culture and telecommunications sectors.

If Minister Clement announces today that Potash Corp. is ready for sale, it will signal that Canada is open to business and open to foreign investment in the natural resources sector. In a time where this government has fought foreign protectionism due to the global economic collapse of 2008, this will further indicate that the Harper government is not simply paying lip service and lecturing other countries on the same. The liberalization of markets and business is a positive step forward as the global recovery has taken longer than projected. The election of a free-trading Republican House of Representatives and Senate now susceptible to filibuster also helps this cause.

As for today’s decision, the Investment Canada Act stipulates that the Minister must first inform the BHP Billiton of his decision. Until the company makes the decision public the government will be able to comment according to the law.

UPDATE: SHOCKER. Minister Clement determines that BHP Billiton’s bid does not provide a net benefit to Canada.

A very disappointing decision economically in my opinion. Politically it is the safe decision as it will save more votes in Saskatchewan than it will lose from investors. However, sometimes you just hope your government will do the right thing.

The government’s decision is “No” to BHP, however, the world’s largest mining company now has 30 days to revise its bid. This is largely a formality under the Act and a takeover of Potash Corp by BHP is not exactly viable after today.

It was widely expected among Ottawa Conservatives that while the Minister was in a tough position on the potash file, the heightened heat exchanged (and subsequent chill) between the Premier’s office and the PMO indicated that the deal was to be done and that it would be done on the principles listed above.

Comments

comments

  • http://sean-cummings.ca Sean Cummings

    I’m in Saskatchewan – people are mad as hell about this and it’s being viewed as another NEP. (Yeah, I know it ain’ t the same thing, I know that Potash Corp is American owned already, etc) but the fact is that conservatives are going to get slaughtered out here come next election if they let the sale go ahead. (Yeah, I know the sale is probably a good biz decision) but most people view the Potash as a Sask owned resource and are drawing the parallel with the NEP – that’s all I’ve been hearing for the past two weeks.

    This tells us two things:

    a) Tories are going to pay a brutal political price in Saskatchewan for letting the deal go ahead.
    b) The Tories have done a terrible job in controlling the message on this file.

    Seriously, it’s all everyone is talking about right now – how they’ll vote NDP if the sale goes ahead.

  • Godot10

    There is a difference between foreign investment and bending over and taking it in the rear. The world will be laughing at Canada if the Conservatives allow this. This is NEP II. In a single decision Harper will have destroyed his entire legacy. He lets the Liberals back in the game with a get-out-of-jail-free card.

    The equivalent transaction would be selling off Canada’s five big banks in one fell swoop to foreign banks. Would that be a good idea for Canada?

    I am a Potash shareholder. I’m not tendering my shares. If they offer $200 maybe.

  • wilson

    Which is EXACTLY the point.
    The shareholders can turn down the bid.
    And Brad Wall can jack up the royalties any time he so desires, because the Saskatchewan taxpayers own the resource, and always will.

  • wilson

    As Ian Macdonald points out,
    the government can delay the decision.

    So PMSH should allow, say 30 days, for the Potash Corp/Brad Wall/Sask First Nations to come up with a white knight bid, or the ONLY bid gets approval, and then that hands the decision to the shareholders.

    The shareholders can turn down this hostile bid.

  • wilson

    ‘people view the Potash as a Sask owned resource and are drawing the parallel with the NEP’

    Then someone better tell the Saskatchewan taxpayers that THEY set the royalty rates,
    not Ottawa, not the current owners.
    Wall could set royalty rates so high, he would stop exploitation (like NDP govt did to oil and gas years ago)
    Brad Wall is ‘pretending’ there is some constitutional issue where ownership of the resource is challenged.
    Saskatchewan taxpayers will to the end of times, own their potash.

  • James

    What you guys are missing is that canpotex regualtes the market. If BHP runs wide open like they do is Australia…then alot of miners will sit at home instead of going to work. Bad for the employees…bad for the economy.

  • C Ralph

    “The liberalization of markets and business is a positive step forward.”

    For whom?

    How have the Inco and Falconbridge takeovers helped Canada?

    Invest in Canada? Absolutely! Bring your $, bring your technology. But don’t sell off these resources off for short-term gain which only ends benefiting a few, and hurting thousands.

  • wilson

    So if BHP drives the price down, Wall can increase the royalties.
    Why would miners choose to unemploy themselves?

  • Hollinm

    First of all you suggest that the government is doing a terrible job in controlling the message. What message? This is a private business transaction. Not a political play. The law requires the government through the Investement Review Act to review an acquisition to determine a net benefit to Canada for takeovers exceeding $2oo million+. If that review indicates a net benefit then by law they are obligated to approve the takeover.
    Wall is being too cute by half. If it was such a strategic resource why did a previous Sask. government privatize it? Wall could buy a controlling interest in it even now if he considers it vital to Sask. interests. Put up a competitive bid.
    This is not the NEP redux and to even imply it is disingenuous. The government has nothing to do with it. It must deal fairly with all sides to the transaction.
    If and if is a big word when it comes to the Conservative federal government the communication strategy is effective and explains the deal and its “net benefit to Canada” then that will go a long way to appease Wall and residents. Wall is afraid of losing tax revenue. Thats his issue.
    The Libs are hoping to capitalize on this issue for partisan gain. They never turned down a take over in 13 years. So they also are being too cute by half.

  • hollinm

    I am glad you are not tendering your shares. That is how the takeover deal should be handled. It is between the company, its shareholders and BHP. Full stop.
    This is not NEPII. This is not government policy. It is a private transaction between two businesses.
    The only involvement of the feds is to review it and decide if there is a net benefit to Canada. That is up to BHP to satisfy the government. However, the government is obligated to follow the law. No amount of grandstanding by Wall or the Liberals will change that.

  • Lmrobin

    The problem is not so much the take over, but the impact on revenue for the province. The current royalty rate is a percentage of world price and as in OPEC, Compotex by vertue of its market share can more or less dictate price. BHP has already said it will pull out. This would be like Saudi pulling out of OPEC. Secondly because of capital right downs any new mine that is opened by BHP in Sask. would result in significant right downs that the province would lose hundreds os millions of royalty revenue and corporate taxes as they would apply to all of BHPs holdings in Sask. That would include all the current POS operating mines. No royalty revenue realized only income tax from employees would enter the province. This would last 10 years so in essence the Sask. would be raped and pillaged for a minimum of 10 years. This has far more significance than just foriegn ownership.

  • djb

    13 Tory butts should be trembling right about now.

  • Carlos

    Tony “if only one citizen complains we must act” Clements….oh no, that was the census…sorry…move right along everybody….

  • wilson

    If you read BHPs offer, they would treat POS as a separate entity, no write downs against other ventures,
    they would cover off the any lost revenues, bring the head offfice and employees from Chicago to Saskatchewan, make investments that benefit the province and set up a transparent oversight board to make sure all promises are kept.

    Compotex is the only issue they have not bent on, as far as I know.
    Saskatchewan taxpayers own the potash, but the shareholders, not Ottawa nor Saskatchewan own the business operations.

    The shareholders have the ultimate say on accepting this (low) bid or rejecting it outright.

    If this was Danny Millions, he would have already lined up a white knight bid.
    Why didn’t Mr Wall seek out an acceptable bid at first sign of a hostile offer?

  • James

    Wilson…miners would not choose to unemploy themselves.

    Miners would sit at home because the way BHP runs it’s operations in Austrailia is full out…so when you fill up and nobody is buying…you get layed off.

    The aussies that work here in Sask. are adament we do not want BHP here.

    The market can not always take full out production.

  • James

    Wilson…miners would not choose to unemploy themselves.

    Miners would sit at home because the way BHP runs it’s operations in Austrailia is full out…so when you fill up and nobody is buying…you get layed off.

    The aussies that work here in Sask. are adament we do not want BHP here.

    The market can not always take full out production.

  • rob-sask

    If the royalties do sink as a result of pulling out of the cartel I won’t complain since I’m no fan of the OPEC oil cartel for instance. I don’t see how that would happen since if they make less total sales outside the group I would assume they’ll rejoin it. Really the whole concept of national/provincial ownership of resources annoys me since it comes out to everyone trying to screw over everyone else.

  • rob-sask

    If the royalties do sink as a result of pulling out of the cartel I won’t complain since I’m no fan of the OPEC oil cartel for instance. I don’t see how that would happen since if they make less total sales outside the group I would assume they’ll rejoin it. Really the whole concept of national/provincial ownership of resources annoys me since it comes out to everyone trying to screw over everyone else.

  • jad

    Write-downs (or right downs if you prefer) cannot be applied against royalties, only against taxable income. So yes, they would reduce corporate income tax, but most O & G companies and mining companies pay minimal corporate income taxes in any case. Saskatchewan would always have the option of raising royalty rates to recoup any losses.

  • jad

    Write-downs (or right downs if you prefer) cannot be applied against royalties, only against taxable income. So yes, they would reduce corporate income tax, but most O & G companies and mining companies pay minimal corporate income taxes in any case. Saskatchewan would always have the option of raising royalty rates to recoup any losses.

  • http://pulse.yahoo.com/_WHFQKRUVMJSEFVO7L3UNR7OMCQ arti.fact

    The right decision for all the wrong reasons.

  • http://twitter.com/konop konop

    The problem with this particular deal is it is terrible for all Canadians. We are to sell out our whole country so that we can be a global boy scout and let other countries control us? No other country in the world would let us purchase a similar sized company.

  • Ted Betts

    Harper rejects BHP deal. Er, I mean, Clement rejected it. Yes, Clement.

    Is anyone really at all surprised that Harper decided electoral politics trumps principle?

    If you are, you haven’t been paying attention for the last 5 years.

  • Ted Betts

    Harper rejects BHP deal. Er, I mean, Clement rejected it. Yes, Clement.

    Is anyone really at all surprised that Harper decided electoral politics trumps principle?

    If you are, you haven’t been paying attention for the last 5 years.

  • Lmrobin

    BHP and other firms have said the same thing around the world. Like politicians say one thing and do the opposite. As a share holder of POS I would not likely sell my shares as I consider them long term capital income generators which makes you correct in that the shareholder makes the final choice. Greed is a powerful emotion and if the price is high enough many may choose to sell. Most fund and pension managers were against this as they had significant issues with how this would impact returns and other interests world wide. This is way bigger than the promises that they were making.

  • Liz J

    If it’s the wrong thing to do, why are such stalwarts like Goodale of the sad, rudderless, leaderless Liberal party so against allowing the sale? Is that all about politics too?

    The government , Mr Clement and the PM should use the 30 day period to explain the pros and cons to the ordinary peons who are terribly confused on the issue at this point. This just allows lies to spread and the opposition to play dirty. Let’s get the straight facts out there and take ownership of the issue.

  • rob-sask

    Up till now I was trying to really convince myself to vote agaist Harper over the prorogations because I like his views so much but somehow this convinces me. I mean, you can’t have too many principles in a minority but I no longer feel connected to the Cons.

  • Anonymous

    CPC… explain something? transparency? give out info? accountability? not allow lies to spread?

    Sorry, I don’t know which CPC you are referring to. Openness is not their strong suit. If it were any closer to Christmas, they’d probably just prorogue at this point.

  • Anonymous

    CPC… explain something? transparency? give out info? accountability? not allow lies to spread?

    Sorry, I don’t know which CPC you are referring to. Openness is not their strong suit. If it were any closer to Christmas, they’d probably just prorogue at this point.

  • Liz J

    Ya think so? Really?