Not any more

Potash takeover gets tentative nod from Investment Canada

In Canada on November 1, 2010 at 20:57

Investment Canada has given a tentative go-ahead to BHP’s controversial takeover of Potash Corp. of Saskatchewan.

Conservative insiders say the departmental recommendation sent to the Prime Minister’s desk is a yellow light — strings are attached — to the government’s approval of the $40-billion hostile takeover of the world’s largest potash mining operation by an Australian corporation.

A source said government monitoring has been proposed to enforce the takeover terms, among them BHP’s promised relocation of executives to Saskatoon and multi-billion-dollar infrastructure investments.

Government supervision is seen as necessary to avoid the bad experiences of other multinationals that have taken over Canadian mining operations and failed to deliver on promises on job generation and investment boosts.

While the final verdict is likely still in Prime Minister Stephen Harper’s hands as he tries to thread the needle between Conservative principle and Saskatchewan politics, the compromise is seen as the only way to escape two intractable positions with high stakes at play.

Approving the takeover outright would’ve infuriated Saskatchewan Premier Brad Wall, who has campaigned vigorously against the deal as a $6-billion revenue loss to provincial coffers, and would put the Conservative’s 13 seats in their provincial fortress at risk. Three other premiers — from Alberta, Manitoba and Quebec — have supported Mr. Wall’s position.

But unilaterally rejecting the deal would’ve tarnished Canada’s global open-for-investment reputation and could’ve jeopardized proposed Canadian takeovers of mining firms Down Under.

The government’s strings on the deal, most of which have not been attached to previous Investment Canada approvals, are apparently not onerous enough to threaten the BHP offer.

It remains to be seen if the Saskatchewan government will be appeased when the details are released on Wednesday, but opposition to the current BHP bid is fierce in the province where Potash Corp. was born as a Crown corporation and now exerts global influence over supply and pricing in the potash-based fertilizer industry.

The rejection of Mr. Wall’s request for a meeting with the Prime Minister this week is seen as a sign of rapidly escalating tensions between two leaders, who were on close terms until this issue flared. While shrugged off as merely being too late to change the Investment Canada verdict, the PMO slamming the door on a friendly premier foreshadows an angry backlash in Saskatchewan to the Wednesday announcement.

Another source says the flip side of the dispute will feature prominently in the government’s damage control, specifically the "net harm” that would be caused by jeopardizing Canadian investments abroad or foreign purchases in Canada.

While a PMO spokesman insisted Monday the final decision is still pending and that Industry Minister Tony Clement’s verdict would not be overturned, the deal was again front and centre in the House of Commons.

Deputy Liberal leader Ralph Goodale, the only MP from Saskatchewan who is not a Conservative, demanded the government block the sale. The New Democrats insisted the government must go even further and pass legislation giving governments greater power to fight takeovers.

It was instructive that House Leader John Baird, the designated hitter to defend the deal, repeatedly promoted the 13 Conservative MPs from Saskatchewan as defenders of the province’s interests.

That reflects intense pressure the Prime Minister is facing from his nervous Saskatchewan MPs and some members of the cabinet, who argue the world’s potash motherlode should be kept under Canadian ownership, even though less than 50 per cent of the shareholders are Canadian.

Mr. Harper’s initial position, dismissing it as an “American-controlled company to be taken over by an Australian-controlled company” was widely translated as signalling the takeover of Potash Corp. would be rubber-stamped. The Prime Minister quickly dialed down his rhetoric on the issue.

But sitting at his desk Tuesday, if he didn’t ink the deal Monday night, Stephen Harper faces an uncomfortable choice between a rock called potash and hard place called politics in trying to sell a compromise that will undoubtedly please nobody.


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