Is The BHP Bid In Trouble?
BHP Billiton’s $40 billion bid to purchase Potash Corporation of Saskatchewan is starting to give me a this-is-not-actually-going-to-happen feeling.
The Canadian Competition Bureau has issued a Supplementary Information Request for the merger. BHP has delayed the deadline for its $130 per share hostile tender offer by a month to November 18 to accommodate the request.
BHP has been saying that it would market potash independently of Canpotex, an export cartel of the three big Saskatchewan potash producers: PotashCorp, Agrium, and Mosiac. This has caused much pulling of hair and gnashing of teeth among Canadian officials who worry that this would cause potash prices to plummet. That the Canadian Competition Bureau might intervene to keep a cartel going is highly ironic.
And Canada’s Globe and Mail has added some specificity to reports, swirling since BHP unveiled its offer, that the Chinese government is interested in buying PotashCorp through Sinopec.
It makes sense that the Chinese government would be interested in doing this. When it comes to potash, China sips from a long and narrow straw. According to Potash One, a company that is developing a Canadian potash mine, China consumes 27% of the world’s potash. It has no significant potash production or potash reserves. Canada, on the other hand, produces 35% of the world’s potash and has more than half of global reserves.
The Canadian Prime Minister has let it be known that he isn’t terribly comfortable with the idea of foreign ownership for PotashCorp. Stephen Harper reminded Parliament that the government can block the merger. “This government's position has not been to give a blank check to foreign takeovers,” he said.
As for BHP, it has been keeping the door to an exit ajar. The company has been indicated there is a limit to how much it would up its Potash bid. It might be noted that two years ago BHP walked away from its hostile bid for Rio Tinto.
Stephen Harper may shoot the PotashCorp deal down