- 02Nov
(Reuters) - Canada insisted on Tuesday it made no decision on BHP's $39 billion offer to buy Potash Corp, even as two newspapers reported that bureaucrats were advising that the bid should go ahead and rumors swirled in the markets that Ottawa would block a deal.
BHP Billiton shares rose 2.2 percent in London, with traders citing market talk that Canada's federal government would reject its bid for Potash, the world's largest fertilizer supplier. Potash shares trimmed overnight gains.
Industry Minister Tony Clement in an e-mailed statement on Tuesday denied that officials of Investment Canada -- part of his ministry -- had already recommended that the government let the Anglo-Australian miner's hostile bid proceed, against the advice of Saskatchewan, Potash Corp's home province.
Later, in response to the market speculation, a Clement spokesman again denied that a decision had been made already.
"I am currently reviewing the facts of the case. As of yet no decision has been made, and no decision or recommendation has been communicated to the investor," he said, referring to BHP Billiton.
A decision is due by the end of Wednesday. (0400 GMT, November 4) By law, Ottawa must decide whether the takeover would carry a net benefit to Canada.
A "yes" ruling is likely to push the takeover process forward, while forcing BHP to decide whether to raise its $130-a-share offer, which Potash has already rejected as inadequate.
Potash Corp's shares are expected to fall if the government opts to veto a takeover, as arbitrage traders will quickly exit the stock. But analysts argue that any weakness in Potash Corp's shares will be short-lived given a recent strengthening in fundamentals across global agricultural markets.
Potash Corp's shares were up 20 cents in midday trade at $146.84 on the New York Stock Exchange. Since BHP announced its bid in late August, the stock has held well above the $130-a-share offer price. Shareholders are betting that a higher bid will eventually materialize.
POLITICS WEIGH
Canada's Conservative minority government risks alienating its political allies if it allows the bid, but it would also risks sending a damaging anti-market message to the global investment community if it blocks the process.
Clement, statement in response to articles in the National Post and Globe and Mail, said he would make the decision on whether to block the takeover -- not Prime Minister Stephen Harper.
"The political fanfare of this proposed deal is clearly playing out here," said Darryl Levitt a Toronto-based lawyer at Macleod Dixon.
"The final decision does in fact rest with Industry Canada, but because there are very strong supporting arguments for both sides of the equation, Mr. Harper cannot risk alienating any part of his constituency," said Levitt.
Saskatchewan, a bastion of Conservative support, opposes the BHP bid on grounds that a takeover would lower royalty and tax revenue.
The National Post, quoting insiders from the ruling Conservative Party, said Harper himself would have the final say. It said the recommendation for approval carried conditions, including a requirement that BHP spent billions of dollars on infrastructure in Canada.
The Globe and Mail, citing people familiar with the situation, said BHP concluded negotiations on the weekend with Investment Canada and the Anglo-Australian miner had satisfied concerns of Canadian officials.
"It is unfortunate that Postmedia chose to run a story without checking facts first, as it has misled many and invoked some unnecessary reactions that have led to further erroneous news reports across Canada and the world," Clement's statement said, referring to the company that owns the National Post.
The National Post said it stood by its story.
"We have two sources on this story who have proven themselves over many years to be both reliable and cautious. Until we've seen something more compelling than a government denial, we will stand by the story," said Stephen Meurice, editor-in-chief of the National Post, in an e-mail.
