Populism trumps ideology as Conservatives block Potash Corp. sale

[SebC]

Stephen Harper has blocked one of the most controversial foreign takeovers in Canadian history, a remarkable about-face for an avowed free trader that sends confusing signals on this country’s enthusiasm for outside investment.

Industry Minister Tony Clement announced late Wednesday that the Harper government has rejected Australia-based BHP Billiton Ltd.'s $38.6-billion (U.S.) hostile bid for Potash Corp. of Saskatchewan – a decision made in the face of a fiercely populist backlash against the deal.

http://www.theglobeandmail.com/globe...rticle1784212/

[Slava]

Glad someone started a thread! I watched the announcement yesterday and find the whole situation so intriguing! I'm not sure if this is as dead as some of the pundits though? Seems like a situation where BHP could come back and offer more money and the federal government might reconsider?

[Regulator75]

Oh wait it's potash not pot ash...

[Red Slinger]

This will likely have a direct economic affect on Calgary ,or at least Western Canada, as BHP was talking about setting up shop likely either in Calgary or Vancouver.

BHP was looking to do quite a bit of growing of the Potash operations and it likely would have helped to employee several hundred Calgarians.

Unfortunate decision.

[Cowperson]

There is a genuine argument that taxpayers would suffer if Potash were taken into the BHP Biliton structure . . . . . so it's not necessarily all about populism.

I think BHP is going to have to come up with some guarantees regarding tax revenues if it wants this to happen.

Cowperson

[speede5]

Originally Posted by Red Slinger

This will likely have a direct economic affect on Calgary ,or at least Western Canada, as BHP was talking about setting up shop likely either in Calgary or Vancouver.

BHP was looking to do quite a bit of growing of the Potash operations and it likely would have helped to employee several hundred Calgarians.

Unfortunate decision.

Maybe for Calgary but the consensus was it would cost jobs in Sask. Either way I don't think this is over.

[mykalberta]

How would taxpayers suffer though? Are their different corporate tax rules if you are a company HQ in a province compared to just a subsiduary?

It should have never gotten this far. If Potash is so important to Sask then why didnt they put in a poison pill when they first divested it from a crown corp?

I think its bad precedence for any resource company looking to cash out from a takeover. Cons had to do it, once every political party showed their hand you could see this coming.

[SeeBass]

I think at the moment this requires a great deal of understanding that most of us are not aware of now.

I usually agree with the choices of the cons and that the premier of a province didn't like it. So at the moment I will support it till I know more. That might be the route of most of us and the opposite for people who don't like the conservatives.

I would assume this will just go along political lines for now.

[FlameOn]

Originally Posted by mykalberta

I think its bad precedence for any resource company looking to cash out from a takeover. Cons had to do it, once every political party showed their hand you could see this coming.

There's already been precedent for this previously with other non-resource companies. Past governments including the liberals have blocked the sales of other major corporations. Remember when Onex was trying to buy both Air Canada and Canadian airlines, some Quebec MPs complained and others complained it would be bad for the consumer with less competition. That sale got blocked pretty fast too and Air Canada ended up taking over Canadian. Bad for Calgarians in the end as Air Canada laid off thousands of Canadian airlines staff and moved lots of jobs to Quebec and outsourced to Brazil.

All these decisions are politically motivated. Though I'll support the decision for now until I read up more on this.

[chemgear]

Ahhhh nooo! My stocks!

Actually, not really a big deal in that regard. They're still doing pretty well and growth potential looks good.

How much can you really "enforce" any tax revenue guarantees?

[FlameOn]

Originally Posted by chemgear

Ahhhh nooo! My stocks!

Actually, not really a big deal in that regard. They're still doing pretty well and growth potential looks good.

How much can you really "enforce" any tax revenue guarantees?

There's also the problem with being subject to foreign tax laws and foreign tax loop holes depending on if it remains a subsidiary or full controlled by BHP.

Example with Google and the double irish scheme they have going
http://news.cnet.com/8301-30684_3-20020329-265.html

[valo403]

Originally Posted by mykalberta

How would taxpayers suffer though? Are their different corporate tax rules if you are a company HQ in a province compared to just a subsiduary?

It should have never gotten this far. If Potash is so important to Sask then why didnt they put in a poison pill when they first divested it from a crown corp?

I think its bad precedence for any resource company looking to cash out from a takeover. Cons had to do it, once every political party showed their hand you could see this coming.

That's actually a really interesting question, it's possible they have a poison pill but BHP was going to be able to acquire sufficient shares to block the triggering. I don't know a lot about Canadian M&A, but the state of poison pills under Delaware law is in a bit of flux in regards to just how far a board can go when blocking takeover bids. Potentially any pill present here was left relatively weak out of fears of it being voided altogether at some point in the future. Then again, maybe a pill wasn't inserted out of a belief that a takeover would be blocked in the manner that this one has so far.

[Bobblehead]

Tough to know how Calgary will respond when you get prominent Calgarians saying to allow the sale would be similar to the NEP.

For anyone who is counting, last week marked 30 years since the much-vilified NEP was imposed on Alberta's energy sector; mention the name Pierre Trudeau to an oilpatch veteran and don't expect a friendly reply.

If Harper and his cabinet give the go-ahead to the Potash takeover, the same will hold true in Saskatchewan -- only instead of the players being Peter Lougheed and Pierre Trudeau, it'll be Stephen Harper and Saskatchewan Premier Brad Wall.

"If the deal gets the nod," said retired oilpatch exec and prominent Calgary businessman Dick Haskayne on Monday night while attending a dinner in Calgary, "it will be the most ill-considered government decision in so far as business is concerned since the NEP in 1981."

http://www.calgaryherald.com/busines...#ixzz14LWTfYvl

[Red Ice Player]

[QUOTE=Bobblehead;Tough to know how Calgary will respond when you get prominent Calgarians saying to allow the sale would be similar to the NEP.




Murray Edwards lauded the decision too. It would have been political suicide to allow this takeover. Considering the TSX had its best day in more than two years it would seem to be a sound move. On another note, god, what a great day for my gold stock!!!!!

[mykalberta]

Originally Posted by valo403

That's actually a really interesting question, it's possible they have a poison pill but BHP was going to be able to acquire sufficient shares to block the triggering. I don't know a lot about Canadian M&A, but the state of poison pills under Delaware law is in a bit of flux in regards to just how far a board can go when blocking takeover bids. Potentially any pill present here was left relatively weak out of fears of it being voided altogether at some point in the future. Then again, maybe a pill wasn't inserted out of a belief that a takeover would be blocked in the manner that this one has so far.

I hope they continue to allow poison pills. For an M&A to take over a company, bleed them dry then leave them with loads of debt is reason enough to allow poison pills. If there is enough shareholder revolt they can replace the board and install ones that will remove the poison pill.

[cal_guy]

I think this quote sums it up quite nicely.

“If we fail to remain competitive, Australia will incur a substantial opportunity cost and, in the worst-case scenario, our resources will fall into overseas hands and we will become a branch office — just like Canada.”

Don Argus former BHP Billiton 2008 in the Hellenic Shipping News.
http://www.thestar.com/business/arti...trol-of-potash

[valo403]

Originally Posted by mykalberta

I hope they continue to allow poison pills. For an M&A to take over a company, bleed them dry then leave them with loads of debt is reason enough to allow poison pills. If there is enough shareholder revolt they can replace the board and install ones that will remove the poison pill.

The concern in Delaware as far as I can tell, and I'm by no means an M&A expert, is based alrgely around boards who use the pills as a means to entrench themselves as opposed to protecting the company from raiders. The cases I've read largely focus upon the proportionality of the pill to the perceived threat that the hostile bid presents to the company, as well as lookign at the independence of the directors when adopting the pill provisions. It's an interesting area, one of the few that got you excited to go to class in the last year of law school. Each case seemed like a potential 'Wall St.' style movie script.

[Azure]

Good.

$38 billion isn't near enough money, nevermind all the other implications.