Canada blocks BHP's Potash bid
- Source: Global Times
- [09:06 November 05 2010]
- Comments
Canada has blocked BHP's audacious $39 billion bid for Potash Corp and left little room for a modified offer, throwing the spotlight on how the world's largest miner can find new avenues for growth.
The government said the deal would not benefit the country, delivering a major blow to BHP Billiton Chief Executive Marius Kloppers after the 2008 failure of a $120 billion-plus takeover attempt of rival Rio Tinto and the collapse of a $116 billion iron ore joint venture with Rio earlier this year.
BHP investors are betting that the Anglo-Australian miner will now return capital through a share buyback or expand its interests in oil and gas in an effort to put its growing cash pile to work.
While Canada gave BHP 30 days to come up with additional proposals that might make its offer for the world's largest fertilizer producer more palatable, the chances of a successful modified bid ap-peared remote Thursday.
"Marius Kloppers is going to be pretty frustrated. BHP is of a size now where just about anything it wants to do of any substance is going to get blocked on regulatory grounds," said Cameron Peacock, a market analyst at IG Markets in Melbourne.
This is the second time Canada has blocked a foreign takeover since 1985, sparking criticism that the government is putting politics before business.
"Some decisions can only be taken once, and there is no turning back ever - such as the case today," Industry Minister Tony Clement said, adding that he was not satisfied with the net benefit to Canada.
The decision surprised investors, as well as BHP's executives and advisers. Potash Corp shares were down about 5 percent in after-the-bell trade, while BHP shares rose 2.6 percent to A$43.72, their highest close since April, on expectations that BHP would consider returning capital to shareholders.
"BHP not spending all that money on Potash ... will increase the probability of a capital return or share buyback, and people like that possibility," said Tim Schroeders, a portfolio manager at Pengana Capital.
Potash, which had unsuccessfully sought to attract a rival bid, repeated its view that BHP's $130-a-share offer was "wholly inadequate."
Analysts said Potash shares were unlikely to tumble back to pre-offer levels of around $112, given a rising market and strong fundamentals in the fertilizer market. Even without any bid, the firm's shares are expected to rise in the medium term.
Reuters
