If the federal government rejects BHP Billiton’s $38.6 billion bid for PotashCorp Nov. 3, it shouldn’t have lasting repercussions for Canadian firms that intend to purchase Australian companies, said a representative of the Canadian Australian Chamber of Commerce.
Last week, Saskatchewan premier Brad Wall made it clear that the deal was not beneficial for the province because of potential royalty losses associated with the Australian’s company’s hostile takeover of PotashCorp. Wall encouraged Industry Canada, which is reviewing the foreign takeover, to reject the deal.
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The decision prompted cries of protectionism in Canada’s business media, including theNational Post’sTerence Corcoran, who wrote a column where he compared Wall to Hugo Chavez, the leader of Venezuela.
Chen Bian, spokesperson for the Canadian Australian Chamber, a group that fosters trade between the two nations, said Australians are not up in arms over the PotashCorp story.
News of the takeover bid is confined to the business pages of Australian newspapers and it isn’t a huge political issue in the country.
“People are looking at it, but I don’t know that it is particularly contentious here,” said Bian, who is from Montreal. “I don’t think anyone is going – oh, those Canadians.”
Nonetheless, the threat of Australian trade retaliation could be a concern for Canadian agribusiness companies that are moving into the Australian market. Agrium, for example, is seeking final regulatory, shareholder and court approval for its $1.24 billion bid to acquire AWB Ltd., the former Australian Wheat Board.
An Agrium spokesperson said he could not comment on the potential implications of the PotashCorp deal.
When it comes to foreign takeovers, Bian said the Australian public and business community are primarily concerned about bids from China. Canadian companies aren’t a huge worry.
“When Viterra bought ABB Grain, it was a very big business deal. But I don’t think anyone ever stood up and said it’s a national security issue.”
Michael Hart, a professor in the Norman Paterson School of International Affairs at Carleton and a research fellow with the C.D. Howe Institute, said Canada should maintain its reputation as a safe place to invest, even if Industry Canada rejects the BHP bid.
That might change, however, if Canadians spurn future foreign takeovers.
“If there’s a pattern of them, that has an effect.”
In recent weeks, a Canadian billionaire has argued that if BHP’s bid is successful, it would be yet another loss for Canadian industry, which has lost dozens of companies in forestry, mining, liquor and steel sectors to foreign buyers over the last couple of decades.
As well, Stephen Jarislowsky, 85, a Montreal resident who has run an investment firm for more than five decades, said the BHP deal could affect Canadian farmers.
“If we give a company to a guy who is trying to raise prices by building a quasi-monopoly, our own farmers are going to have to pay more (for fertilizer).”
Meanwhile, rising grain prices since BHP Billiton made its $130-a-share offer for PotashCorp might force the company to raise its bid.
Rising grain prices are also pushing fertilizer prices and fertilizer manufacturer share prices higher.
As a consequence, Gleacher &Co analyst Edlain Rodriguez told Reuters News Service that BHP may have little choice but to raise its bid, even if a rival proposal doesn’t surface.
“The fundamentals have improved significantly, with corn and everything else moving – that’s like a game changer,” said Rodriguez. “As a result, I think it is very likely that BHP has to raise that number quite a bit. I think somewhere around $160 is the right number for PotashCorp.”
BHP BILLITON
Headquarters:Melbourne, AustraliaClaim to
fame:World’s largest mining company. Holdings include base metals, iron ore, coal, petroleum, aluminium, diamonds and manganese
Year end:June 30
Total sales:$52.8 billion (US)Profits:$12.5 billion (US)
Basic earning per share:$2.24 (US)Employees:40,990
POTASH CORP
Headquarters:Saskatoon
Claim to fame:World’s largest fertilizer company. Has 20 percent of world potash production capacity, five percent of phosphate capacity and two percent of nitrogen capacityYear end:Dec. 31
Total sales:$3.98 billion (US)Net income:$988 million (US)Net income per share:$3.34 (US)Employees:5,136
Source: Staff research | WP GRAPHICS
