The growing cost of courtship

20 October 2010 By Una Galani Follow @ugalani

The miner is ready to make concessions to win support for its $39 bln bid for Potash Corp from the fertiliser giant’s home province. It won’t want to pay the C$3 bln Saskatchewan seeks to cover lost tax income. But BHP can use the obstacle to justify not raising its bid too far.

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BHP Billiton voiced confidence on Oct. 20 that it can address concerns over its $39 billion bid for Canada's Potash Corp after the province of Saskatchewan, where the fertiliser group is based, indicated it would recommend the country blocks the deal.

The province is due this week to announce its recommendation which will feed into the federal government's assessment of whether the deal passes the Investment Canada Act, which requires that foreign investments are a "net benefit" to the country.

"At the heart of any 'net benefit' calculation is the people of Saskatchewan being compensated for the C$3 billion in revenue Saskatchewan will lose over the next 10 years as a result of a BHP takeover of Potash Corp", a province official said in an statement emailed to media.

BHP offered a oneoff payment of C$370 million into a local infrastructure fund but that doesn't even come close to offsetting the estimated C$3 billion that the province will lose, the official added.

Revenues generated by Saskatchewan would be reduced if the AngloAustralian miner uses Potash Corp's tax credits against the development of Jansen, a separate potash project it owns in the country. BHP did not stipulate how it would address the concern.

A final decision on whether or not to approve the deal will be made by Canada's Minister of Industry and is not expected until November.

BHP is offering to pay $130 per share for Potash Corp. The fertiliser group's New Yorklisted shares are trading at $143.

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