TORONTO (AP) — BHP Billiton on Sunday withdrew its hostile takeover bid for Potash Corp. of Saskatchewan, saying it cannot convince Canada’s federal government to approve the deal.
Ottawa announced earlier this month that it would block the deal because it wasn’t a net benefit to Canada. BHP had 30 days to appeal, but said Sunday in a statement that it cannot satisfy the net benefit requirements outlined by the government.
“We have not been able to obtain clearance under the Investment Canada Act and have accordingly decided to withdraw the Offer,” BHP Billiton CEO Marius Kloppers said in a statement.
Anglo-Australian BHP Billiton, the world’s largest mining company, was attempting a hostile $38.6 billion takeover of Potash Corp., which controls more than 25 percent of the world’s supply of potash. Potash is a fertilizer ingredient critical to the global food supply.
BHP said the offer and the benefits to Canada would have been “unparalleled in substance, scope and duration.”
Had the deal been approved by the government and shareholders, it would have been one of the biggest in Canadian history — and the largest in the world this year.
BHP said it will now reactivate the remaining $4.2 billion part of its share buy back program that it previously suspended.
The failure to do the Potash Corp. deal is yet another setback for Kloppers. BHP Billiton and Rio Tinto just scrapped plans for a $120 billion iron ore joint venture in the remote Australian Outback after antitrust regulators in Australia, Europe and Asia opposed it or demanded changes. The global financial crisis also derailed a planned merger of the two companies.
Canadian Prime Minister Stephen Harper has said even those in favor of foreign investment in Canada were opposed to BHP’s takeover bid for Potash Corp. and he questioned whether any other country would approve it.
What was once a little-known resource became a symbol of national pride in recent weeks. Saskatchewan has over half the world’s reserves of potash and Potash Corp. is one of the Saskatchewan’s largest revenue-generating companies, accounting for 15 percent of its provincial budget as recently as two years ago.
Harper’s Conservative government is widely believed to have bowed to political pressure to protect a rich natural resource.
Saskatchewan Premier Brad Wall opposed the foreign takeover and ran a vigorous campaign. BHP’s bid became an emotional issue in Saskatchewan.
It’s only the second rejection of a foreign takeover in Canada in 25 years, but it risks the country’s reputation of being in favor of foreign investment.
BPH was hoping to profit from what it expects will be rising fertilizer demand in China and India. China had expressed unease that a BHP takeover of Potash might create a “potash monopoly” that would boost prices and hurt China. A Chinese state-owned company was said to be interested in making a rival bid, but no other offer has surfaced.
Potash Corp said in a statement Sunday that BHP’s decision to withdraw its offer “underscores the PotashCorp Board of Directors’ unanimous belief that the BHP Billiton offer substantially undervalued PotashCorp and failed to reflect both the value of our premier position in a strategically vital industry and our future growth prospects.”
The company made no mention of another bid.
Potash Corp has said since August that BHP’s $130-per-share offer was wholly inadequate. Potash Corp shares closed at $139.91 in trading on the New York Stock Exchange on Friday.
BHP Billiton’s share price edged up 9 Australian cents to 44.39 Australian dollars (US$43.90) on the Australian bourse in early trade after the announcement, while the rest of the Australian market started marginally lower.
Tony Russell, a manager at stockbroking firm RBS Morgans, said the price movement suggested the market viewed the announcement positively.
“Considering the weakness in commodities prices on Friday night, you would have thought BHP would have been off at least a percent today,” Russell said.
Associated Press Writer Rod McGuirk in Sydney contributed to this report.