BHP Billiton blames Canadian authorities for PotashCorp deal failure

BHP Billiton BLT confirmed this morning that it had formally pulled out of efforts to buy Canada's PotashCorp POT, blaming tough regulatory hurdles and stringent conditions set by the country's authorities for ultimately killing off any prospect of a deal.

BHP, the London listed mining giant, made a $130 per share offer for PotashCorp in mid-August and said it had since made a series of concessions to ease the way for Canada's regulators to give the purchase the go-ahead. Nevertheless, last week Canadian Minister of Industry Tony Clement said that he was not satisfied that BHP's offer was likely to be of net benefit to Canada. In its response today, the miner said attempting to resolve the issues connected to Mr Clement's rejection of the offer “would have required additional undertakings beyond those BHP Billiton had already offered which would have conflicted with BHP Billiton's business strategy and been counter to creating shareholder value.” The company said it was now prepared to write off approximately US$350m of transaction costs, of which approximately US$250m was related to the US$45bn acquisition financing facility needed to fund the deal.

BHP Billiton Chief Executive Officer Marius Kloppers expressed disappointment at the outcome. “Unfortunately, despite having received all required anti-trust clearances for the offer, we have not been able to obtain clearance under the Investment Canada Act and have accordingly decided to withdraw the offer. We remain committed to Canada and we plan to develop a significant presence in the potash industry in Saskatchewan. As part of those plans we will continue to progress our Jansen Project and other development opportunities,” he said.

BHP said its offer would have resulted in a significant net benefit to Canada, Saskatchewan and New Brunswick and that its package of terms was unparalleled in substance, scope and duration, reflecting the importance of potash to Canada and Saskatchewan. The company had offered to commit to legally binding undertakings that would have, among other things, increased employment, guaranteed investment and established the company's global potash headquarters in Saskatoon, Saskatchewan.

The investment commitment included US$450m on exploration and development over the next five years over and above commitments to spending on the Jansen project. An additional US$370m would have been spent on infrastructure funds in Saskatchewan and New Brunswick and BHP would also have applied for a listing on the Toronto Stock Exchange. The company said it was also ready to forego tax benefits, remain a member of Canpotex for five years and relocate to Saskatchewan and Vancouver over 200 additional jobs from outside Canada. As part of these measures, BHP had also agreed to an unprecedented monitoring and compliance regime underpinned by a US$250m performance bond.

Elsewhere today, BHP said it was reactivating the remaining US$4.2bn component of its previously suspended US$13.0bn buy-back program.

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