* Province fears loss of tax revenue, royalties
* Federal government won't tip its hand on deal
* Potash Corp shares down slightly in New York
(Adds details, comments from Conference Board)
By Rod Nickel and David Ljunggren
REGINA/OTTAWA, Oct 20 Saskatchewan dismissed on
Wednesday the idea that a hostile offer from mining giant BHP
Billiton (BHP.AX) for provincial crown jewel Potash Corp
(POT.TO) would bring net benefits, playing up an argument that
the federal government could use to reject a deal.
Ottawa, charged with making the final decision on whether
the $39 billion takeover offer for Potash, the world's biggest
fertilizer producer, goes ahead, said it was still examining
"I can't do the dance of the seven veils before the
decision is made," Industry Minister Tony Clement told
reporters. "The process has to be a pristine process".
The bid is a challenge for the Conservative federal
government, which enjoys widespread support in Saskatchewan,
but also has a broad pro-business agenda.
Under the Investment Canada Act, the federal government can
block a major takeover if it deems that a deal would not
present a "net benefit" to Canada. A decision is due Nov. 3.
Ottawa has said it will pay attention to Saskatchewan's
views on this deal, as a takeover could have far-reaching
consequences for provincial revenues. The bulk of Canada's
production of potash, a key crop nutrient, is located within
the Western Canadian province.
Prime Minister Stephen Harper caused some confusion by
telling the House of Commons that "this is a proposal for an
American-controlled company (Potash Corp) to be taken over by
an Australian-controlled company (BHP)."
Harper aides later referred to a report that called Potash
"a widely held North American company". The Liberal opposition
urged the government to listen to Saskatchewan and block the
Saskatchewan fears it will lose about C$3 billion ($2.9
billion) in revenues over the next 10 years if the deal goes
through because of the way royalty payments are structured.
"In order for this takeover to be neutral in our view, the
people of this province would need to see C$3 billion come from
somewhere. And that's a net neutral, that's not even a net
benefit," Saskatchewan Premier Brad Wall said.
"We are going to be making the final decision today -- our
cabinet and our caucus -- and then we will announce our final
decision in respect to the takeover tomorrow," he added.
On Tuesday, sources told Reuters that BHP had failed to
meet Saskatchewan's demand for extra cash and talks between
both sides had broken down.
Potash Corp has rejected BHP's $130 a share bid, and has
repeatedly said it expects other offers, although none has
emerged. Potash Corp shares fell $1 to $142.43 on the New York
Stock Exchange on Wednesday.
TAKE A LOOK on BHP's Potash bid [ID:nN22340110]
SCENARIOS-What could happen to Potash Corp? [ID:nN15201930]
Value investor view on Potash Corp bid: [ID:nRTV153281]
BHP/Potash timeline graphic: link.reuters.com/nav26p
BHP, which offered Saskatchewan only a fraction of the C$3
billion that the province wants over 10 years to make up for
expected revenue losses, said it is confident about addressing
the tax-loss concerns.
It said it was working with the Canadian government's
Investment Review Division on additional "significant"
undertakings to get a deal across the line by the government's
Nov. 3 decision date.
Sources familiar with discussions told Reuters the province
wanted an up-front payment of more than C$1 billion in cash to
make up for expected revenue losses, along with other
Saskatchewan has rejected BHP's offer related to a one-off
payment of C$370 million into an infrastructure fund.
According to media reports, BHP has also indicated that,
after a takeover, it is willing to structure the company in a
manner that would protect the province from some of the revenue
losses it might otherwise face.
"It is an option that has to be studied in detail, but it
goes at least part way in addressing the premier's concerns,"
said Glen Hodgson, chief economist at the Conference Board of
Canada, which recently complied an independent report for the
province detailing the potential impact of a takeover.
"I do think that there is something there that is worth
deeper investigation," he added.
In Ottawa, deputy Liberal leader Ralph Goodale, who is his
party's only member of Parliament from Saskatchewan, told
reporters the federal government had ignored opposition
requests for more information on how it would assess whether
the deal might benefit Canada.
"The government's answer should be 'no'," he said.
(Writing by Euan Rocha, additional reporting by John McCrank;
editing by Janet Guttsman and Rob Wilson)