* Says no net benefit to Canada; leaves scant room to revise
* Gives BHP Billiton 30 days to come up with alternatives
* Potash shares fall 3.2 percent vs rally in main index
* BHP shares jump 6.1 percent on buyback expectations
* Blow for BHP chief Kloppers; may now look at oil, gas
(Adds Potash shares, updates BHP shares)
By Michael Smith and David Ljunggren
SYDNEY/OTTAWA, Nov 4 Canada blocked BHP
Billiton's (BLT.L) $39 billion bid for Potash Corp (POT.TO) and
left little room for a modified offer, throwing the spotlight on
how the world's largest miner can find new avenues for growth.
Canada said the deal would not benefit the country,
delivering a major blow to BHP Chief Executive Marius Kloppers
after the 2008 failure of a $120-billion-plus bid for rival Rio
Tinto (RIO.L) (RIO.AX) and the collapse of a $116-billion iron
ore joint venture with Rio earlier this year.
BHP (BHP.AX) investors are betting the Anglo-Australian
miner will now return capital through a share buyback or expand
its interest in oil and gas to put its growing cash pile to
While Canada gave BHP 30 days to come up with additional
proposals that might make its hostile bid for the world's
largest fertiliser producer more palatable, the chances of a
successful modified offer appeared remote.
"Marius Kloppers is going to be pretty frustrated. BHP is of
a size now where just about anything it wants to do of any
substance is going to get blocked on regulatory grounds," said
Cameron Peacock, market analyst at IG Markets in Melbourne.
For other BHP-Potash stories [ID:nN22340110]
Q+A on what next for BHP [ID:nSGE6A3004]
Newsmaker on BHP CEO Kloppers [ID:nSGE6A309J]
Instant view [ID:nN03109670]
Text of Clement statement [ID:nSGE6A20MX]
Value investor view on Potash: [ID:nRTV153281]
BHP/Potash timeline: link.reuters.com/zew32q
BREAKINGVIEWS column on Canada [ID:nN03135643]
POTASH INVESTORS ANGRY
The move late on Wednesday left some investors in Potash
fuming after many had piled into the shares expecting a
"We are quite angry because the decision will probably
prevent us from unlocking the value (in Potash Corp)," said
Lionel Melka, a portfolio manager with hedge fund Bernheim
Dreyfus in Paris. "This is purely a political decision, it is
Potash Corp shares, which had been trading about 12 percent
above BHP's $130 per share bid, slid 3.2 percent by 1530 GMT
after the market reopened on Thursday, compared with a 1.9
percent gain in Toronto's main stock index .GSPTSE.
BHP shares in London shot up 6.1 percent to the highest
levels at least since the merged company was created in 2001 on
expectations BHP would consider returning capital to
"BHP not spending all that money on Potash ... will increase
the probability of a capital return or share buyback, and people
like that possibility," said Tim Schroeders, a portfolio manager
at Pengana Capital in Australia.
Based on current metals prices, the group will have a cash
pile of $16.4 billion by the end of next year and a $10 billion
buyback would be 5 percent accretive, Liberum Capital in London
said in a note.
While investors expect BHP to look at a buyback or a special
dividend, analysts also said the miner could increase its
exposure to oil and gas using an estimated $11 billion warchest.
Shares in Australian oil and gas firm Woodside Petroleum
(WPL.AX) rose 1.8 percent on speculation it could now fall in
BHP's sights, while Oil Search (OSH.AX) rose 2.9 percent.
POLITICS BEFORE BUSINESS?
The Canadian decision was only the second time the nation
has blocked a foreign takeover since 1985, sparking criticism
the minority Conservative government was putting politics before
"Some decisions can only be taken once and there is no
turning back ever -- such as the case today," Industry Minister
Tony Clement said. He ruled that the deal did not meet the legal
test of being a net benefit to Canada.
Under the Investment Canada Act, a foreign takeover must
benefit the country in terms of jobs, exports, production and
But the decision had always been a thorny one for a minority
government that needed to weigh political considerations against
the desire to ensure Canada stayed open for business.
The Conservatives have most of the seats in Saskatchewan,
the Prairie province where Potash Corp is based, and fervent
Saskatchewan opposition to the bid meant they risked losing
those seats in an election likely to take place next year.
"I think it comes as a shock to the market," said John
Stephenson, senior vice president at First Asset Investment
"I think it goes in the face ... of the direction of the
government of Canada for the last number of years, which is
we're open for business. Clearly, we're sending a signal that
no, we're not."
Clement said he was unable to release the precise reasons
for the decision, which came after strenuous objections from
Potash Corp, its home province of Saskatchewan and customers of
the crop nutrient essential for boosting crop production.
Potash Corp, which had unsuccessfully sought to attract a
rival bid, repeated its view that BHP's $130-a-share offer was
Analysts said Potash Corp shares were unlikely to tumble
back to pre-offer levels around $112, given a rising market and
strong fundamentals in the fertilizer market. Even without any
bid, the firm's shares are expected to rise in the medium term.
Russian fertiliser producer Phosagro said it would announce
a decision after Nov. 15 on whether it might group together with
other Russian firms and buy a stake in Potash Corp.
China, a major potash user worried about BHP's influence
over supply of another key commodity, welcomed Canada's decision
to block the bid.
BHP launched its bid in August, seeking an entry into the
lucrative potash market, 25 percent controlled by Potash Corp.
(Additional reporting by Louise Egan in Ottawa; Sonali Paul
in Melbourne, Niu Shuping in Beijing and Eric Onstad in London;
Editing by Mark Bendeich, Lincoln Feast and Erica Billingham)