* Deal could reduce government tax revenues, royalties
* BHP seen getting tax writeoff for interest costs
* Other potash miners fear change to marketing system
* Saskatchewan cautious about a China bid
(Adds comments on China, political scientist view, lawsuit
By Euan Rocha
SASKATOON, Saskatchewan, Sept 29 A takeover of
fertilizer giant Potash Corp (POT.TO) could cut into corporate
tax revenues and mining royalties, the premier of the western
Canadian province of Saskatchewan warned on Wednesday.
Canada's federal government is reviewing whether BHP
Billiton's (BHP.AX) $39 billion hostile takeover bid for Potash
Corp would provide a net benefit to the country.
Ottawa will consider how such a deal could affect federal
and provincial revenues, Wall told reporters in Saskatoon,
Potash Corp's home base.
Saskatchewan is specifically concerned that BHP could use
the interest it is charged for borrowing money to complete the
takeover to write off corporate income taxes owed to both
Ottawa and Saskatchewan.
"We don't have the final estimates yet, but there is a real
risk in terms of a substantial, potential decrease in corporate
income taxes," Wall said. "We will balance the desire that we
have for a positive investment climate with also the need to
think long term."
An independent report for Saskatchewan on the implications
of a Potash takeover has been delayed to Monday from Thursday
after its author, the Conference Board of Canada, requested
more time, a spokesman for the provincial government said
earlier on Wednesday.
The report is likely to influence whether BHP's bid wins
political approval and whether Canada seeks to impose
"Asking an outside group such as the Conference Board to
look at it carries a certain amount of credibility," said John
Courtney, senior policy fellow at the University of
Saskatchewan's graduate school of public policy.
"If they are looking for some sort of weapon to bolster
their case, then the report coming out next week, if it's along
the lines of (Wall's stated concerns), would certainly do
Wall has said in the past he is also concerned that a BHP
takeover of Potash, the No. 1 producer of the fertilizer, could
reduce royalties if the Anglo-Australian mining giant markets
the crop nutrient independently, instead of through the
Canpotex marketing consortium.
Such a change could weaken potash prices, which would lower
Saskatchewan Energy Minister Bill Boyd said the provincial
government has met with Mosaic Co (MOS.N) and Agrium Inc
(AGU.TO), Potash Corp's partners in Canpotex, and both have
expressed concerns about changes to the marketing regime.
Saskatchewan, which produces a quarter of the world's
potash, depends on the royalties for hundreds of millions of
dollars in income each year, but received nearly C$1.4 billion
($1.35 billion) in 2008-09 after potash prices jumped.
"BHP Billiton will look after their shareholders, and they
should, and I respect that," Wall said. "Potash Corp will look
after their shareholders, and they should, and I respect that.
"We will look after our shareholders, the people of the
province, whose resource it is in the first place, and I know
all companies will respect that as well."
Wall also said Saskatchewan would take a careful look at
any rival bid for Potash involving a Chinese sovereign fund or
state-owned company. China, the world's top potash consumer, is
likely to push toward lower potash prices if it took an
ownership stake in the company.
"China is a country that has done a pretty good job
recently of safeguarding their own interests," Wall said.
"It is also exactly what we are trying to do."
Prime Minister Stephen Harper has said he will consider
Saskatchewan's concerns in deciding whether the federal
government approves any takeover.
The two companies returned to a U.S. district court in
Chicago on Wednesday in hearings for Potash Corp's lawsuit
aimed at fending off BHP's takeover bid.
Lawyers argued over the documentation BHP must produce for
the court's discovery process. Potash Corp wants BHP to produce
documents relating to BHP's potash-industry investments dating
back to 2001, while BHP proposes they go back only to 2008.
Judge Jeffrey Gilbert did not rule on the date range but
agreed with another judge's comment on Monday that Potash
Corp's request for documents is too broad.
(Additional reporting by Rod Nickel in Winnipeg and Eric
Johnson in Chicago; editing by Peter Galloway and Rob