* 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 (Reuters) - 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 the issue.
“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 deal.
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 concessions.
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.
$1=$1.02 Canadian Writing by Euan Rocha, additional reporting by John McCrank; editing by Janet Guttsman and Rob Wilson