Politics at core of Potash deal

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Sun Media, Friday, October 22, 2010

More than 25% of the world's fertilizer is produced by a single company, Potash Corp., in Saskatchewan. And more than half of the world's potash, 53%, comes from there.

Fertilizer grows food and food feeds an ever growing global population. This makes Saskatchewan the global superpower in potash.

It also makes Saskatchewan extremely skittish about Potash Corp., being sold to BHP Billiton of Australia, even though it is already 51% owned by foreigners, 38% owned in the United States, with its executive offices in Chicago rather than Saskatoon.

BHP's hostile takeover bid of $130 per share amounts to nearly $40 billion.

The stock has since soared to nearly $150, meaning BHP would have to come up with several billion dollars more to close the deal at Thursday's market price.

BHP has already offered lots of sweeteners. It says it would remain in Canpotex, the marketing cartel, er, consortium that sets the price of potash.

It says it would relocate the headquarters of the Potash division to Saskatoon, where its executives would live and raise their children.

They could do worse -- Saskatoon is a gracious and sophisticated city with the broadest boulevards this side of Paris, and the world-class University of Saskatchewan campus on the banks of the South Saskatchewan River.

BHP has also offered to set up a $370 million infrastructure fund, which would be enough to build an enclosed stadium in Regina, home of the province's beloved Roughriders.

You want an NHL franchise? BHP can probably get that, too.

But Premier Brad Wall is having none of it. With his concerns about the future of Canpotex, and worried the province could lose billions of dollars for the provincially owned resource, he urged Ottawa on Thursday to stop the sale on the grounds it fails to meet the "significant benefit" test of Investment Canada. The significant benefit test is whatever the government of the day says it is.

So now the ball is in Stephen Harper's court, and the file is in the hands of Tony Clement, the industry minister. Well, at least after his very bad summer over ending the long-form census, Clement has an extremely consequential issue on his desk.

Before flying out to the summit of la Francophonie in Switzerland Thursday, Harper told the House Wednesday he was reluctant to block a deal "for an American-controlled company to be taken over by an Australian-controlled company."

The Harper government previously vetoed an American bid to buy the Canadian aerospace icon, MDA, makers of the Canadarm. It even wrote a national security clause into the Investment Canada Act.

But it can hardly invoke that in the potash case.

Nor can it say Canada can't allow such a vital resource, one which grows half the world's food supply, to fall into foreign hands, when it is already in foreign hands -- although had they been Chinese hands that might have been another matter.

At the end of the day, this is about politics. The Conservatives hold 13 out of 14 Saskatchewan seats in the House, and Premier Wall is their close ally on the provincial scene.

The people of Saskatchewan don't want this deal -- federal polling shows 70% of Saskatchewanians are against it.

The most likely outcome is that Clement will attach Wall's shopping list, with Ottawa approving the deal subject to Saskatchewan's conditions being met.

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