Leave that S*&( in Saskatchewan

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There is much gnashing of teeth in Canada over their government’s rejection of BHPBilliton’s takeover offer of Potash Corp on national interest grounds. Canada’s national newspaper, The Globe and Mail, has a number of articles critical of the government’s decision and in particular Canada’s ad hoc takeover rules (sounds pretty much like the process here). Internationally, the past 60 years have seen a focus on trade and trade rules, with FDI taking something of a back seat. As cross border investment flows continue to become much more important it will be interesting to see whether there is more discussion at an international level over investment rules. As for BHPBilliton and Potash, I never found BHP’s arguments that convincing. Supposedly, Potash can be mined, so it is a good fit for BHP, and fertiliser growth will grow tremendously in coming years with the growth of emerging market (Chinese) demand for meat and other fertiliser intensive food. But I have seen a number of presentations in recent years on the extreme mismanagement of fertiliser use in China currently (remember the green sea around Qingdao before the olympics, and in Lake Tai around the same time).  It seems to me that better management and alternative farming techniques and the growth of organics are likely to significantly affect fertiliser demand in coming years. But if you’re not convinced, I’m sure that Potash shares will be a lot cheaper tomorrow morning than they were today!

3 Responses to "Leave that S*&( in Saskatchewan"
  1. Granted, some countries waste a lot the stuff, mainly because of misguided policies of heavily subsidising it.  We used to do that too until the mid ’80s – another sensible reform by the Hawke govenment that was pushed through against loud predictions of doom (rural communities! food security! dustbowls! Green fundamentalism! etc) by subsidy recipients. But the long term trend to more use and limited supply is clear, and as it becomes more expensive I reckon those subsidies are more likely to be expanded than reduced.  So I think it’s a clever long term play.

  2. So the Canadian govt rejected a bid from an Aussie company to take ownership of a company that is already mostly US owned? Yet Canadian Viterra and Agrium were free to acquire Australia’s ABB and AWB respectively? I don’t think I’m quite getting this…

  3. Confused, there was a good column in the Fin Review on Saturday from a Canadian “public affairs consultant” (ie lobbyist) on what went wrong for BHP.  Basically, they didn’t do their homework on the local history and politics.  Among other things, the firm they were taking over was nationalised in the 1970s as the US then-owners kept evading provincial taxes, and the BHP deal was deliberately structured to evade provincial taxes in favour of national taxes.  This hit a very hot button in an election year in a seperatist province.

    Mind you, according to this par the underlying reason BHP badly mishandled things was because they hired US rather than Canadian consultants.  Maybe the author was writing from self-interest.

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