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BHP Billiton (LON:BLT) report: Canada blocks takeover of PotashCorp

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

- The Canadian Minister of Industry has effectively rejected BHP Billiton's attempt to acquire PotashCorp on the grounds that it is unlikely to be of net benefit to Canada. This is deeply disappointing for BHP Billiton, in particular as it is the third major transaction in a row that it has failed to complete. It is now abundantly clear that very large transactions are unpopular at the state level on a global basis.

- The door has been left open – BHP Billiton has 30 days to persuade the Minister to change his mind. However, in our view this is unlikely to happen, given that the deal has been on the table since August.

- This is only the second transaction out of more than 1,000 that has been blocked under the Investment Canada Act and so presumably BHP Billiton did not anticipate the real level of opposition to the transaction. The basic error seems to have been that BHP Billiton may not have fully analysed the current political environment in Canada. The reality is that the current Conservative government badly needs the votes in Saskatchewan, an election is due next year and there is solid local opposition to the transaction.