BHP Billiton withdraws bid for Saskatchewan’s Potash Corp

TORONTO – Anglo-Australian mining giant BHP Billiton has withdrawn its hostile takeover bid for Saskatchewan-based PotashCorp, officially squashing what would have been the biggest takeover in Canadian history.

The withdrawal comes less than two weeks after Ottawa rejected the US$38.6 billion offer as not having enough net benefit for Canada.

The company still had 30 days to try to convince the federal government on the merits of its proposal to buy PotashCorp (TSX:POT), world’s biggest producer of potash, a key component used in fertilizer.

But it withdrew its bid saying Ottawa required “additional undertakings” beyond what it had already offered. It said the government demands would have conflicted with the company’s business strategy and would have been counter to creating shareholder value.

BHP said it still believes its offer _ described as “unparalleled in substance, scope and duration” _ would have resulted in a significant net benefit to Canada.

BHP’s CEO Marius Kloppers said even though he was disappointed, the company remains committed to Canada.

“We plan to develop a significant presence in the potash industry in Saskatchewan,” he said in a statement released Sunday evening.

The federal government will now have to answer questions from other foreign investors on just how open Canada to overseas investment.

Earlier on Sunday Prime Minister Stephen Harper, who was attending the G20 summit in Seoul, said Australia took him to task over the decision to block the bid for PotashCorp.

Harper had said he would address all questions once the 30-day review of the BHP bid was concluded.

He also pointed out that Canada and Australia have almost identical investment review regimes.  And he questioned whether any other country in the world would have allowed such a deal.

PotashCorp had fought the bid throughout saying it was “wholly inadequate” and seriously undervalued the company.

Industry Minister Tony Clement rejected BHP’s hostile bid Nov. 3, a denial that was only the second time Ottawa has rejected a foreign takeover outright under the Investment Canada Act.

Ottawa blocked an attempt by MacDonald, Dettwiler and Associates Ltd. (TSX:MDA) to sell its space division to U.S. defence firm Alliant Techsystems Inc. in 2008.

The decision was welcome news in Saskatchewan, which had launched a furious lobbying blitz to persuade Clement to kill the deal, arguing that potash is a strategic industry with unlimited growth potential for Canada and must be kept in Canadian hands.

On Sunday, Clement released a statement saying he wanted to recognize BHP’s “good faith and integrity” throughout the process.

Clement said Ottawa recognized that there may be ways to improve the review process under the Investment Canada Act when it came to major foreign investments.

“Any changes deemed necessary will be addressed by our government in a responsible and appropriate manner,” he said.

“Our policy has always been clear: we welcome foreign investment for all the benefits it brings, including new ideas, sources of capital, and job creation.”

BHP also announced Sunday it would return $4.2 billion to shareholders through a previously suspended buy back program.

“BHP Billiton has a strong track record of returning capital to shareholders,” said company chairman Jac Nasser. “The decision to reactivate the buy-back program is entirely consistent with our commitment to maintain an appropriate capital structure.”