Potash deal to cost province C$2 bn

BHP Billiton’s $40 billion hostile bid for Potash Corp of Saskatchewan Inc would cost the province of Saskatchewan C$2 billion ($1.95 billion) in lost tax revenue, according to a report.

The deal would cost C$200 million annually over 10 years, the Conference Board of Canada, an independent organization that researches economic and public policy issues, said today in a report posted on a Saskatchewan government website. The study will be used for the province’s submission to a review of BHP’s bid under the Investment Canada Act.

“With the exception of significant government revenue impacts, we found few negative takeover effects,” the board said in the report. Potash Corp rose as much as 1.5 per cent in New York trading after the publication of the report, which may make it easier for Melbourne-based BHP, the world’s biggest mining company, to proceed with its $130-a-share offer. Saskatoon, Saskatchewan-based Potash Corp, rejected BHP’s

August 18 bid as too low and said it was seeking other offers.

“The gist of the report is they’re not opposing the bid,” Mark Gulley, an analyst at Soleil Securities in New York, said in an interview. “It’s not unreasonable to suggest Saskatchewan could make up the tax shortfall by modifying its rules to tax potash production along with potash profitability.”

BHP and Potash Corp, the largest producer of its namesake crop nutrient, said in separate e-mailed statements that they will study the Conference Board’s report.

Canadian concern
The offer “will bring significant benefits to Saskatchewan and to Canada,” BHP said. BHP’s bid has reignited concern in Canada over foreign ownership of some of the country’s largest natural-resource companies.

In 2006, Switzerland’s Xstrata Plc made a successful hostile bid for nickel producer Falconbridge Ltd. while Brazil’s Vale SA agreed to acquire Toronto-based miner Inco Ltd. London- based Rio Tinto Group agreed to buy Canadian aluminum producer Alcan Inc. in 2007. “The issue is not that BHP is the devil, but that many Canadians feel they’re selling their soul,” Connelly said.