PotashCorp and BHP Billiton comment on withdrawal of tender offer

first_imgYesterday Potash Corp of Saskatchewan issued the following statement in response to the announcement by BHP Billiton that it has withdrawn its unsolicited tender offer to acquire PotashCorp: “BHP Billiton’s decision to withdraw its offer underscores the PotashCorp Board of Directors’ unanimous belief that the offer substantially undervalued PotashCorp and failed to reflect both the value of our premier position in a strategically vital industry and our future growth prospects.“We believe our opportunity for growth in the industry is unmatched and we are excited about the future. As the food requirements of our growing global population continue to increase, we believe PotashCorp has the right strategies in place to enhance earnings in the strong market conditions we see unfolding.  Building further value continues to be our primary focus, and with our world-class asset base and proven business strategies, we believe we are well-positioned to exceed the expectations of our customers and deliver compelling value to our shareholders.”“BHP Billiton said it “has determined that the condition of its offer relating to receipt of a net benefit determination by the Minister of Industry under the Investment Canada Act cannot be satisfied, and accordingly, the offer has been withdrawn. A total PotashCorp-related transaction cost of approximately $350 million, of which approximately $250 million related to the $45 billion acquisition financing facility, will be recognised as an exceptional item in the December 2010 interim accounts.”The company maintains that its offer would have resulted in “a significant net benefit to Canada, Saskatchewan and New Brunswick. As a package, the proposed undertakings offered by BHP Billiton in a signed, written submission to the Minister of Industry were unparalleled in substance, scope and duration, reflecting the importance of potash to Canada and Saskatchewan. The company had offered to commit to legally-binding undertakings that would have, among other things, increased employment, guaranteed investment and established the company’s global potash headquarters in Saskatoon, Saskatchewan.”The investment commitment included $450 million on exploration and development over the next five years over and above commitments to spending on the Jansen project. An additional $370 million would have been spent on infrastructure funds in Saskatchewan and New Brunswick. BHP Billiton would also have applied for a listing on the Toronto Stock Exchange.BHP Billiton was also prepared to make a commitment to forego tax benefits to which it was legally entitled and, as a condition of the Minister’s approval, BHP Billiton was prepared to remain a member of Canpotex for five years. Both of these undertakings were intended to allay any concerns the Province of Saskatchewan may have had regarding potential losses in revenues.“Further, to give the company an even stronger Canadian presence, BHP Billiton undertook to relocate to Saskatchewan and Vancouver over 200 additional jobs from outside Canada. BHP Billiton would have maintained operating employment at PotashCorp’s Canadian mines at current levels for five years and would have increased overall employment at the combined Canadian potash businesses by 15% over the same period. BHP Billiton also made a number of additional undertakings in relation to Saskatchewanian and Canadian participation in senior management roles within the combined potash business, within a new Potash Advisory Board and also on the Board of BHP Billiton.“Local suppliers would have been guaranteed a full and fair opportunity to provide goods and services and BHP Billiton undertook to spend at least $8 million per annum on community programs, primarily in Saskatchewan and New Brunswick, while raising overall community spending from PotashCorp’s current levels to BHP Billiton’s levels. BHP Billiton also offered to invest in the University of Saskatchewan to create a Mining Centre of Excellence to enhance the province’s mining capabilities and to raise the international profile of both the University and the province.“BHP Billiton was prepared to accept an unprecedented monitoring and compliance regime that would have provided the Government with additional assurances that the undertakings would be complied with, including making available a $250 million performance bond.”During the investment review process, BHP Billiton engaged with officials from the Investment Review Division of Industry Canada. It says that “in view of the reasons underlying the Minister’s interim decision of November 3, the company believes that the Minister of Industry would have required additional undertakings beyond those BHP Billiton had already offered which would have conflicted with BHP Billiton’s business strategy and been counter to creating shareholder value.”BHP Billiton Chief Executive Officer Marius Kloppers expressed disappointment at the outcome. “Unfortunately, despite having received all required anti-trust clearances for the offer, we have not been able to obtain clearance under the Investment Canada Act and have accordingly decided to withdraw the offer. We remain committed to Canada and we plan to develop a significant presence in the potash industry in Saskatchewan. As part of those plans we will continue to progress our Jansen Project and other development opportunities,” he said.“Our core business strategy of diversifying our investments across geographies and commodities differentiates us and, more importantly, continues to deliver value to our shareholders and the communities and countries where we operate. We have an unparalleled portfolio of tier one assets, which we believe can sustain decades of increased production. We plan to invest $15 billion in our global business this financial year and expect our ongoing capital commitment to continue to deliver robust production growth,” Kloppers added.BHP Billiton also announced its intention to continue the company’s strong track record of returning excess capital to shareholders by reactivating the remaining $4.2 billion component of its previously suspended $13.0 billion buy-back program. BHP Billiton Chairman Jac Nasser said: “The decision to reactivate the buy-back program is entirely consistent with our commitment to maintain an appropriate capital structure while we continue to make substantial investments in our growth projects. BHP Billiton has a strong track record of returning capital to shareholders. From 2005, BHP Billiton has completed buy-backs totalling $12.7 billion or 11% of issued capital, and has also paid out $17.9 billion in dividends.”last_img read more

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