28/10 Potash Shares Fall on Worries About BHP Deal

By IAN AUSTEN
Published: October 28, 2010

OTTAWA — Investors seem to be growing nervous about the future of the Potash Corporation of Saskatchewan.


Shares of the company, the world’s largest fertilizer maker, fell $4.79, or 3.25 percent, to $142.53 in New York trading despite the release of an unusually strong quarterly financial report. Some analysts attributed the decline to increasing speculation that the government of Canada might block a hostile $38.6 billion bid for Potash from BHP Billiton, the Australian mining company.

The province of Saskatchewan — home to both Potash, the company, as well as some of the world’s largest deposits of potash, the mineral, increased pressure on the government this week to block the takeover.

The province is concerned that an acquisition by BHP would cut its tax revenues and royalty payments.

Both Saskatchewan and the Canadian government are controlled by right-of-center political parties. Before coming to Ottawa to meet with his federal counterparts earlier this week, Brad Wall, Saskatchewan’s premier, cited recent remarks to an Australian newspaper by Don Argus, BHP’s former chairman.

Last May, Mr. Argus told The Herald Sun of Melbourne that Australia should shun Canada’s practice of allowing foreign companies to control natural resources.

“Australia needs to be most careful that it does not forfeit the economic merit of our resources sector,” he said. The newspaper paraphrased Mr. Argus, who was chairman at the time, as saying that Canada had lost control over many of its crucial resources “much to the detriment of the country.”

On Thursday, The Globe and Mail, a Toronto newspaper, reported that the federal government now “appears to be swayed” by Saskatchewan, although it did not offer a source within the government.

“There is a lot more noise coming out of Saskatchewan than anybody expected or wanted.” said a person with knowledge of the negotiations between BHP and the government who did not wish to be identified because the person was not authorized to speak to the media.

Potash said Thursday that strong demand increased third quarter revenue by 43 percent, to $1.58 billion. Earnings were $402.7 million or $1.32 a share in the quarter, compared with $247.9 million or 82 cents a share a year earlier.

William J. Doyle, the president and chief executive of Potash, said that talks were under way with other potential bidders.

But during a telephone interview, he also suggested that the growth reflected in the quarterly results was a sign that shareholders would prosper even if the company was not sold.

“We’re at the precipice of a new long-term period of growth,” he said. “The future upside will be reflected in our stock price.”

Cyrus Sanati contributed reporting from New York.
A version of this article appeared in print on October 29, 2010, on page B6 of the New York edition.