Canada's homegrown hero vs BHP

Foreign takeovers have burned Canada before – jobs were cut and head offices relocated. So it's little wonder Canadians are wary of BHP Billiton's bid for their prized PotashCorp, even if the share price is rocketing.

FT.com

Jim Sereda and Paul Hill are successful Saskatchewan businessmen who own shares in PotashCorp.

Yet the two take very different views of the unfolding battle for control of the big Canadian potash producer that was sparked by last week’s $US39 billion hostile bid from Anglo-Australian BHP Billiton.

"In all the doom and gloom of the past few years, it’s nice to see that we’re the centre of attention for a while,” says Sereda, who owns two pharmacies in Lanigan and Nokomis, towns in central Saskatchewan province whose economies are dominated by a nearby PotashCorp mine.

As soon as he heard about BHP’s bid, Sereda rushed to his computer to check the potash producer’s share price. "I had lockjaw,” he recalls on discovering that it had soared by a quarter.

Hill, whose family has extensive interests in real estate, broadcasting, insurance and oil and gas, takes a longer-term view, and is less enamoured by the prospect of foreigners gaining control of one of Canada’s biggest industrial companies by market value.

"I support BHP coming to Saskatchewan, building and growing a major enterprise,” Hill says. "But should they be permitted to take over our own home-grown corporation?”

Saskatchewan has long had an image as a hotbed of prairie populism. Tommy Douglas, a former premier of the province whose slogan was "People before Profits”, was the chief architect of Canada’s universal healthcare system in the 1960s.

Although the more pro-business Saskatchewan party swept into office three years ago, the government still controls the main telephone company, power utility, natural gas distributor and car insurer.

Hill’s concern about BHP’s approach to PotashCorp is based on a succession of deals that have denuded the province of corporate head offices over the past two decades.

Ipsco, a big steelmaker, was bought two years ago by Russia’s Evraz, which now runs its Saskatchewan operations from its North American headquarters in Portland, Oregon.

Saskoil, an energy producer that, like PotashCorp, was a government corporation before privatisation in the 1990s, once employed about 400 people at its head office in Regina, the provincial capital. But almost all those jobs have disappeared since it was acquired by Calgary-based Nexen.

Numerous other energy companies, including ExxonMobil’s Canadian subsidiary, have moved their main offices from Saskatchewan to neighbouring Alberta over the years.

But the prospect of control of PotashCorp being moved elsewhere has evoked little wider concern in the province, which is home to 1 million people. "It’s never been a company of the people,” says Peter Phillips, a professor at the University of Saskatchewan’s school of public policy. "It’s become less and less a Saskatchewan company, and more and more a global company.”

Phillips predicts that even a counter-bid by a Chinese company would find little popular resistance. "I think they would look at it a little more carefully,” he says, "but it’s not as if [the Chinese] could take the asset away.”

The federal government in Ottawa has approved several Chinese investments over the past two to three years in Alberta oil sands projects.

BHP already has a solid presence in Saskatchewan. Over the past four years, it has acquired exploration rights to 14,000 sq km of land in Saskatchewan and the neighbouring province of Manitoba, including many areas close to existing PotashCorp mines. In January, it agreed to buy Athabasca Potash, another Saskatchewan developer, for $C341million ($A363.6 million).

As part of a drive to win locals’ hearts and minds, the Australian group sponsored last winter’s world junior ice hockey championship in Saskatoon, the province’s largest city.

But Hill has little faith in BHP’s promise to keep PotashCorp’s head office in Saskatoon if the deal goes ahead. "Historical experience has been that they make these commitments but at the end of the day, they don’t exist,” he says.

Bill Doyle, PotashCorp’s US chief executive, and many senior managers, are based in Chicago.

Saskatchewan residents are naturally concerned about the impact that a new owner of PotashCorp would have on their daily lives.

"As long as they know they’ll be employed, that’s the main thing,” says Madelin Greve, who owns an insurance and travel agency in Lanigan, close to BHP’s Jansen mining project.

The town’s 1,500 residents are likely to judge BHP by whether it goes ahead with the Jansen mine or decides that PotashCorp has sufficient capacity to meet its needs for the time being.

"It would certainly be nice to have another mine built in this area,” Sereda says. But he adds: "When there are unknowns, you are uneasy.”