BHP Billiton foiled again

Marion Dakers
Canada’s rejection of BHP Billiton’s $39bn (£24.7bn) hostile bid for Potash Corp leaves the Anglo-American mining giant adrift. Chief executive Marius Kloppers has been extolling the importance of the takeover for months, but with just 30 days to deal with the government’s serious objections, it seems the blockbuster bid has all but run out of steam.

As well as the federal government’s objections, BHP must convince the province of Saskatchewan of the deal’s benefits next week, as well as tackle a US court case filed by Potash, which claims BHP misled shareholders.

BHP stock has already come under pressure from investors worried that the price of Potash is too high, and the firm could decide to cut its already substantial losses.

Once the takeover is brought to a decisive end, either by BHP itself or the Canadian authorities, the firm will be left with some $39bn in spare cash.

Several analysts have suggested the firm could begin a share buyback. Olivia Ker at UBS said earlier this week that such a scheme might be up to $10bn in size, and could create a four per cent boost to earnings per share.

As well as impatient BHP shareholders, the coalition government will also be tracking the takeover fallout. Vince Cable’s department last month launched a review of UK takeover rules with a view to introducing a “Cadbury’s law”, to protect British companies from overseas predators.

BHP called off a $58bn bid to buy rival Rio Tinto in 2008 after the market turned, and earlier this year aborted an $177bn Austrialian JV with Rio. BHP has once again been thwarted.