BHP Billiton takeover of Potash could cost Canada over £1bn in lost taxes

 
Marion Dakers
BHP BILLITON’S $39bn (£24.6bn) hostile bid for Potash cleared a hurdle yesterday, as an independent report found that BHP is a more suitable owner than potential rival Sinochem.

The report, commissioned by the Canadian province of Saskatchewan, said that BHP’s takeover could cost the area at least C$2bn (£1.23bn)?in lost taxes, though the government could change its royalty structure to mitigate the loss.

Potash shares jumped more than two per cent in Toronto yesterday.

The report also found that BHP’s interests are more closely aligned with Saskatchewan’s than the interests of any Chinese group, most likely to be led by Sinochem, that might mount a rival bid. China is a major consumer of the fertiliser.

“A producer that is unhinged from market discipline could potentially wreak havoc on Saskatchewan’s finances,” the report said.

After digesting the report, the Saskatchewan government plans to present its position on the takeover later this month to Ottawa, which could veto the takeover after a review that will look at whether the deal is of net benefit to Canada.

The report’s authors cautioned against Saskatchewan formally opposing the takeover bid, warning that opposition would be seen as undermining shareholder rights, depressing Potash’s share price and possibly hurting junior potash companies.

LLOYD PENGILLY AND ADAM BRETT
JP MORGAN

JP MORGAN has taken the lion’s share of the advisory work in BHP Billiton’s mammoth $39bn (£24.6bn)?bid, and has drafted in some of its most illustrious names to make sure it keeps its place at the front of the pack. As lead financial adviser, JP Morgan is coordinating its efforts for BHP Billiton between London and the US.

Leading the team on this side of the pond is one of the firm’s most senior bankers, Lloyd Pengilly, who was originally made one of the executive committee members when JP Morgan struck its joint venture with Cazenove back in 2004.

Pengilly is joined by Adam Brett, the head of the EMEA metals and mining group, who is a particularly busy bee at present. He also recently advised Vedanta on its proposal to acquire a majority stake in Cairn India for up to $9.6bn.

Brett previously advised on the creation of the JP Morgan Cazenove joint venture before joining the UK firm in 2005. He also sits on the FSA’s Listings Authority Advisory Committee.

BHP has also hired five further banking advisers – Toronto Dominion Securities, Banco Santander, Barclays Capital, BNP Paribas and Royal Bank of Scotland.