Potash bid a test for takeover rules

[CHIMO]

BHP Billiton Ltd (BHP-N70.21-1.73-2.40%).'s massive bid for Potash Corp. of Saskatchewan (POT-T147.3430.1125.68%) is forcing Ottawa to contend with a hot-button issue that went dormant with the credit crunch: how to respond to foreign suitors poised to take over major Canadian corporations.

The Harper government, burned by what it believes was the failure of companies such as U.S. Steel and Vale SA to keep promises about Canadian jobs, is warning potential acquirers of Potash Corp. they'll be held to the commitments they make in order to satisfy federal scrutiny of foreign bids.

Under the Investment Canada Act, a foreign purchase of a domestic company must provide a “net benefit” to the country. Such acquisitions can also be subject to a national-security test, particularly if the purchaser is a state-owned enterprise, which could come into play if a Chinese company joins the takeover battle for Potash.

During the pre-recession takeover boom, the government declined to use the act to block a series of mega-deals for top Canadian companies, including Vale's purchase of Inco Ltd., Xstrata PLC's acquisition of Falconbridge Inc. and U.S. Steel's deal for Hamilton steel maker Stelco Inc. But Ottawa's acquiescence to those deals generated considerable controversy, and came under even more criticism after the recession hit and the new owners cut jobs. The government is now locked in a legal battle with U.S. Steel, accusing it of breaking the promises it had made to maintain employment and boost output at two former Stelco plants in Ontario; the company laid off or retired 2,400 workers and scaled back production, citing the effect of the global economic crisis on demand for steel.

http://www.theglobeandmail.com/globe-investor/potash-bid-a-test-for-takeover-rules/article1676473/

Takeover rules? BS. If it ain't communist, then it's good. Milton Friedman/Harper philosophy.