PotashCorp seeks to bind bidders to Sask., Canpotex

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Published: October 14, 2010

Pledges that PotashCorp’s headquarters will remain in Saskatchewan and maintain a “commitment” to the export marketing agency Canpotex are among the conditions the company plans to tie to any takeover bid it supports.

Saskatoon-based PotashCorp, currently fending off a hostile bid from just one suitor, Australian-based mining giant BHP Billiton, on Wednesday laid out a “Pledge to Saskatchewan,” the points of which it said it would seek a “commitment by any bidder to endorse them.”

Since mid-August, PotashCorp, the world’s biggest potash firm, has rejected the US$39 billion bid from Billiton, the world’s second-largest mining company, calling it a “grossly inadequate” and “aggressive attempt to acquire (PotashCorp) for significantly less than its intrinsic value.”

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“We intend to ensure the purpose and spirit of this company are maintained in every circumstance as we move forward,” PotashCorp board chairman Dallas Howe said Wednesday in a release.

For example, in its pledge, PotashCorp “or any supported bidder will commit to maintaining the company’s headquarters in Saskatchewan,” while also committing its senior officers, including its chief executive, chief financial officer and president of its PCS Potash arm, to “maintain residency” in the province.

The company also promised its executives responsible for “legal, human resources and investor relations” will relocate to Saskatchewan.

Though it didn’t name names in its release, PotashCorp is referring to several of its top executives now working mainly out of its U.S. corporate office at Northbrook, Ill., north of Chicago.

PotashCorp’s “pledge” Wednesday also seeks a commitment to its involvement in Canpotex, the export marketing agency it co-operates with the province’s other major potash producers, Calgary fertilizer firm Agrium and U.S.-based Mosaic Co.

“We believe the sale of offshore potash through Canpotex helps serve the interests of the province and other stakeholders,” PotashCorp said, adding that part of its pledge includes a commitment to “strong continuing provincial revenues” from Saskatchewan’s potash resource.

PotashCorp said it “has managed Saskatchewan’s finite potash resources to maximize long-term value for all stakeholders” and feels “the benefits of this strategy are on the verge of fuller realization and must be protected for the best interests of the province and investors.”

Thus, the company said, if any supported bidder comes forward who is also a purchaser of potash, that buyer “must commit to purchasing products through Canpotex under an arm’s-length arrangement.”

Among other line items in its “pledge,” the company aims to bind any future owner of PotashCorp to:

  • completing over $7 billion in long-term capital expansions of the company’s potash assets, including $5.7 billion of expansions in Saskatchewan between 2005 and 2014;
  • a local spending target of at least 60 per cent, excepting PotashCorp’s purchases for major expansions, energy, transportation and raw materials;
  • being “the No. 1 corporate citizen in Saskatchewan in terms of philanthropic giving;” and
  • continuing its “aboriginal engagement strategy” to encourage increased employment and economic development.

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