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Three years ago, when Australia’s BHP Billiton came bidding for Potash Corp. of Saskatchewan Inc., opponents of the deal had all of the arguments. A majority of the company’s shareholders may have lived outside Canada, along with its CEO, but nevertheless this was a Canadian icon, a “national champion,” or, if you really wanted to get hard-headed about it, a “strategic asset.”
Why would anyone want to sell a company that controlled 53% of the world’s potash reserves? Why, that is, other than the $130 a share —nearly $40 billion in total — that BHP was offering. But what was such a pittance if it meant pulling PotashCorp out of the Canadian-led global potash cartel, on which the vastly inflated world price of potash depended? Surely any idiot could see the folly in that. And in time, enough idiots did: The federal government, egged on by the government of Saskatchewan, blocked the sale.
At the time, blinkered ideologues like me expressed concern that, in the name of preventing one foreign-owned company from taking over another foreign-owned company, and for the sake of preserving “our” control of a resource that would remain as much owned, taxed and regulated by the province after the sale as before, PotashCorp’s shareholders — including the 49% who were Canadian — had been deprived of the capital gain they could legitimately have expected on the sale. Naively, we wondered what the consequences for future investment decisions might be if investors, having once bought Canadian shares, could have no assurance they would later be able to sell them.
Three years later, we can see how wrong we were. Because it isn’t just the takeover premium that shareholders were denied when the deal was nixed: it was much of the company¹s existing value. It turns out even a “strategic asset” cannot unilaterally dictate the behaviour of the other members of a cartel to which it belongs.
In December 2010, a month after BHP’s bid was rejected, billionaire Suleiman Kerimov engineered the merger of two Russian fertilizer companies, Uralkali and Silvinit, in a clear challenge to PotashCorp’s dominance.
For the rest of this article, click here: http://business.financialpost.com/2013/09/11/andrew-coyne-dissolution-of-an-industry-cartel-leaves-potash-corp-shareholders-wishing-icon-had-sold/