Life in Canada

Federal government should stop hollowing out of corporate Canada: Jarislowsky

As the likelihood of a competing bid for PotashCorp diminishes, one of the Canadian fertilizer giant's biggest shareholders says BHP Billiton's US$38.6-billion takeover offer should be rejected by Ottawa, which is slated to rule on the bid in just over two weeks.

Montreal-based billionaire investor Stephen Jarislowsky said the bid is too low and should be defeated so Canada can avoid having another major company sold to foreign interests.

"Nobody else in the world gives their raw materials away and doesn't have control over them," Jarislowsky, the third-largest shareholder of PotashCorp, said in an interview Friday.

"Whether it's Australia, Russia, China, Japan, Venezuela, Mexico, nobody (does this) except a few fools. And we have fools from sea to shining sea."

Jarislowsky's comments came after the Reuters news agency reported that Chinese chemical giant Sinochem had abandoned its plans for a competing bid for PotashCorp. Neither PotashCorp, which has been seeking a white knight bidder, nor BHP, would comment on the report.

Federal Industry Minister Tony Clement is reviewing BHP's bid under the Investment Canada Act, which stipulates that any foreign takeover of a Canadian company must be of net benefit to Canada. He's scheduled to release his decision Nov. 3.

BHP Billiton has pressed Ottawa on the merits of its bid and noted that the Anglo-American company, the world's largest miner, has operated in Canada for decades and owns the country's first diamond mine, the Ekati project in the Northwest Territories which employs about 800 people.

The federal government has blocked only one foreign takeover outright under the act, and has approved several controversial deals that saw the ownership of most of Canada's steel and nickel mining industries pass into foreign hands.

Clement emphasized the Conservative government's openness to foreign investment, saying Canada is "open for business."

"We believe that having a judicious mix of both domestic and also foreign investment helps our economy be innovative, helps our economy grow, create new jobs and new opportunity, helps our consumers," Clement said Friday following a speech in Toronto.

However, he added that "there are occasions" when foreign investment won't be approved under the Investment Canada Act.

Jarislowsky, who owns 8.7 million shares or about three per cent of PotashCorp, said BHP's bid of $130 per share is too low, but wouldn't divulge what price would prompt him to sell his stake. The activist investor, founder and CEO of Montreal-based Jarislowsky Fraser Ltd., indicated that he'd prefer to see Saskatoon-based PotashCorp remain Canadian.

"I think that we should not lose all our companies. We can't even buy a decent portfolio in Canadian stocks anymore," he said.

"I've seen whole industries disappear in this country, being bought up. When I came to this country in 1949, Montreal was an enormous head office city. Now there's next to nothing left except a few French Canadian companies," he added.

"Why should we be so stupid to just hand these things over, one after another?"

PotashCorp CEO Bill Doyle has dismissed BHP's offer as far too low, but so far it's the only bid on the table.

The most likely alternative bidder was thought to be state-owned Sinochem, which was rumoured to be putting together an offer with Canadian pension funds.

Clement said Sinochem never even got as far as contacting Ottawa about a potential bid.

"I've never talked to them, they've never talked to me," he said. "There are no other bidders."

Shares in PotashCorp (TSX:POT) closed down $1.44 or just under one per cent to C$146.78 on the Toronto Stock Exchange — still far above BHP's offer of $130 a share.

On the New York Stock Exchange, shares in the company (NYSE:POT) fell 1.5 per cent cent in trading Friday, down $2.26 to $144.91.

"I don't think the bidding is having much impact on share prices anymore," said Mark Connelly, an analyst with Credit Agricole Securities in New York.

"The fundamentals in fertilizer are so strong that I can't imagine why any fertilizer investor wants to sell any of their stocks."

Shares in fertilizer producers have been climbing steadily since the U.S. Department of Agriculture lowered its corn production forecast last week. Lower yields are expected to boost demand for fertilizer as corn prices rise and farmers seek to produce more.

Connelly said BHP would have to raise its bid to $150 a share "for anybody to even consider it," but added that a fair premium would be closer to $190 a share.

Ottawa blocked an attempt by MDA (TSX:MDA) to try to sell its space division to American firm Alliant Techsystems Inc. in 2008, the first and only time the federal government rejected a foreign takeover outright under the act.

The government has come under fire for its handling of recent foreign acquisitions. Brazilian mining giant Vale's takeover of the former Inco for $19 billion in 2006 was criticized during a year-long strike involving about 3,000 employees at the company's operations in Sudbury, Ont. Vale employees in Voisey's Bay, N.L., are still on strike after more than 14 months.

And Ottawa is in the midst of a lengthy court case with U.S. Steel Corp. (NYSE:X), which acquired the former Stelco for more than $1 billion in 2007. U.S. Steel admits it broke employment and production promises it made under the Investment Canada Act, but says it had no choice because of the global recession.

The American steel producer recently shut down some of its operations in Hamilton for the second time in less than two years, but Clement said the undertakings made by the company were only in effect for a limited period of time.

"They have the power to make whatever decisions they want free from those undertakings because the undertakings have expired," he said Friday. "We still have a court case respecting the period during which the undertakings were in place and that court case continues."