BHP Billiton Ltd, the world’s largest mining company, resumed a share buyback after abandoning its hostile $40 billion takeover offer for Canada’s Potash Corp. of Saskatchewan Inc in the face of government opposition.
BHP will purchase $4.2 billion of its shares under a $13 billion buyback program suspended in 2007, the Melbourne-based company said today in a statement.
Chief Executive Officer Marius Kloppers withdrew his offer for the world’s largest fertiliser maker after Prime Minister Stephen Harper’s government said on November 3 it didn’t meet the requirements of the Investment Canada Act to bring “net benefits” to the country. It’s the third time Kloppers, 48, has failed to complete a deal in the past two years, notching up at least $800 million in transaction costs.
The buyback “probably isn’t as much as some people had wanted,” said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne, including BHP shares. Scrapping the Potash deal indicates BHP “didn’t really have a Plan B or any wriggle room to move forward,” he said.
BHP, which could spend as much as $25 billion buying back shares according to Morgan Stanley, declined 0.9 per cent to 2,342 pence by 8:32 am in London. It earlier fell 0.4 per cent to close at A$44.14 on the Australian stock exchange in Sydney.
The cost of protecting against a BHP bond default dropped. Credit-default swaps on BHP slipped 5 basis points to 80 basis points as of 3:28 pm in Sydney, according to Australia & New Zealand Banking Group Ltd prices.
Second rejection
BHP’s withdrawal “underscores the Potash Corp. board of directors’ unanimous belief that the BHP Billiton offer substantially undervalued Potash Corp,” the Canadian company said in an e-mailed statement.
Industry Minister Tony Clement’s decision to block the deal was only the nation’s second rejection of a foreign takeover in the past 25 years. Clement told reporters in Toronto yesterday he rejected the bid in part because of concern BHP wouldn’t bring new expertise or increase production. Under the Investment Canada Act, the government can block any transaction valued at C$299 million ($295 million) or more if it finds it doesn’t provide benefits to the country such as jobs, exports and investment.
