TORONTO (AP) — A provincial minister said Thursday that it probably isn't in the interest of Saskatchewan to support a possible bid for fertilizer-maker Potash Corp. of Saskatchewan Inc. by a Chinese state-owned company.
Saskatchewan Energy and Resources Minister Bill Boyd told The Associated Press that his government is concerned that a Chinese company would want to overproduce potash and drive down its price.
Chinese state-owned companies like Sinochem are reportedly interested in making a rival bid for Potash Corp. China is the world's largest potash consumer.
Australia's BHP Billiton Ltd. launched a hostile $130-a-share takeover last month after Potash directors rejected its offer as being inadequate. Potash Chief Executive Officer Bill Doyle has said a number of parties have expressed an interest in alternative transactions.
Potash Corp. is the world's largest fertilizer company and one of the province's largest revenue-generating companies.
Boyd said the interests of Saskatchewan taxpayers "may not be aligned" with the interests of the Chinese who could own the company and then want potash for the lowest price possible.
Potash Corp. could represent 15 to 20 percent of the province's revenue one day, Boyd said.
"At the moment our view is that our interests are probably not aligned with someone with who is going to be a buyer of potash," Boyd said.
"It's pretty basic economics. When you are a consumer of a product your interests are to see that the product is sold for as low a price possible. If you are the owner of that product your interest is not the same."
The provincial Saskatchewan government doesn't have the ability to block a sale of the company, but the province will be make a recommendation on a sale to the federal Canadian government who does. Canadian law says large foreign takeovers can be blocked if it's not a "net benefit" to Canada.
Boyd also said the province wouldn't want BHP Billiton to pull out of the Canpotex potash marketing cartel if it gets the company. Canpotex represents the large Saskatchewan potash producers in sales of potash outside North America. BHP Billiton initially said it would pull out of the cartel and sell potash itself, but the company has since backtracked.
"Our position is that Canpotex has worked very well for the Saskatchewan people and we would need an awful of convincing to look at any other models," Boyd said.
"We've made it very clear to them that this is a very important issue that we would want some very firm guarantees on that."
Boyd said the Conference Board of Canada, an independent consultant, will help the province examine what options it has before the province makes a recommendation to the federal government about a possible takeover. The board will deliver its report at the end of the month.
Potash is a potassium compound used in agriculture and industry. Potash consumption has been growing over the past decade as the need for potash grows in tandem with the development of countries like China and India. The main markets are China, the U.S., Brazil and India.
Potash shares soared to over $230 just before the global recession hit in 2008. Shares of Potash closed down 98 cents to $149.49 on the New York Stock Exchange on Thursday.