11:03 PM
By Sonali Paul
MELBOURNE | Mon Nov 15, 2010 12:45am EST
MELBOURNE (Reuters) - Top global miner BHP Billiton (BHP.AX) scrapped its $39 billion bid for Canada's Potash Corp (POT.N), the world's biggest deal this year, and bowed to calls from investors to return cash with a $4.2 billion share buyback.
BHP (BLT.L), conceding defeat for the third straight time on a major proposed acquisition, signaled with its revived share buyback that it had limited opportunities for other big buys.
Shareholders will be eager to hear what further growth prospects the company will chase with its cash pile when BHP Chief Executive Marius Kloppers fronts the group's annual meeting in Australia on Tuesday.
"Certainly the best investment is probably in themselves at the moment," said Brendan James, a partner at BHP shareholder Perennial Growth, referring to the prospect of a bigger buyback.
Canada blocked BHP's bid for the world's largest fertilizer maker on November 3 and gave BHP a month to prove the takeover would benefit Canada.
"Unfortunately, despite having received all required anti-trust clearances for the offer, we have not been able to obtain clearance under the Investment Canada Act and have accordingly decided to withdraw the offer," BHP Chief Executive Marius Kloppers said in a statement.
It will be tough for the world's largest miner to chase other major buys, given its size and dominance in most of its markets.
"I think the regulatory environment is very difficult to negotiate when you are as big as BHP," said Tim Schroeders, a portfolio manager at Pengana Capital, who has shares in BHP.
"They have been very ambitious in terms of the size of deals that have been proposed and that makes it very difficult to fly under the radar in terms of the regulatory process."
NO CLEAR BENEFITS
BHP said Ottawa was asking for too many concessions beyond the more than $1 billion worth of undertakings the company had already offered as benefits to Canada.
In the first public comments on why Ottawa blocked BHP, Canadian Industry Minister Tony Clement said it was partly because BHP lacked expertise in potash mining and marketing, so it was not clear the deal would benefit Canada.
"BHP did not demonstrate to my satisfaction that their plans to market potash would enhance Canada's already prosperous position to compete internationally," he told reporters in Toronto after BHP withdrew its bid.
He acknowledged the rejection was controversial and said Canada continued to welcome foreign investment.
"Our government recognizes, however, that there may be ways to improve the review process," Clement said.
Posts
