BHP Kills PotashCorp Bid, Revives Shareholder Buyback

BHP Billiton has scrapped its $39-billion bid for Canada’s PotashCorp and bowed to calls from investors to return cash, a move that came days after regulators blocked the year’s biggest takeover deal.

BHP, conceding defeat for the third straight time on a major proposed merger or acquisition, signalled with its revived $4.2-billion share buyback that it had limited opportunities for other big buys.

Canada blocked BHP’s hostile bid for the world’s largest fertilizer maker on Nov. 3 and gave BHP a month to prove the takeover would benefit Canada.

“Unfortunately, despite having received all required antitrust 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, which owns BHP shares.

Analysts said BHP may look at takeovers in the petroleum sector since it is only a mid-size player in that industry and would be less likely to run into competition hurdles.

“For us the two most obvious potential targets are Woodside Petroleum and Anardarko Petroleum, while outside of oil and gas we also feel an acquisition of Freepor would have its merits,” said Dominic O’Kane at Liberum Capital in London.

BHP will book $350 million in costs for the PotashCorp bid, mainly due to $45 billion financing facility it lined up.

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“IthinktheregulatoryenvironmentisverydifficulttonegotiatewhenyouareasbigasBHP.”

– TIM SCHROEDERS

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