Potash Corp. Says Study Understates Revenue Loss

Potash Corp. of Saskatchewan Inc. said a study commissioned by the Canadian province where it’s based into BHP Billiton Ltd.’s $40 billion hostile bid understated a potential loss of tax revenue.

The Conference Board of Canada, an independent researcher of economic and public policy issues, said yesterday in a report that the offer would have “few” negative effects on the province of Saskatchewan apart from C$2 billion ($1.96 billion) of lost revenue over 10 years.

That sum is too low because the study assumes BHP wouldn’t mine potash at full output, “in direct contradiction” of previous BHP statements, Potash Corp. said today in a filing. Potash Corp. also said the loss is unique to BHP’s bid because the Melbourne-based company owns the undeveloped Jansen potash project in the province.

Saskatchewan will use the study in its submission to a review of BHP’s offer under the Investment Canada Act, under which the federal government can block transactions if it finds they don’t provide a “net benefit” to the country. Canada yesterday extended by 30 days the deadline to review the offer.

Potash Corp., the world’s largest producer of its namesake crop nutrient, in August rejected BHP’s $130-a-share bid as too low and has sought other offers. The Saskatoon, Saskatchewan- based company said in today’s filing it would encourage the government of Saskatchewan to remain open to reviewing alternative bids “on a fact-based approach.”

Jansen Mine

Potash Corp. closed at $144.05 in New York Stock Exchange composite trading yesterday.

Saskatchewan would lose out on C$200 million of tax receipts annually over a decade if BHP bought Potash Corp. because the deal would enable the Australian company to write off costs of Jansen and help it minimize corporate tax payments, the board said in the report.

“On first reading it does not seem that negative for BHP Billiton, and in our view, the governments of Canada and Saskatchewan are likely to support BHP Billiton’s proposed acquisition,” UBS AG analysts Olivia Ker and Glyn Lawcock said today in a note, referring to the conference board report.

BHP, the world’s biggest mining company, said yesterday it will study the Conference Board report. The offer “will bring significant benefits to Saskatchewan and to Canada,” it said.

To contact the reporters on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net; Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net; Amanda Jordan at ajordan11@bloomberg.net

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