Canadian COMPETITION LAW

September 20, 2010

In an unexpected development, ABC and others are reporting that BHP has extended its bid for Potash Corp. a month following a supplementary information request issued by the Canadian Competition Bureau.  According to ABC, BHP has pushed forward its deadline for its bid to November 18 (from the previous deadline of October 19) to allow the Bureau to complete its review.

While BHP is reported as stating that it is “confident that the offer will receive all requisite regulatory approvals in due course”, the fact that the Bureau has issued as supplementary information request (the Canadian equivalent to U.S. second requests) by definition indicates that the Bureau views the transaction as potentially complex or very complex, and has taken the position that it requires more time to review the proposed acquisition.

This development is more interesting yet, given that many competition/antitrust commentators publicly stated that the potential issues with the BHP/Potash transaction were likely to be associated with obtaining Canadian foreign investment approval under the Investment Canada Act (not least of which based on the recent challenge of U.S. Steel by the Canadian government for its alleged non-compliance with its undertakings in connection with its acquisition of Stelco).  Many commentators felt that the potential competition law issues were not likely to be significant based on the fact that, while BHP had Potash assets in Saskatchewan, they were non-producing and therefore that the potential overlap (anti-competitive effects) were unlikely to be significant.   Having said that, since the opening days of the BHP bid, local political opposition to the bid appears to have grown, apparent issues appear to have arisen based on indications that BHP (if successful) may withdraw from the existing potash export cartel and there have as well been increasing rumours of a potentially competing Chinese bid.

Given that BHP has received a supplementary information request, the approval process will now be moved into a U.S./EU “second stage” review, with the approval clock stopped until BHP has fully complied with the Bureau’s supplementary information request (under Canada’s new U.S.-style two-stage merger control regime).

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