BHP Billiton cleared the first regulatory hurdle in its bid for Canada's Potash Corp but the miner still has a long way to go to pass the deal with Canadian authorities and the target's shareholders.
BHP, the world's largest mining company, said it received antitrust clearance from the US Federal Trade Commission to proceed with its $39 billion hostile bid for the world's largest fertiliser maker.
However, BHP's offer is still contingent on other regulatory approvals. The bid is likely to face much tougher scrutiny in Canada, where the country's competition watchdog has already requested additional information.
Today, investors and analysts said Potash's shareholders were the biggest obstacle to the deal.
"At the end of the day it is up to the shareholders and the buck stops with them if it even gets that far. At the moment shareholders are saying it is not enough," DJ Carmichael analyst James Wilson said.
Last month, BHP launched its hostile $130-a-share offer to acquire Potash. The Saskatchewan-based company flatly rejected the bid as "grossly inadequate" and has filed a lawsuit against BHP in an attempt to stymie a takeover.
Potash's US-listed shares ended at $145.4, an 11.8 per cent premium to BHP's offer, suggesting investors anticipate a higher bid.
Analysts expect a competing bid to involve a Chinese entity such as Sinochem, which has hired two investment banks to advise it on options.
BHP also said it had approved the development of its $1.5 billion Macedon gas field off Western Australia which is due to start producing in calendar 2013. BHP's estimated share of the project is $1.05 billion.
In Canada, BHP's bid faces review under the Canada Competition Act and under the Investment Canada Act.
This week's request by the Canadian Competition Bureau for more information, prompted BHP to extend the deadline on the tender offer by a month to November 18th.
The Investment Canada review is expected to be BHP's biggest regulatory hurdle, because it must prove its offer is of net benefit to Canada and, perhaps, that there is no risk to national security.
BHP chief executive Marius Kloppers toured Canada this week, meeting with politicians both at the provincial and federal levels, to convince them of merits of the BHP offer.
Mr Kloppers has made clear the takeover process is likely to continue at least until the end of this year, which means it will likely extend its bid beyond the current deadline.
Reuters