November 04, 2010
The Death of BHP-Potash and the Rise of Go-To-The-Government Poison Pills
Posted by David Zaring

The industry minister of Canada, invoking its Investment Canada Act, just scotched the Australian bid for Potash, which was, for a brief pre crash period, the most valuable company in the world.  The statute requires that foreign investment in the country be a net benefit to Canada - which, though I don't know this area, seems like a statute that would come close to violating TRIPs and Canada's BITs (which usually include provisions that foreign investors must be treated the same way domestic ones are ... Canada would need to establish that it does something like "good for Canada" reviews for domestic M&A as well, I would think).

Anyway, there's few economists who think that "good for X" government reviews of M&A are actually good for anything.  But it is the bleeding edge of takeover defense.  In China, antitrust is the mechanism through which this sort of vetting is done, as Anu Bradford can tell you.  In Canada, it is the ICA.  And in the US, it is national security, which is an intensely scrutinized way to kill, say, Chinese bids for American tech and gold mine companies (the two most recent times it has been used).  Anyway, I've got an article on the American national security review process in the S.Cal.L.Rev., and if you're interested, you can have a look here.

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