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Federal Industry Ministry Tony Clement leaves the podium without answering questions in Ottawa on Wednesday after announcing his decision to reject a takeover of PotashCorp. ((Sean Kilpatrick/Canadian Press))

The federal government has rejected BHP Billiton's $40-billion hostile takeover bid for Potash Corporation of Saskatchewan, but appears to have left the door open to further talks.

Industry Minister Tony Clement said Wednesday that Canada wants to attract investment and business, but "some decisions can only be made once … and there's no turning back, ever."

He said BHP's offer for PotashCorp would not benefit the country — but he did seem willing to entertain a sweetened bid from the Australian mining giant. He offered no specifics.

"BHP Billiton has 30 days to make any additional representations and submit any undertakings," Clement said. "At the end of that period, I will make a final decision."

"The federal government understands the intrinsic value of the potash industry to the country and to the people of Canada," he said. "My job is to assess the potential bid with reference to the Investment Canada Act and the economic policies of the country."

BHP Billiton, in a written statement, said it "is disappointed, but continues to believe that the offer is of net benefit to Saskatchewan, New Brunswick and Canada." The company said it will continue to co-operate with Clement and Industry Canada and will review its options.

Potash Corp. said the announcement "does nothing to change our view that the BHP Billiton $130 per share offer is wholly inadequate. The PotashCorp board of directors strongly believes that the offer fails to reflect both the value of PotashCorp's premier position in a strategically vital industry and the company's future growth prospects."

The decision appeared to mark a reversal of the stand the government took on Oct. 20, when Prime Minister Stephen Harper told the Commons that the bid was a "proposal for an American-controlled company to be taken over by an Australian-controlled company."

The federal Investment Canada Act allows Ottawa to block any deal worth $299 million or more if it finds the takeover doesn't provide "net benefits" to Canadians.

Wall welcomes decision

Saskatchewan Premier Brad Wall applauded the decision.

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Saskatchewan Premier Brad Wall says his government's decision to oppose the takeover had resulted in a roller-coaster of emotions in the last few days.

"I want to especially thank minister Clement and his team," he told reporters in Regina. "Most of all, I want to thank the people of Saskatchewan who were very, very, very engaged in this."

Wall said his government's decision to oppose the takeover had resulted in a roller-coaster of emotions in the last few days.

"We struggled with our decision," he said.

"We are still a nation that is open ... we are a free-trading country. But we have been blessed with a great amount of natural resources ... and we may have to act differently in that regard," he said. "This is a very strategic resource."

Better bid expected

Following Clement's announcement, shares in PotashCorp fell $7.20, or just under five per cent, to $138.30 US in after-hours trading. Elsewhere, shares of BHP Billiton rose about three per cent to $43.90 Aus. in early trading on the Australian Securities Exchange.

Toronto-based Excel Fund Management investment strategist Gavin Graham told CBC News he expects the company will make an improved offer.

"If he was going to say no then he would have said no without any 30-day window of opportunity," said Graham.

"As you know, the rumours in from London were that BHP was going to improve its offer by 10 per cent or thereabouts, which again if you … go back to Falconbridge and Inco and Alcan, the first bid was never the one that got accepted.

"Therefore, if BHP is serious about wanting Potash … and it looks like they are, it behooves them to raise the bid."

"They have been dragged kicking and screaming toward what we hope is a clear 'no' on this deal," said Liberal Leader Michael Ignatieff. "I say 'we hope,' because there's 30 more days. Our position is that the door should be shut firmly on this deal. The issue here was control of a strategic resource."

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PotashCorp underground production supervisor Dave Esslinger displays a sample of potash 1,000 metres below the surface at the potash mine in Rocanville, Sask. ((David Stobbe/Reuters))

NDP Leader Jack Layton said public pressure on the government had an impact.

"The pressure coming from the people of Saskatchewan is clearly rattling this government, and they've been forced to listen," said Layton. "However, they're leaving the door open in the next 30 days for this corporation to sweeten their offer so the Conservatives can then permit it."

"We believe that the door should be closed, and it should simply be closed now," Layton said.

Harper's minority government had faced pressure from four provinces — Saskatchewan, Alberta, Manitoba and Quebec — and in the House of Commons to disallow the takeover.

Harper's Conservatives hold 13 of 14 seats in Saskatchewan.

Wall had opposed the sale, citing a study that pointed out losses in provincial revenues over the next decade, and because potash is a strategic resource. The province produces 30 per cent of the world's potash, a crop nutrient.

BHP had offered to offset provincial revenue losses by contributing to an infrastructure fund, a proposal Saskatchewan officials have called inadequate.

New Brunswick had 'concerns'

In New Brunswick, the company has embarked on a new mining operation valued at $1.7 billion, and politicians in that province have supported Wall's position against a takeover.

In a letter sent last week to Harper, New Brunswick Premier David Alward said he had "concerns" about the proposed takeover, but he also acknowledged the jurisdiction of the federal government to make the decision under the Investment Canada Act.

 If it goes through, the deal would add to the list of takeovers of Canada's largest natural resource companies over the last decade. They include the Swiss company Xstrata's acquisition of nickel producer Falconbridge in 2006, the purchase by Brazil's Vale of Inco in 2007, and the takeover by U.K.'s Rio Tinto of Alcan, also in 2007.

The federal government has come under fire for its handling of recent foreign acquisitions.

Vale's takeover of Inco was criticized during a year-long strike involving the company's operations in Sudbury, Ont.  Vale employees in Voisey's Bay, N.L., are still on strike.

And Ottawa is in the midst of a lengthy court case with U.S. Steel Corp., which acquired the former Stelco in 2007.

The federal government has reviewed 1,637 takeovers since 1985 and rejected only one, the bid in 2008 by American firm Alliant Techsystems for Vancouver-based MacDonald Dettwiler & Associates Ltd.'s information systems, satellite and space mission businesses.