TORONTO - Anglo-Australian mining giant BHP Billiton officially conceded defeat Sunday, withdrawing its hostile takeover bid for Saskatchewan-based PotashCorp.

The withdrawal comes less than two weeks after Ottawa rejected the US$38.6 billion offer as not having enough net benefit for Canada.

The company had 30 days to try to convince the federal government on the merits of its proposal to buy PotashCorp (TSX:POT), the world's biggest producer of potash, a key component used in fertilizer.

But it withdrew its bid Sunday saying Ottawa required "additional undertakings" beyond what it had already offered. It said the government demands would have conflicted with the company's business strategy and would have been counter to creating shareholder value.

Had the deal been approved by the government and shareholders, it would have been the biggest in Canadian history -- and the largest in the world this year.

PotashCorp said BHP Billiton's decision underscores the fact that their offer "substantially undervalued" the Canadian company.

"We believe our opportunity for growth in the industry is unmatched and we are excited about the future," PotashCorp said in a news release.

"As the food requirements of our growing global population continue to increase, we believe PotashCorp has the right strategies in place to enhance earnings in the strong market conditions we see unfolding."

BHP said it still believes its offer -- described as "unparalleled in substance, scope and duration" -- would have resulted in a significant net benefit to Canada.

BHP's CEO Marius Kloppers said even though he was disappointed, the company remains committed to Canada.

"We plan to develop a significant presence in the potash industry in Saskatchewan," he said in a statement released Sunday evening.

The federal government will now have to answer questions from other foreign investors on just how open Canada is to overseas investment.

Industry Minister Tony Clement said on Sunday that the government welcomes foreign investment that can bring "new ideas, sources of capital, and job creation."

He also recognized BHP's "good faith and integrity" throughout the process, but added that despite the rejection of its takeover bid, Canada's low business tax, educated work force, and stable banks are great reasons to invest in the country.

"I don't think our position is in any way to the detriment as a result of this decision being made," he said.

"I think that when you have a law in place ... to be considered for foreign investment, it stands to reason that in many cases those foreign investments would be approved, but there may be some cases where they would not be approved and I think foreign investors understand that."

Clement said Ottawa recognized that there may be ways to improve the review process under the Investment Canada Act when it came to major foreign investments. He said that in the coming days he will be explaining how he interprets factors under the Act.

"I do understand however that within some people's minds it has raised issues about what the ground rules are going to be henceforth so that's why I believe it's prudent for me to explain in a little bit more detail," he said.

Also, on Sunday, Prime Minister Stephen Harper -- speaking in Yokohama, Japan, where he was attending the Asia-Pacific Economic Co-operation summit -- said Australia had earlier taken him to task over the decision to block the bid for PotashCorp.

Harper had a bilateral meeting with his Australian counterpart on the sidelines of the G20 summit in Seoul, South Korea, that preceded the APEC gathering.

Harper said he pointed out that Canada and Australia have almost identical investment review regimes. And he questioned whether any other country in the world would have allowed such a deal.

PotashCorp had fought the bid throughout saying it was "wholly inadequate" and seriously undervalued the company.

Clement rejected BHP's hostile bid Nov. 3, a denial that was only the second time Ottawa has rejected a foreign takeover outright under the Investment Canada Act.

Ottawa blocked an attempt by MacDonald, Dettwiler and Associates Ltd. (TSX:MDA) to sell its space division to U.S. defence firm Alliant Techsystems Inc. in 2008.

The decision was welcome news in Saskatchewan, which had launched a furious lobbying blitz to persuade Clement to kill the deal, arguing that potash is a strategic industry with unlimited growth potential for Canada and must be kept in Canadian hands.

NDP leader Jack Layton called it a victory for the power of public opinion.

"I think voters learn here if they raise their voices strongly enough it can have an impact."

The New Democrats planned to press ahead with a motion this week to get more transparency in the Canada Investment Act so it's not such a "shadowy operation behind closed doors," Layton added.

BHP also announced Sunday it would return $4.2 billion to shareholders through a previously suspended buy back program.

"BHP Billiton has a strong track record of returning capital to shareholders," said company chairman Jac Nasser. "The decision to reactivate the buy-back program is entirely consistent with our commitment to maintain an appropriate capital structure."