Lengthy Kidman and Co sale may undermine foreign investment

Agricultural industry experts say the drawn-out sale of S. Kidman and Co could hurt Australia’s reputation.

Cattle barons

The drawn-out sale of S. Kidman and Co has been criticised by agricultural industry experts who claim it could damage Australia’s reputation among potential foreign investors.

Australia’s largest cattle station business — which holds land 1.5 times the size of Tasmania — has been sold to Gina Rinehart and Shanghai CRED for $365 million.

The company was on the market for more than 18 months and a bid by an all-Chinese consortium was twice rejected by Treasurer Scott Morrison on national interest grounds.

Experts said the lengthy process could deter foreign investors looking to buy agricultural assets from entering the market because of the time and costs of lodging a successful bid.

Under the terms of the deal, Mrs Rinehart’s Hancock Prospecting will take 67 per cent of the joint venture and the Chinese group the rest.

Investment fund Laguna Bay chief executive Tim McGavin said offshore investors were not keen on volatility when making major foreign asset purchases.

“Capital can handle a lot but just not uncertainty,” Mr McGavin said. “If it’s a yes or no decision, that’s fine, but definitely not ­uncertainty.

“I think we have to be very careful in deciding the future of strategic assets.

“I didn’t have a problem with the Treasurer’s decision but the process could have been handled a lot better.”

Industry veteran David Warriner said there would be negative repercussions around the lengthy takeover process for the Kidman assets.

The Rinehart and Chinese offer is subject to approval from the Foreign Investment Review Board and a range of Chinese regulatory bodies.

It is also reliant on Kidman selling the Anna Creek and Peake cattle stations, which will reduce the overall purchase price to $365m.

“It did damage our reputation from a foreign investment point of view,” Mr Warriner said.

“It gave the indication to foreign buyers that things were going to be more expensive and any sale was going to take a long time. But now there has been a large transaction — although it still needs to get there — shows that foreign interests can enter an acquisition with a minority stake.”

In the past two years, Hancock Prospecting has spent more than $200m on six stations in Western Australia’s Kimberley region and the Northern Territory.

Ms Rinehart emerged on Friday as one of the country’s top Wagyu cattle owners after buying 1000 of the most expensive breeding cows from Victorian David Blackmore.

Kidman has pastoral leases covering 101,000 square kilometres across three states and the Northern Territory.

Kerry Stokes, chairman of the Seven Network, bought the Mount House pastoral station near Halls Creek in July in a deal estimated by rural property sources to be worth more than $20m.

Last year, he also purchased the nearby 400,000ha Napier Downs station — one of the finest in the Kimberleys with a herd of 20,000 red brahman cattle — for about $25m.

Fortescue Metals chairman Andrew Forrest recently paid $7m for the Minilya cattle station in WA’s Gascoyne region to add to his portfolio of Minderoo, Nanutarra, Uaroo and Brickhouse properties. He also holds Harvey Beef, the largest beef processor in WA.

Ray White Rural principal Bruce Gunning said the Kidman sale price would be positive for agricultural deals and Chinese demand for beef cattle assets remained strong.

Mr Gunning said most Chinese investors realised they would have to enter into joint ventures with local players to secure the support of the government and regulators.

“The Chinese investors are very interested in the super-heavyweight divisions where the assets are $100 million-plus,” he said.

“They want to run their own show, they don’t feel comfortable having an Australian partner or one from any other country — they want to run it themselves.

“But they are realising they are going to have to join with a local partner.”