Chinese whispers on Kidman & Co sale

Illustration: Rod Clement.

Who’d want to be a Chinese company trying to buy a prime Australian asset right now?

Patient conglomerate Shanghai Pengxin and its billionaire owner Jiang Zhaobai, that’s who.

Shanghai Pengxin’s billionaire owner, Jiang Zhaobai.

Despite two knockbacks from Treasurer Scott Morrison and the Foreign Investment Review Board, Shanghai Pengxin and its major subsidiary, Hunan Dakang Pasture Farming Company, remain intent on snaring the glittering prize of Australia’s largest private landholding, the S. Kidman & Co outback cattle empire.

Its $371 million offer for Kidman’s nine legendary stations, 77,000sq km of red dirt in three states and 185,000 cattle, remains on the table as the preferred bid, as far as S. Kidman & Co is concerned.

But the dilemma now for everyone, from the Kidman board to its sale managers Ernst & Young and Shanghai Pengxin itself, is working out what exactly is the government’s attitude to foreign investment and what bid structure might be acceptable to Morrison and Nationals leader Barnaby Joyce.

Empire dreaming

The hope had been that once the federal election was over, the idea of Chinese companies buying national assets, especially millions of acres of farmland, would be much less of a political hotcake.

Deputy Prime Minister Barnaby Joyce. Picture: Britta Campion/The Australian.

But as China’s state-owned State Grid and Cheung Kong Infrastructure Holding discovered yesterday when their respective bids for Ausgrid were vetoed, the narrow election win and the strengthening of the Nationals’ hand seem to have made matters worse for Shanghai Pengxin’s cattle empire dreaming.

Shanghai Pengxin has lobbyists GRACosway walking the corridors of power in Canberra, trying to work out what configuration of any next bidding group will be acceptable to FIRB, Scott Morrison and, most critically, Barnaby Joyce.

S. Kidman & Co has left its E&Y sales process manager Don Manifold tearing out his hair after a tortuous 14 months since the bidding. The pastoral group appointed high-profile government smoothers CapitalHill Advisory — Nick Campbell and Michael Photios’s federal lobbying business — to discretely discover what bit of the previous Chinese bid was unacceptable, and what proportion of Chinese ownership of the Kidman empire would meet FIRB and Morrison’s approval.

Options being canvassed within agricultural circles by Shanghai Pengxin and its 20 per cent listed partner Australian Rural Capital are numerous.

Talks are being held with several leading pastoral families to see if they would join a joint bid for Kidman, with squattocratic names such as the McLachlans, McBrides, Camms and Hughes families being thrown around with little regard for accuracy.

Family feud

More interesting is a suggestion of dissent within the ranks of the extended Kidman family itself, and its 58 family members, not all of whom were keen on selling their illustrious heritage — and family money-spinner — in the first place, especially at a time when cattle prices were on the rise after the dreadful Queensland drought.

New pastoral baron and former SA pig farmer Tom Brinkworth.

While the Abel-Smith branch of the family has pushed the sale hard, other members of the cattle dynasty are implacably opposed, including the Ayers and Clover families, descended from two of Sir Sidney’s daughters Edna and Gertrude.

Other prominent descendants and shareholders — some, like the Clovers, based in Britain — include family names such as Bourne-Arton, MacKinnon, Wallman and Kidman, as well as the Fulham, Wyeroo, Warenda and Kernwood investment groups and individuals.

It is feasible the dominant Ayers and others could decide to join with Shanghai Pengxin and hang on to their cherished cattle empire with a majority 50 per cent or 51 per cent stake, using the Chinese money to buy out their cash-up-and-sell-out distant cousins.

But if all that fails, or Shanghai Pengxin gets the signal it will never be welcome to buy so much Aussie acreage, new pastoral baron and former SA pig farmer Tom Brinkworth is waiting in the wings.

Brinkworth, who has neither a polo pony nor silver spoon pedigree to his name, has openly modelled his cattle expansion success on Sidney Kidman’s vision and is understood to have recently pitched a serious, if lesser-priced, bid for the entire Kidman group to E&Y.

Clear as mud

No one would accuse the FIRB process of being transparent.

Treasurer Scott Morrison. Picture: Renee Nowytarger/The Australian.

And just when we thought we were getting a handle on it, along comes Scott Morrison — running late, and seemingly determined to make an already opaque process even less clear.

After the publication of our report yesterday on the politically sensitive division of FIRB duties inside the Turnbull government, Morrison’s office broke its silence to have something clarified.

Yes, Morrison himself is in charge of the big things — starting with NSW Premier Mike Baird’s poles and wires privatisation, as has been dramatically underlined.

“The Treasurer takes direct responsibility for FIRB transactions which involve complex and controversial matters,” said a spokesperson for the Treasurer. “Other cases may be dealt with by portfolio ministers as directed by the Treasurer.”

The trouble was our report had much too much clarity.

According to the Treasurer’s office, it is not true that Assistant Treasurer Kelly O’Dwyer is in charge of the politically sensitive agricultural sales.

Apparently Small Business Minister Michael McCormack — one of Barnaby Joyce’s Nats — could get a bit of the agricultural action. Sounds exciting, but we’ll see if it happens.

As reported, the addition of McCormack will also help to avoid any perceived conflicts of interest that might arise thanks to O’Dwyer’s husband Jon Mant, who is an executive director at UBS, an investment bank with mandates on half the deals in Australia.

The nub is that nothing is formal. Everything will be decided on a case-by-case basis. At the Treasurer’s discretion.

Unclear? That seems to be the point.

No Grylls on menu

The RSVPs are flooding in for Rio Tinto’s night of nights in Perth on August 26, when CEO Jean-Sebastien Jacques will host hundreds of people to celebrate 50 years of digging up red dirt in the Pilbara.

Newly returned WA Nationals boss and Pilbara MP Brendon Grylls.

Western Australia’s two leading federal MPs, Julie Bishop and Mathias Cormann, will be there, as will enfeebled WA Premier Colin Barnett and Labor premier-in-waiting Mark McGowan.

But, as predicted, the leader of the other significant party in WA, newly returned Nationals boss Brendon Grylls, has sent his apologies.

Grylls — who as it happens is the Member for Pilbara — was invited to the event a few weeks ago.

Rio makes most of its earnings in his electorate, which is also the base for most of its 12,000 employees in Western Australia.

Little did Rio know that, at the very time the invitation was in the mail, Grylls was secretly plotting to roll all-round-nice-guy Terry Redman as WA Nationals leader — with a great big new mining tax for Rio and Andrew Mackenzie’s BHP Billiton as his key policy platform.

Grylls’ proposed iron ore tax would cost Rio $1.65 billion a year based on current production levels.

The unveiling of that audacious policy this week means that, while he won’t be in the Perth Convention and Exhibition Centre ballroom, Grylls will be enemy number one at the Rio bash later this month.

And we hear JS will even work the controversy into his keynote speech in an attempt to calm fears among the big delegation of international customers who have been invited.