Gina Rinehart's Hancock Prospecting has launched a joint bid with a Chinese partner for the nation's largest landholder, S.Kidman & Co, in what will be a further political test for Australia's foreign ownership rules and signals the biggest push so far by Australia's wealthiest businesswoman into agriculture.
Hancock will own 67 per cent of Kidman's giant cattle portfolio and Chinese conglomerate Shanghai CRED 33 per cent under the formal agreement announced late Sunday following months of speculation. While the involvement of a Chinese bidder will keep the deal in the political spotlight, it is the first bid for the pastoral empire by a consortium majority owned by Australian interests.
Mrs Rinehart's political connections are also expected to give the $365 million deal a better chance of winning approval from Treasurer Scott Morrison, who knocked back a Chinese-led offer in May.
The offer is conditional on Australian foreign investment approval, regulatory approvals from China and the sale of the Anna Creek station to other Australian grazing interests. If successful, that is expected to take about six weeks.
While Chinese ownership of the Kidman landholdings, which make up around 1.3 per cent of Australia's land mass, have become a political hot potato, the deal is also significant as it marks the biggest push so far by Australia's richest businesswoman into agriculture. Hancock has spent around $200 million on cattle stations in Western Australia and the Northern Territory over the last two years as it diversifies away from its traditional mining operations. Last week, it announced a deal to buy 1500 head of cattle from top Victorian Wagyu breeder David Blackmore.
Ms Rinehart said the new owners would work with the Kidman management and staff to grow and develop the existing operations.
"Kidman is an iconic cattle business established more than a century ago by Sir Sidney Kidman. It is an operation founded on hard work and perseverance by an outstanding Australian, and is an important part of Australia's pioneering and entrepreneurial history," Mrs Rinehart said.
Australian Outback Beef deal
Under the bid implementation agreement, Hancock and Shanghai CRED, which is owned by Chinese businessman Gui Guojie, will establish a joint venture company called Australian Outback Beef (AOB) to acquire 100 per cent of the shares in Kidman.
Shanghai CRED was part of an original consortium bidding for Kidman led by Shanghai Pengxin and including Australian Rural Capital. Andrew Fox, the son of trucking magnate Lindsay Fox, had also been reportedly been considering teaming up with Hancock on a joint bid.
Kidman has agreed exclusivity arrangements with AOB, which means it must pay a break fee if it decides to accept another offer. "We welcome the significant investment proposed in addition to the purchase price and are confident that the Kidman business will be in good hands," Kidman chairman John Crosby said.
The Rinehart offer is the first firm bid for Kidman by a majority Australian-owned consortium which is expected to help get the deal across the line. Foreign ownership under the AOB bid will be 1 per cent less than the 33.9 per cent currently, which the Hancock consortium is confident will work in its favour when addressing foreign ownership concerns.
Ms Rinehart's family also have long ties to the pastoral sector and she is close to Deputy Prime Minister Barnaby Joyce, who had concerns about the original Chinese-led bid. The Hancock family started its first cattle station in North West Australia.
In May, a Chinese-led consortium called Dakang Holdings pulled its $370 million bid after the Treasurer Scott Morrison rejected the deal on national interest grounds, triggering a heated debate around Chinese foreign investment in key Australian assets.
Political alarm bells
The Hancock bid is worth $365 million, excluding the proceeds from the sale of Anna Creek and the Peake assets, which will be paid to Kidman when the assets are sold.
The Anna Creek Station is to be sold separately because it is adjacent to the Woomera missile testing centre, one of the most strategically sensitive locations in Australia. In 2009, the Federal government blocked the sale of Oz Minerals to Chinese firm Minmetals on the grounds that its Prominent Hill copper and gold mine, which is 150 kilometres away, was too close to Woomera.
The presence of Chinese investors could still raise alarm bells. Mr Morrison blocked the sale of Ausgrid, a NSW-government owned electricity network, to China State Grid Corporation on national security grounds. The Federal government has recently changed the rules for FIRB approval to give security agencies more input into decisions and has promised to release a list of strategically significant firms.
The National party has raised political concerns about the sale of Australian agricultural land to foreign buyers, which it says poses a threat to food security. The government introduced a national register of foreign ownership of agricultural land but the Productivity Commission has said this creates unnecessary red tape.
S.Kidman & Co is one of the country's largest beef producers, with 185,000 cattle and pastoral leases covering 101,000 square kilometres. The sale process has dragged on for 18 months, with more than 600 interested parties holding talks with sale manager Ernst & Young.
This story was first published on The Australian Financial Review.
