S Kidman sale delayed by up to nine months – exclusive

The A$350 million-plus ($270 million; €239 million) deal to sell Australia’s largest private property portfolio to Chinese company Shanghai Pengxin and its local partner Australian Rural Capital (ARC) could be delayed by between four and nine months, a source with knowledge of the deal has told Agri Investor.

S Kidman and bidders were told last week that Australia’s Foreign Investment Review Board (FIRB) will process the parties’ application for approval after an election. An election that benefits Prime Minister Malcolm Turnbull, who is facing falling opinion polls, could be held as early as July.

The bidders and seller were said to be “extremely disappointed” at the delay, and had believed the deal would be processed in time for Turnbull’s diplomatic visit to China last week. However, Turnbull is thought to have been personally involved with the decision to delay the FIRB findings.

With the deal now so closely linked to the country’s political timetable, the three parties are said to be prepared for further delays, uncertain whether politics could drag out or influence the approval process.

ARC partnered with Shanghai Pengxin before S Kidman announced for the second time in six months that the Chinese company was its preferred buyer.

S Kidman owns 10 cattle stations across South Australia, Western Australia, the Northern Territory and Queensland covering 101,411 square kilometres. Australian Treasurer Scott Morrison said last year that one station in particular, Anna Creek, had raised security concerns because half of its pastoral lease is located in the Woomera Prohibited Area of South Australia, a weapons testing range.

The treasury then blocked the deal to sell S Kidman to Shanghai Pengxin last November. The company was put back on sale without the Anna Creek property this year.

“I made a determination in November last year that the proposed acquisition of S Kidman […] by foreign investors would be contrary to the national interest and therefore did not authorise the sale to proceed,” Morrison said in a later statement. “Obviously any prospective foreign investor purchase of S Kidman […] would be examined against Australia’s national interest.”

Only Australian interests were permitted to re-enter bidding for the S Kidman portfolio. Shanghai Pengxin’s decision to partner with a local investor came as public debate over foreign ownership of the Australian cattle station properties intensified.

Foreign land ownership can be a contentious issue in Australia; Bega Cheese executive chairman Barry Irvin has said the FIRB is being used as a “xenophobic weapon” against Chinese buyers. Terra Firma portfolio company Consolidated Pastoral Company, which is Australia’s largest privately owned cattle business, also weighed in March, saying the investment rules for foreigners would put off Chinese investors.