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S Kidman deal hit by FIRB wrangling

Extensions and a stay of execution for the Foreign Investment Review Board's decision mean the ruling will be delayed beyond the 2 July election.

The date of the Foreign Investment Review Board’s decision on the S Kidman deal has become a point of contention between the bidders and the government, and the sale could become an issue in the upcoming election.

A source close to the deal said the Treasury had asked bidders for numerous extension requests, and finally asked them to delay until 1 August. The prospective buyers refused, the source said, and the Treasurer, Scott Morrison, then used a 90 day stay of execution clause in Australia’s Foreign Acquisitions and Takeovers Act to extend the deadline. This would bring the decision to 15 July, after the 2 July election. The bidders were worried that if they granted the extension, further requests would follow, with the possibility of the stay of execution at a later date.

A source recently told Agri Investor they were worried a final outcome could be dragged out for months.

The Shanghai Pengxin subsidiary Dakang Australia has now officially agreed to buy S Kidman for A$370.7 million ($289.76 million; €255.92 million) in consortium with Australian Rural Capital (ARC). ARC will buy 20 percent and Dakang will buy 80 percent.

Morrison has commissioned an external review, announcing at a press conference yesterday: “I have today instructed Treasury to put in place an independent and external review of the sale and tender process in relation to Kidman because I want to be absolutely confident when I finally consider this matter that Australians have had every opportunity to be participating in that process […]. I will not be rushed into this.”

S Kidman will need to show it provided ample opportunities for competing Australian bids. Treasurer Scott Morrison said “the government will not be making a hasty decision” and will ensure national interests are prioritised. The cattle station group is Australia’s largest private land owner, with around 100,000 square kilometres.

The independent senator for South Australia Nick Xenophon has said the S Kidman sale will be a key issue in the July 2 election. Xenophon has previously advocated FIRB reforms, including closer scrutiny of other agribusinesses and infrastructure.

Meanwhile the coalition government has advocated a foreign investment scrutiny shake-up, including a new agricultural land foreign ownership register and closer screenings on all foreign ownership transactions on national interest grounds.

Chinese investment in Australian agribusiness reached A$375 million ($287 million; €252 million) in 2015. Three of a total 12 deals accounted for nearly half of Chinese investment in the sector last year, including the Beingmate investment in Darnum/Fonterra and Tanma Bearing Group’s acquisition of the Wollogorang and Wentworth stations.

The FIRB said in November it did not approve the S Kidman sale to Shanghai Pengxin because of its inclusion of the Anna Creek station, part of which is on the Woomera Prohibited Area (WPA) a weapons testing range in South Australia. The S Kidman portfolio was valued at around A$350 million ($251 million; €234 million) when the sale included Anna Creek, which is now being sold to the Williams Cattle company, according to local reports.