October 20, 2016

Just when we thought the 18-month long battle for the S. Kidman cattle empire was coming to a close, another surprise comes out of Australia.

It was only weeks ago that Gina Rinehart, Australia’s richest woman who gained the bulk of her wealth in the country’s mining boom, announced she had partnered with China’s Shanghai CRED to form the joint venture, Australian Outback Beef, through which the two made a A$365 million (US$276.8 million) bid for the cattle conglomerate.

Under the terms of the agreement between the two partners, Gina Rinehart’s Hancock Prospecting would own 67 percent of S. Kidman, with Shanghai CRED owning the remaining 33 percent. Following repeated rejections of offers from Chinese bidders or partnerships with majority Chinese partners, it was widely believed that the offer would be acceptable to the Australian government because the Chinese partner would hold a low enough minority stake in the iconic and nationally significant agricultural holding.

However, it seems the joint venture may be outbid. Four of the country’s richest ranchers and cattlemen – Tom Brinkworth, Sterling Buntine, Malcolm Harris, and Viv Oldfield created the BBHO syndicate and are expected to make a bid of A$385 million (US$295 million) for the entire Kidman business, including Anna Creek Station – the largest cattle ranch in the world, and politically sensitive parcel near the Woomera weapons testing range.

The syndicate members, who already run a combined 400,000 head of cattle across the country, state that each member would continue to run their own businesses however they plan to market their cattle through S. Kidman & Co.

“We’ve got properties quite close to the Kidman properties,” Buntine told ABC, adding, “We would be looking to break the properties up to complement our existing portfolios. It’s a more efficient use of staff and plant.”

No Need for FIRB

The syndicate has reportedly notified the S. Kidman Board of its planned bid, meanwhile, both Rabobank and the NAB are rivaling to fund the deal which, unlike all previous offers, will not require approval from Australia’s Foreign Investment Review Board (FIRB). The syndicate has also stated that it will cover the $3.8 million break fee agreed upon between S. Kidman and Hancock Prospecting if either party walks away from negotiations.

Although the domestic bid will not need regulatory approval, and satisfies pushback from both politicians and the Australian populace against foreign ownership of large scale agricultural operations in the country, the fact that the members plan to break up the S. Kidman holdings could be a drawback in the eyes of its management. Throughout the entire,drawn-outt bidding process, Greg Campbell, managing director for S. Kidman has maintained that he was against breaking up the cattle properties.

“We intend to fight for these places,” Brinkworth told the Wall Street Journal. “It is our intention to take this great Australian company and legacy and grow it into a global brand.”

Fight they might have to, because even though the Kidman Board is required to consider all bids higher than the current bid by Gina Rinehart and Shanghai CRED, if the Rinehart/CRED partnership gains regulatory approval, they will have the right to match or outbid the syndicate, signaling the possibility of a drawn out bidding war.

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Lynda Kiernan