11 October
Sue Neales
The Australian
It is part of Australia’s bush folklore that when the helicopter carrying Chinese magnate Xingfa Ma touched down last year on a muddy Gulf of Carpentaria beach — so Ma could announce he wanted to buy surrounding Wollogorang Station for $47 million — the billionaire had never before visited the remote region.
Nor did he know how many cattle were on the 705,000sq km station on the Queensland-Northern Territory border, or even how the premium price proffered by its real estate agents was determined.
And when Ma’s son tentatively asked his father what he was going to do with the rough remote bush country with its 80km frontage to the crocodile-filled Gulf, Ma reputedly spoke of its “development potential” and his vision that in a few decades, or centuries, a city the size of Melbourne would cover its shores.
It’s a story that hardened cattlemen love to tell, poking fun at the seeming ignorance of many cashed-up Chinese rushing to buy farms to reap the financial benefits of the Asian food boom.
But there is nothing rash or ill-informed about the $365m joint bid for the bulk of the Kidman cattle and land empire by Australia’s richest woman, Gina Rinehart, and
Chinese real estate billionaire and AFL sponsor Gui Guojie.
(It is also likely Ma, who had already spent $20m buying two Pilbara cattle stations as well as Ferngrove Wines, had done his due diligence, though the steep $47m price tag appears to bear little relation to Wollogorang’s productive capacity.)
(It is also likely Ma, who had already spent $20m buying two Pilbara cattle stations as well as Ferngrove Wines, had done his due diligence, though the steep $47m price tag appears to bear little relation to Wollogorang’s productive capacity.)
While the Hancock-Shanghai CRED deal was only locked in over the past eight days — and the bid agreement signed by their Australian Outback Beef consortium and the Kidman board late on Sunday — it has all the hallmarks of a winning proposal.
After the Turnbull government vetoed two previous majority-Chinese ownership bids for the Kidman group as not in the national interest, a consortium 67 per cent owned by Rinehart’s Hancock Prospecting and 33 per cent by Gui’s CRED group is more likely to be politically and publicly palatable.
After the Turnbull government vetoed two previous majority-Chinese ownership bids for the Kidman group as not in the national interest, a consortium 67 per cent owned by Rinehart’s Hancock Prospecting and 33 per cent by Gui’s CRED group is more likely to be politically and publicly palatable.
One Nation senator Pauline Hanson, always opposed to the sale of farmland to foreigners, declared she is happy, given “the vast majority of the company remains in the hands of Australians”.
“Ms Rinehart has my full support and gratitude,” Senator Hanson said.
“I have faith in her love for the country and its assets, and won’t stand in the way of an Australian buying the country’s largest cattle property.”
“I have faith in her love for the country and its assets, and won’t stand in the way of an Australian buying the country’s largest cattle property.”
Vocal critics of the flood of station sales to the Chinese — including radio presenter Alan Jones, senator Nick Xenophon and Deputy Prime Minister Barnaby Joyce — also bestowed their approval.
Increasing the likelihood that the Hancock bid will win the golden tick from the Foreign Investment Review Board and Treasurer Scott Morrison is the exclusion from the deal of the world’s largest cattle station, Anna Creek, and the neighbouring Peake station. It was the inclusion of Anna Creek, 27,300sq km of sprawling low-productive outback country to the west of Lake Eyre, which includes Defence’s high-security Woomera Rocket Range, that led to the blocking of a bid led by the Shanghai Pengxin group for the Kidman properties for reasons including national security.
“The parcel of land that we’re talking about is some 1.3 per cent of Australia’s landmass; the largest single parcel (Anna Creek Station) is next to the Woomera Protected Area,” Morrison said when rejecting that Chinese bid in November last year.
“The parcel of land that we’re talking about is some 1.3 per cent of Australia’s landmass; the largest single parcel (Anna Creek Station) is next to the Woomera Protected Area,” Morrison said when rejecting that Chinese bid in November last year.
“We welcome foreign investment but as Treasurer I will always make sure that investment is done in Australia’s national interest.”
Presuming Hancock and Shanghai CRED succeed in buying S. Kidman and Co 18 months after the publicly listed family company was advertised for sale, the agricultural sector is asking if the magic formula for foreign investment has now been found.
Is one-third foreign ownership — especially when Chinese companies are involved — with the majority partner controlled by Australians the new acceptable face of businesses wanting to buy agribusinesses?
David Goodfellow, former head of Macquarie’s Bank’s Pastoral Fund and Elders, and now the local managing director of Chinese agribusiness and manufacturing conglomerate the RIFA Group, certainly hopes not.
RIFA has bought, with full FIRB approval, $150m of cattle and sheep properties in western Victoria and northern NSW — including the prized $14m Blackwood estate near Dunkeld — with no Australian partner involved. “This (Kidman bid) is obviously a strategy they think will work because other bids have failed, but I think it’s a long stretch to say this 33 per cent to 67 per cent (ownership balance) is a preference backed by FIRB,” Goodfellow says.
“I know there is criticism that FIRB rules about foreign investment are not clear enough but I don’t think there should be hard rules around part-ownership because it needs to vary according to investors, their experience and appetites.
“I don’t mind 100 per cent foreign ownership; to me (FIRB approval) should be more about is there local control, Australian board directors and a robust local management team that can make autonomous decisions and understands Australian farming systems and things like buying locally and supporting local communities.”
The danger of blocking foreign bids for farmland unless an Australian partner has a majority stake is that capital inflows could dry up, says David Williams, managing director of specialist agribusiness corporate advisory firm Kidder Williams.
The danger of blocking foreign bids for farmland unless an Australian partner has a majority stake is that capital inflows could dry up, says David Williams, managing director of specialist agribusiness corporate advisory firm Kidder Williams.
Agriculture needs capital to develop underperforming farms into productive businesses, while intensive spending on large outback cattle stations such as those in the Kidman portfolio could lift their carrying capacity fivefold.
“This is an elegant outcome for the government in this special and sensitive case but it’s also a bit of luck because Gina (Rinehart) has deep pockets and was prepared to pay what the (Pengxin) Chinese bid was also putting up for Kidman, when no other Australian bidder had been able to make that price work,” Williams says.
“But if we always insist on a partnership model, it will bring the price down because Australians are generally not prepared to pay the same price as foreigners for these assets, so the average offer would be lower. That will only hurt Australians trying to sell the farm and get off the land.
“We will miss out on (deals) if the partnership model and minority Chinese ownership becomes the norm; and we need this capital if we are going to sweat the (farm) assets to produce more food.”
Courtesy of The Australian
