An interesting read, they have far more cash than any of us could imagine!!
Shanghai Pengxin had been scouring Australia’s agricultural sector for investment opportunities for two years before it decided to bid for the sprawling S. Kidman & Co pastoral empire.
This week, almost a year after the Kidman family decided to sell the cattle station portfolio, a Shanghai Pengxin-led consortium secured formal preferred bidder status, becoming the frontrunner in a race that has become increasingly politicised.
It was a deal that came together not just around the board table — Shanghai Pengxin’s $370.1 million bid was significantly higher than earlier valuations but similar to an offer made by Hong Kong fund Genius Link Asset Management — but around the dinner table.
The defining moment, according to some close to the deal, came during two tours taken by Shanghai Pengxin management and Kidman chief executive Greg Campbell and pastoral manager Paul Quigley to the stations.
It was during these dinners, at the remote pastoral properties, that the prospective buyers saw management and station staff — including the jackaroos — sitting together discussing the operations of the farm. Shanghai Pengxin’s owner Jiang Zhoabai, who by Forbes estimates is worth $US1.88 billion ($2.6bn), has quietly visited Australia at least five times in the past three years.
However, he has left almost all negotiations over Kidman to his executive team and others, including Dakang Australia director Gary Romano, who told The Weekend Australian the company had run the ruler “over a number of entities that might have been appropriate for us to approach” before Kidman was put on the market.
“We talked to a lot of players like others have done, we had been looking for a while but for whatever reason we didn’t go forward,” Romano said. “So when (Kidman) came up ... we thought we’d put in an attractive bid.”
Despite this week’s agreement, there is still some way yet before Shanghai Pengxin, through its controlling stake in Hunan Dakang, will be able to purchase Kidman.
Scott Morrison has delayed a decision till after an expected election, Bill Shorten has already admitted “uneasy” feelings about the sale, and senator Nick Xenophon has vowed to make the issue “an election battle line”.
It was never expected that the sale of Kidman, with pastoral leases spanning more than 1 per cent of the continent, would be easy. From the outset, the extended family that has controlled the pastoral empire for more than a century seemed unsure about whether they should sell.
The Kidman family, which controls a third of the company, was itself split about the sale, while another shareholding block — owned by British cousins of the Kidmans — was also opposed.
Shanghai Pengxin also met resistance from the Treasurer, who knocked back an earlier proposal partially on national security grounds — Anna Creek, the world’s largest cattle station and part of the Kidman portfolio, overlaps the Woomera military zone.
Anna Creek has now been carved out of the larger portfolio and is being sold to the Williams Cattle Co for about $16m.
It has been a long process. Shanghai Pengxin, which has also partnered with Australian Securities Exchange-listed Australian Rural Capital for the bid, overcame interest not only from GLAM, but also other Chinese players including Ningbo Xianfeng, a group headed by Lu Xianfeng, which has a controlling stake in blind maker Kresta.
Rifa Australia, a division of Chinese conglomerate Zhejiang, was also thought to have taken a look at the assets, as did property firm Shimao and a number of local groups including the Smorgon family, the Canadian pension fund-backed Hewitt Cattle, and trucking baron Lindsay Fox.
Shanghai Pengxin has already invested heavily in New Zealand, and become tangled in a debate about foreign investment.
There, it took almost two years of wrangling for Shanghai Pengxin to be allowed to buy 16 farms, about 8000ha, once part of the Crafar portfolio, in a deal worth about $NZ200m ($178m).
The company last year attempted to acquire Lochinver Station for $NZ88m, but was knocked back by the Key government because it failed on the test of providing a substantial benefit to New Zealand. That is a similar test to one Senator Xenophon wants applied in Australia.
In commentary appended to a parliamentary inquiry into foreign investment, Senator Xenophon recommended Australia “adopt a national interest test modelled on New Zealand laws that set out national interest criteria, including the economic effects of foreign versus local investment”.
Meanwhile, Shanghai CRED, the other major backer of Hunan Dashang, has also invested in New Zealand after snapping up the Carrington Estate resort.
It is also closing in on the purchase of nine more pastoral leases — including Yakka Munga and Mount Elizabeth station as well as seven other stations in the Goldfields region of Western Australia — for $25m.
The patience and depth of overseas capital has become a boon for local landholders who have posted large gains in the revaluation of assets.
GLAM, which has already struck a smaller deal with local cattle firm Australian Country Choice, said it wanted to invest $1bn in Australia as it built a global food business. No doubt it is already looking elsewhere, having hinted at discussions with the AACo and Terra Firma-owned Consolidated Pastoral.
Some relish the opportunity. Ellerston Capital chairman Ashok Jacob told the Global Food Forum this week — somewhat tongue in cheek — that “Australian agricultural investors should be looking for every opportunity to relieve large Chinese investors of as large an amount of money as possible”.
“I mean, if the Chinese capital markets have too much money and they want to go and buy assets here for, you know, multiples of what they’re going to sell it for in the next five to 10 years, that’s great news for Australia; it’s a capital injection,” Mr Jacob said.
“We should be running ticker-tape parades for everybody trying to come in and buy land that people have been trying to sell for the last 25 years.’’
The lower it goes the more interested they'll be, as Ed pointed out in the take over thread, it's cheaper for them to just buy the company at NTA than build the fleet and assets including farms.
I'm going to take advantage of the likely last of the worst...
WLD Price at posting:
40.0¢ Sentiment: Buy Disclosure: Held
