Chinese GLAM trumps rival Shanghai Pengxin’s cattle bid

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S Kidman & Co’s pastoral empire in Australia (Image: The Australian)
The Australian | 10 February 2016

Chinese GLAM trumps rival Shanghai Pengxin’s cattle bid
 
Chinese investment company Genius Link Asset Management has trumped rival Shanghai Pengxin’s bid for the S. Kidman & Co pastoral empire just as the race for the coveted cattle stations nears the final hurdle.
 
According to sources, GLAM’s offer is in excess of $370m, far above the $350m submitted by its compatriot bidder late last year.
 
However, the loftier valuation does not reflect the final outcome.
 
Last-ditch offers from Australian investors who are excluded from the cumbersome processes dictated by the Foreign Investment Review Board will have four weeks to trump the preferred bidder, raising expectations Kidman may ultimately remain in local hands.
 
According to sources, FIRB is expected to hand down its recommendation on the sale by next week, enabling Treasurer Scott Morrison to then endorse the winning offer.
 
Despite the heightened political sensitivities about increased foreign ownership of high-profile Australian assets, Ernst and Young, which is handling the sale, is expected to determine the preferred bidder status solely on price.
 
But the structure of the auction means the local players hold the advantage.
 
Billionaire trucker Lindsay Fox has already generated political support for his late-stage entry in to the race, with Agriculture Minister Barnaby Joyce urging local investors to display greater enthusiasm about the opportunities in the agricultural sector.
 
The additional time afforded domestic bidders opens the door to parties that had previously expressed interest, including FK Gardner & Sons and Victor Smorgon Group.
 
Yet the relentless Chinese interest in Australian agricultural assets look set to continue.
 
The Kidman portfolio, which controls pastoral leases covering more than 100,000sq km in the outback and almost 200,000 cattle, is just one of a string of assets luring acquisitive investors from Asia.
 
The influx is primarily driven by China’s increasingly carnivorous diet, which has sparked an upsurge in cross-border food deals as the investors attempt to lock down supply sources for the country’s expanding middle and upper classes.
 
GLAM already owns a number of significant agribusiness assets in Australia, including Riverina Oils & Bio Energy, a substantial oilseed producer, and olive oil plantation TreeTops. The concentration of ownership could intensify if Jumbuck joined GLAM in its bid for the properties — as has previously been speculated. Kidman’s portfolio would add to Jumbuck’s already significant portfolio of 12 stations spread across Western Australia, South Australia and NSW.
 
Shanghai Pengxin, controlled by Jiang Zhaobai, a property billionaire, has displayed an equally keen demand for the sector, accumulating a bunch of dairy farms in New Zealand.
 
Yet the spate of Chinese bidders has emerged at an awkward time.
 
Concerns were mounting about the privatisation of NSW’s electricity grid, a race dominated by Chinese investors, just as the controversy over a long-dated lease on Darwin’s port also went to interests from China.
 
Advocates of the offshore investors point out any security concerns should have been allayed by the exclusion of Anna Creek from the portfolio. The cattle station overlaps a military facility in South Australia and if a Chinese bidder prevails the property will be offered to one of the members of the sprawling Kidman clan.
 
One source also argued that international owners already control key agricultural assets via their shareholding in the listed Australian Agricultural Company and the unlisted Consolidated Pastoral company, held by British private equity firm Terra Firma.
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