Cattle kingdom carve-up disharmony

10 Apr, 2015 03:47 PM
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The S. Kidman and Co property portfolio includes Anna Creek Station in South Australia, which at 23,000 square kilometers is the largest cattle property in the world.
The decision to sell has not been unanimous
The S. Kidman and Co property portfolio includes Anna Creek Station in South Australia, which at 23,000 square kilometers is the largest cattle property in the world.

LAST night's announcement of sale plans for the legendary S.Kidman and Company's vast privately owned beef business follows a nasty fracturing in relationships among family shareholders.

A sizeable potion of the extended Kidman family member shareholders is believed to be strongly opposed to the sale or remains undecided at least until the 116-year-old pastoral legacy of former 'cattle king' Sir Sidney Kidman tests the market with a tender memorandum being released next month.

Sir Sidney's descendants, some of whom work for the unlisted company, own 98 per cent of the of the iconic S. Kidman and Company business founded when the former drover and livestock trader took full control of the pastoral enterprise he and his brother had established in the 1880s.

On the back of much-improved Top End seasonal conditions and a lower exchange rate, the sale of Australia's biggest land area - almost two per cent of the continent - and about 185,000 beef cattle, is set to attract huge interest, particularly from offshore investors.

Company officials have not identified any potential front-runners interested in the business, but concede S. Kidman and Company has, like many other Australian agribusinesses, received unsolicited approaches from local and overseas investors in the past 18 months.

Sixteen properties in three States

Kidman's 100,000 square kilometres of pastoral land is spread over 16 properties and out-stations in three States, producing about 15,000 tonnes of carcase beef each year, including about 1.3pc of Australia's boxed beef exports.

Last financial year the company reported a net operating cashflow of $9.3 million and paid dividends of 20 cents a share.

But it recorded a net after tax loss of $1.4m as herd numbers declined 15pc because of tough seasonal conditions to 182,350 head, and their livestock market value fell about $10m to $97.4m.

Kidman's land portfolio includes Anna Creek Station in central South Australia, which at 23,000 square kilometres is the world's largest cattle property.

Other holdings are "Durham Downs", "Durrie", "Glengyle", "Morney Plains", "Naryilco" and the recently acquired "Rockybank" in Queensland; "Innamincka", "Macumba" and "Tungali" in SA; "Helen Springs" in the Northern Territory, and Ruby Plains in Western Australia.

Some properties including the 13,500 square kilometre Innamincka Station in north eastern SA have been in Kidman hands for up to 120 years.

The Kidman business is to be offered for sale by tender in its entirety as a going concern, including stock, plant and property. No indicative price expectations have been released.

Defiant shareholders

The decision to sell has not been unanimous, despite behind-the-scenes lobbying over several years from some shareholders keen to cash in before generational growth dilutes their potential share returns.

Some defiant shareholders insist they are "not at all interested in selling", particularly given the increasingly bright outlook for beef exports from the company's wide spread of strategically accumulated landholdings.

The company has also recently seen notable changes to some family directors' roles at board level, with Adelaide-based company livestock marketing manager, William Abel-Smith, (an executive director) failing to win majority voter support for his position during last year's November 21 annual general meeting.

Mr Abel-Smith is understood to have been a strong supporter of the proposed sale.

Company details lodged with the Australian Securities and Investment Commission (ASIC) show new directors Mark Grimshaw from Koroit in Victoria's Western District and UK shareholder Richard Bourne-Arton from Yorkshire joined the board this year, replacing Mr Abel-Smith and Joanna Clover from the UK, who stood down on December 31.

S. Kidman and Company has 58 family shareholders and shareholder trusts representing immediate family descendants up to five generations deep in the Kidman family tree.

The shareholder base includes families in Britain descended from Sir Sidney's daughter Gertrude who migrated to the UK when she married.

Some descendants of early business partners of Sir Sidney are also on the share register, as are a handful of shareholders whose families had key employment ties with the company.

Last year speculation emerged about family members holding possible part-sale talks with London-based private equity company Terra Firma, which owns the big rival beef cattle business Consolidated Pastoral.

The Adelaide-based Kidman company's official comment about the sale has noted family members wanted to capitalise on the present demand for quality Australian agricultural assets and global demand for beef.

"Many of the family have other existing investments in Australian agriculture and elsewhere and the sale will allow them to convert long-term capital gains into cash to support their other businesses and investments," said managing director Greg Campbell.

"The company is in excellent financial shape, being debt-free with no mortgages over any assets.

"Our business strategy, which was largely set in the early days of the company, has stood the test of time."

Unprecedented opportunity

Until recently bulls servicing the Kidman herd were bred near Condobolin in NSW, but now most of the Kidman herd is bred in outback regions and fattened on the naturally irrigated floodplains of western Queensland's the three big rivers.

The Kidman property portfolio's geographic spread into northern Australia also provides ready access to live export markets.

Company management has described the planned sale as an unprecedented opportunity for an investor to acquire a "well-balanced, large-scale, professionally managed portfolio of genuine blue ribbon Australian cattle properties, and a small slice of Australian history".

Mr Campbell said the quality of Kidman cattle was highly regarded and the company brand well known at saleyards and in the feedlot sector within Australia and South East Asia.

He said considerable effort had been made to inform the company's 170 employees about the proposed sale during the past few days, including those in remote stock camps.

"It might have come as surprise, given the Kidman family's had such a long-term involvement in the Australian cattle industry, but everybody understands the shareholders have the right to sell the business."

The sale tender will be managed by Ernst and Young in Adelaide which will issue an information memorandum with further details on the process next month.

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FarmOnline
Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
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READER COMMENTS

Percy
10/04/2015 11:54:31 PM

Great opportunity for another nation to buy this operation and then split from the rest of Australia to form their own mini nation-state. Or maybe just live export the cattle to the homeland where any profits are made and kept.
stockman
11/04/2015 7:22:28 PM

Why is Australia called a wealthy country when most major property sales are to overseas investors? Are we just kidding ourselves?
Simon
14/04/2015 10:42:34 AM

We don't know! We're still waiting for an urban razor gang to edit our agricultural white paper! #NoAusAgPolicy
outback
14/04/2015 10:45:15 PM

Family fueds. When all this country gets sold, it should only be on 50 year leases. No freehold should be sold to overseas investors.
Bushfire Blonde
22/04/2015 8:34:07 PM

Australia is no longer a wealthy country - it has been ruined by years of labor and finance being far too costly. The world is slowly realizing that it is one of the dearest countries on the planet to live and to operate a business. One thing about these foreign moneyed men coming into the bush is that eventually it will produce plenty of cleanskins for the Little Aussie battlers who have survived operating one of the dearest countries in the world to live in and to operate a business.

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COMMENTS

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Why do they forget the small producers they are the backbone of the industry. What. Did this
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Good these guys will be able to help the farmers they are treating like second class peasants.
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Lets' hope Troy Grant doesn't Delforce's website or it will be yet another NSW