CORPORATE beef producer S. Kidman & Co has entered into a Bid Implementation Agreement with a consortium comprising Dakang Australia Holdings, whose major shareholder is Shanghai Pengxin Group, and ASX-listed Australian Rural Capital Ltd.
The announcement ends months of speculation about Kidman’s future, and its likely purchaser.
According to a statement issued yesterday, Dakang Australia and Australian Rural Capital have committed to make a takeover offer to acquire 100pc of Kidman shares, offering Kidman shareholders A$31.38 per share, valuing Kidman at A$370.7 million. Under the deal, Dakang will control an 80pc stake and its Australian partner, ARC, 20pc. ARC has already confirmed to Beef Central that its capital raising will take place within Australia.
The offer is conditional on Foreign Investment Review Board approval, as well as various other conditions and regulatory approvals.
S. Kidman & Co currently operates 10 cattle stations, a bull breeding stud and feedlot covering 101,000sq km across regional South Australia, Queensland, Western Australia and the Northern Territory.
Kidman chairman John Crosby said the company was pleased to have reached agreement on the sale terms with the consortium as its preferred bidder.
“The consortium and Kidman have complied with all requests that have been made by the FIRB and we believe the sale will secure the long-term future of the Kidman enterprise,” Mr Crosby said.
“We believe Dakang Australia and ARC will be good custodians of the business and this transaction will provide a solid platform for growth and, at the same time, an opportunity for Australians to participate in Kidman’s future.”
“The significant investment proposed by the consortium will see an increase in production and the expansion of international markets for Kidman beef, the majority of which is already exported,” he said.
“The Kidman board will recommend that Kidman shareholders accept the consortium’s offer subject to there being no superior proposal, the Independent Expert concluding that the offer is both fair and reasonable and the transaction being permitted to proceed under Australia’s foreign investment legislation.”
ARC is listed on the ASX and specialises in rural investments. Its executive chairman, James Jackson, is also deputy chair of Elders Limited, and a former director and chairman of ASX-listed MSF Sugar.
Gary Romano, a Director of Dakang Australia said his company was delighted to have ARC as its partner, given its expertise in the local agriculture sector and the opportunity it will provide Australian investors to participate in the Kidman business.
James Jackson, for ARC said: “This will be an excellent opportunity for Australian investors to participate in the growing international demand for Australian beef in partnership with committed co-investors with significant supply chain experience in Asian markets.”
“Our ambition is for Kidman to become an even stronger player in Australia’s beef cattle sector, and transform it into a truly global brand for beef and related products, underpinned by a proud Australian heritage and outstanding operating capabilities,” he said.
Anna Creek excised from deal
Anna Creek station in South Australia will not be included in the deal, this afternoon’s statement confirmed.
The entry into a BIA by Kidman with the Consortium follows an extensive campaign by Kidman to secure a transaction that the board considered to be in the best interests of shareholders and all Kidman stakeholders, it said.
The shareholders of Dakang Australia are Hunan Dakang Pasture Farming Co Ltd’s (Dakang Pasture Farming) wholly-owned subsidiary, Dakang (HK) Holdings Ltd; holding 51pc and Shanghai CRED Real Estate Stock Co Ltd (CRED) holding 49pc. Dakang Pasture Farming is listed on the Shenzhen Stock Exchange and has a market capitalisation of A$3.75 billion.
Dakang Pasture Farming’s major shareholder is Shanghai Pengxin Group (Pengxin) which owns 55pc of the company. The unlisted CRED is privately held and is one of the largest real estate developers in Shanghai, with an increasing focus on international investment.
Mr Romano said as long-term investors, Dakang Australia and ARC were looking forward to the opportunity to make a great Australian business even better, and to partner in the future prosperity of the States and Territory in which Kidman operates as well as the national economy.
“The Consortium is supportive of the current strategy and direction of Kidman and intends the business to be continued in its present form with the new owners providing opportunities to grow the business, both within Australia and ultimately internationally,” he said.
“We expect to be working very closely with the existing Kidman management and drawing on the commodity and trading expertise of ARC to realise the full potential of the business.”
He said the consortium had an initial investment plan over the first 12 months totalling A$46.3 million comprising capital improvements and restocking on existing Kidman properties.
Beyond this, a five-year strategic plan will be formulated with Kidman management to determine priority investment areas for the business.
“We intend to continue investing where it is required to improve productivity and performance, apply our insights into the rapidly growing Chinese market, and bringing proven know-how in the development of integrated supply chains and marketing models,” Mr Romano said.
As Dakang Pasture Farming and Pengxin have demonstrated in their New Zealand dairy operations, the group had the ‘capability and willingness’ to work with Kidman’s management team to grow the business, this afternoon’s statement said.
“With the benefit of shareholders who are committed to long and productive partnerships, we hope to increase both Kidman’s export and domestic capacity and generate additional regional employment,” Mr Jackson said.
A major consideration for the consortium in framing its proposal to acquire Kidman was a clear recognition of the skills and experience of the Kidman management and employees who have driven its success to date, the consortium said.
“We are respectful of the heritage of Kidman and intend that the business be continued in its current form, informed by a strategic review to be completed post-transaction. The core values of integrity, excellence and safety and a commitment to positive environmental and animal welfare outcomes are shared across the consortium, with strong commitments to people, communities, customers and sustainability.”
The consortium intends to retain the Kidman head office in Adelaide, where the company has had a long connection.
According to today’s lengthy and legal jargon-heavy statement, the offer is subject to a number of conditions, including:
- A minimum acceptance condition of 90pc of current Kidman shareholders
- Obtaining necessary regulatory approvals in Western Australia and South Australia in relation to the change of control of certain pastoral leases
- No objection from the Treasurer, under the Foreign Acquisitions and Takeovers Act 1975
- Obtaining certain Chinese regulatory approvals
- Completion of the divestment of the Anna Creek station by Kidman
- Approval of the deal by shareholders of Dakang Pasture Farming and ARC
- No ‘Superior Proposal’ being received by Kidman that is recommended by the majority of the Kidman board of directors; and
- No ‘material adverse change’ in relation to Kidman (i.e. its value changes due to unforeseen circumstances).
The consortium said it would declare its offer unconditional when the last of the offer conditions is satisfied or waived.
The Kidman board is now awaiting the Independent Expert’s Report on the cash offer and will meet shortly to consider the Target’s Statement.
The Treasurer has signed an interim order extending the period during which he can consider the Consortium’s proposed acquisition of Kidman for 90 days from the date that the interim order is published in the Commonwealth Gazette, which is expected to be on or before 26 April.
The deal is expected to be finalised by August 5.
Source: Joint statement issued by S. Kidman & Co, Dakang Australia, Australian Rural Capital.