Kidman sale timing questioned

While a notable portion of the extended Kidman family's shareholder base strongly opposes selling the 116-year-old pastoral empire, rural property and agribusiness industry observers say the timing could hardly be better given current international and local interest in beef production.

On the back of much-improved seasonal conditions across much of the Kidman estate and declining exchange rate trends, the sale of Australia's biggest land area - almost 2 per cent of the continent - plus 185,000 beef cattle is sure to attract huge interest, particularly from offshore.

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

Last year speculation emerged about some 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.

Details of the full sale proposal will be released with a tender memorandum by Ernst and Young next month, although many family shareholders are believed to have only agreed to the plan to end ongoing agitation from some within their ranks who are eager to test the market or cash in.

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

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 S. Kidman and Company reported a net operating cashflow of $9.3 million and paid dividends of 20 cents a share worth a total $2.36m.

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 the "Tungali" feedlot in SA; "Helen Springs" in the Northern Territory, and Ruby Plains in Western Australia's Kimberley region.

The entire Kidman business is to be offered for sale by tender as a going concern, including stock, plant and property, with the official line being no consideration has been given to hiving off any holdings for a partial sale.

However, the family's decision to sell is 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 further.

With a big percentage of shareholders still wanting the geographically diverse beef business to continue as a family venture taking full advantage of burgeoning global market opportunities, many are understood to prefer to see the willing seller faction quit the business with an appropriate payout.

Others have taken financial advice with the view to investigating all sale options, including inviting in new equity partners to help expand the operation.

One family member confided that given all signs were pointing to bright long-term future for beef demand and the industry "it's no wonder a decent portion of shareholders are against a sale".

Some feared the healthy business was being unreasonably pushed towards a fire sale.

"Its such a tragedy. After everything Sir Sidney achieved and what he built for Australia, this sale process has come about due to the selfishness of descendants who can't see the bigger picture," the family member said.

Among those at the centre of the storm is former family board director and Adelaide-based company livestock marketing manager, William Abel-Smith, who failed to win majority voter support for his board job at last November's annual general meeting.

Mr Abel-Smith is a strong supporter of the proposed sale.

Company details lodged with the Australian Securities and Investments Commission 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.

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

He said while news of the sale may have come as surprise to staff and the wider community, given the Kidman family's long involvement in the Australian cattle industry, "everybody understands the shareholders have the right to sell the business".

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

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

THE S. Kidman and Company business is owned by 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.

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

The Kidman family's net business worth was last year estimated by Business Review Weekly (BRW) as $364 million (up about $10m on 2013), or number 37 on the BRW Rich Family List, which is led by Victoria's Smorgon family, worth an estimated $2.7 billion.

Descendants are spread across three main Kidman family shareholder groups based in Australia, the UK and US, with prominent shareholders including the Fulham, Wyeroo, Warenda and Kernwood investment groups and individual family names such as Clover, Bourne-Arton, Ayers, MacKinnon, Abel-Smith and Wallman.

But as with many dynastic family businesses there have been differences in the direction certain members have wanted to take the company.

An observer and Queensland beef and grain producer from another of Australia's most famous dynastic families, Tim Fairfax, said he was initially surprised at the Kidman family's decision.

"This would have been a very hard decision," he said.

"However, one should never allow history to rule a commercial and strategic direction.

"I can understand them making this decision, especially when there is such a diverse family shareholding."

The Kidman property portfolio's geographic spread into northern Australia also provides ready access to live export markets and a natural hedge against seasonal variations across the continent.

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 company has described its 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".

Kidman cattle were highly regarded and the company brand was well known at saleyards and in the feedlot sector within Australia and South East Asia.

- with MATTHEW CRANSTON