On 19 November 2015, Scott Morrison, Treasurer of Australia announced that he would not authorise the proposed acquisition by foreign investors of S. Kidman and Co. Limited. Mr Morrison stated that he would not be authorising the sale to proceed as currently proposed on the basis that the sale was contrary to the “national interest”. Mr Morrison indicated that the factors that he had taken into account in considering the “national interest” included the size and significance of the total portfolio of Kidman properties along with the national security issues around access to the Woomera Prohibited Area (WPA). Mr Morrison’s decision was consistent with the recommendation from the Foreign Investment Review Board (FIRB).
Under the Foreign Acquisitions and Takeovers Act 1975 (Cth), all foreign investment applications are examined against Australia's national interest. FIRB Policy describes the ‘national interest’ assessment as a mechanism for the Government to balance potential sensitivities against the benefits of foreign investment on a case-by-case basis. Under FIRB policy, the “national interest” test takes into account a range of factors, including the following:
In his announcement, Mr Morrison indicated that he had taken into account the following matters:
One of Kidman's stations, Anna Creek, is also the largest single property holding in Australia.
Importantly, around 50 per cent of the Anna Creek pastoral lease is located in the [WPA] in South Australia.
The WPA weapons testing range makes a unique and sensitive contribution to Australia's national defence and it is not unusual for governments to restrict access to sensitive areas on national security grounds.
Given the size and significance of the total portfolio of Kidman properties along with the national security issues around access to the WPA, I have determined, after taking advice from FIRB, that it would be contrary to Australia's national interest for a foreign person to acquire S. Kidman and Co. in its current form.
Kidman is Australia's largest private land owner and holds approximately 1.3 per cent of Australia's total land area, and 2.5 per cent of Australia's agricultural land. Kidman owns and operates 10 cattle stations, including properties across regional South Australia, Western Australia, the Northern Territory and Queensland. Those cattle stations cover approximately 101,411 square kilometres and manage a long-term average herd of approximately 185,000 cattle.
Mr Morrison has noted that following communication of his decision to all bidders to acquire S. Kidman and Co. Limited have elected to withdraw their FIRB applications prior to his Final Order being formalised.
Mr Morrison has indicated that he will now “consider any such future alternate proposal or set of proposals on its merits, consistent with his obligation to ensure that, any such sale is on terms that are not contrary to the national interest.” It will now be a matter for the vendor to consider how they propose to proceed with offering the composite interests of S. Kidman and Co. Limited for sale.
Mr Morrison reiterated that “Australia welcomes foreign investment where it is consistent with [its] national interests.”
Author: Trent Taylor
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Trent Taylor, Partner
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Published by Trent Taylor