Chapman Eastway featured in the AFR again this week discussing the importance of good governance for publicly listed companies and the limitations of sharehold er agreements on business freedom.
Read the full article here.
Spare a thought for the shareholders of Australia’s largest private landholder, S.Kidman & Co, who are hearing yet again of another $400 million bid for their cattle grazing empire in a sale process that has been dragged out for almost 18 months.
The shareholders – more than 50 of them – have had to endure countless political plays and a painstaking vetting process by Ernst & Young of all sorts of ragtag and genuine bidders, extending the pain of what must be one of the longest transactions in cattle station history.
The country’s richest person, Gina Rinehart, and her Chinese co-investor offered $365 million earlier this week, reigniting the sensational politics and foreign investment concerns.
The Kidman board has agreed to Rinehart’s bid but is open to superior proposals including, when they eventually transpire, from major rural families such as the Brinkworths, Buntines, Harris’s and Oldfields, and now even financial planners representing up to 50,000 superannuation funds.
But while all this plays out the Kidman board, the shareholders and descendants of Sir Sidney Kidman, along with the station managers and even the man in charge of selling the company, have all been gagged from talking.
For the family there is a good reason for that.
The so-called Kidman family, though none of them bear this surname anymore, is 33 per cent foreign based, and, like just about every big rural family, their private disputes and differences are not helped when splashed across the country’s newspapers.
Several reluctant Kidman descendants vehemently opposed the original plan to sell the company.
There is a slight problem for the Kidman business when it comes to privacy, though.
With more than 50 shareholders Kidman is classified as a public company, which means it is subject to a similar amount of corporate reporting and governance to that of a listed company.
When public interest and debates over foreign investment, national security and federal politics are running hot, companies like Kidman with profoundly symbolic names and assets are prized targets.
The strange thing is that S. Kidman’s landholding is not even freehold land. More than 98 per cent of it is pastoral lease from the federal government and the majority of leases expire in 44 years.
Furthermore, it’s not even “prime” agricultural land. Huge tracts of the land holding are partial desert and the productivity of much of the land can only be captured after the short summer rainfalls.
Yet those facts have not wavered the public attention.
One board member, speaking on condition of anonymity, says the sale process had been very difficult for family members. “It’s been a traumatic experience for some of our shareholders,” the director says.
“They thought they had a sale but then they didn’t.”
Close the deal
S.Kidman’s managing director, Greg Campbell, says the Kidman family is looking forward to being able to complete the sale of the business.
“It will finally enable current shareholders to recycle capital back into their own business and agribusiness ventures. Australian-based businesses owned by Kidman family shareholders operate in sectors including farm inputs, commercial fishing, dairying, prime lambs and intensive commercial cattle.”
For many big rural family businesses this is where it can often come unstuck.
Chapman Eastway’s Anthony Ryan, who advises major farming families on succession in Australia, says the hardest thing with such big sales is how to enact the family law provisions of equity.
“When the assets are too big the succession plan can fail,” Cortis says. “We think this could happen a lot over the next 20 years.
“Shareholder agreements can be too proscriptive, old, difficult documents so what often becomes the problem is about the way shareholders agree on making decisions.”
Chapman Eastway’s Sean Cortis says this is where the importance of governance comes into the equation.
“Wealthy Asian families have taken to listing their family business. There is strong empirical evidence that good governance increases shareholder value and so that governance should be applied to family businesses.”
For S.Kidman & Co the privacy is likely to come soon with Rinehart’s bid likely to trump rivals and give the family much-needed closure to a long-running saga.
Kidman managing director Greg Campbell says it will be over next year. “The shareholders are hopeful of a sale concluding by early 2017.”
Read more: http://www.afr.com/business/agriculture/a-long-road-for-the-skidman–co-family-succession-plan-20161012-gs0c70#ixzz4NInjoNFR
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