Open & transparent sale process for foreign investment

Australia is ideally placed to become a premium food supplier in the global food demand boom. Australia is always keen to attract investment but what do these new regulations mean for overseas investment?

The Australian Government revealed it’s new regulations in the latest stance to increase scrutiny in foreign investment in Agriculture.

The rationale has been based on “what’s in the national interest” and the discussion should be more around “Isn’t it in the national interest to enable more foreign investment?”

In many ways, Australian agriculture is still developing and evolving, and investment structures and vehicles are one area that comes to mind. There is no doubt we need more foreign investment into agribusiness more broadly in Australia if we are to take the opportunities that the global community offers.

As at June 2017, overseas entities owned 13.6% of all agricultural land in Australia, largely through leasehold interests, with the UK being the largest investor, followed closely by China.

It is unlikely the new rules will do much to reestablish a level playing field with a determined foreign buyer sitting out the 30 days before offering as much money as before but will slow down any private transactions.

New regulations in place from February 2018 state that Australian agricultural properties worth more than A$15 million have to:

• public marketing/advertising was undertaken for the sale of the property, using channels that Australian bidders could reasonably access (e.g. advertised on a widely used real estate listing site or large regional/national newspaper);
• the property was marketed/advertised for at least 30 days; and
• there was equal opportunity for bids or offers to be made for the property while still available for sale.

Prior to being offered to potential overseas suitors.

Exceptions to this requirement include acquisitions where the applicant:

• is acquiring a property via a private sale that was marketed/advertised in the above manner in the last six months but did not sell or where the sale fell through; or
• has a substantial Australian ownership share (i.e. 50 percent or more), as this constitutes an opportunity for Australian bidders, despite a foreign ownership share.
• is required to make the acquisition to comply with state or commonwealth law e.g. mining buffer zones.

What does this mean for sellers?

Angst and inconvenience for a number of sellers (many of whom are Australian farmers). Many families and corporate property-owners have genuine reasons for wanting to keep a transaction private, ranging from privacy and reputational issues to political and timing considerations. Sellers wanting to stick to a private process may have to exclude foreign bidders, and perhaps achieve a lower price for their asset.

Foreign buyers, meanwhile, won’t see much point in making unsolicited bids, some of which have rewarded sellers generously in the past.
More information can be found at the Australian Government FIRB website or contact Impact Ag to discuss your investment opportunities.