Australia on Thursday blocked the sale of one of the world's largest cattle estates to foreign entities, ruling it was not in the national interest with part of the holdings in a weapons testing area.

S. Kidman and Co Ltd, Australia's biggest private land owner, is on the market with Chinese companies Genius Link Group and Shanghai Pengxin reportedly in a bidding war to secure the sprawling pastoral empire for up to Aus$350 million ($249 million).

But amid concerns about valuable agricultural and mineral assets passing into foreign hands, Treasurer Scott Morrison said he would not authorise any sale to overseas investors.

"Consistent with the recommendation from the Foreign Investment Review Board, I have decided that the acquisition by foreign investors of S. Kidman and Co. Limited would be contrary to the national interest and shall not be authorising the sale to proceed as currently proposed," he said.

Kidman, founded in 1899, holds around 1.3 percent of Australia's total land area, and 2.5 percent of the nation's agricultural land. It is a key source of beef for export to Japan, the United States and Southeast Asia.

The company has 10 cattle stations, including properties across regional South Australia, Western Australia, the Northern Territory and Queensland covering 101,411 square kilometres (39,155 square miles) -- an area larger than South Korea -- with a herd of 185,000 cattle.

One of them, Anna Creek, is the largest single property holding in Australia -- bigger in size than Israel -- and around 50 percent of its pastoral lease is located in the Woomera Prohibited Area (WPA) weapons testing range in South Australia.

Morrison said his decision was based on the size and significance of Kidman's total portfolio along with national security issues around access to the WPA, which has been used to test nuclear bombs, launch satellites and track space missions.

"Australia welcomes foreign investment where it is consistent with our national interests," he said, adding that he had communicated his decision to bidders and they had withdrawn their Foreign Investment Review Board applications.

- Surprise outcome -

Kidman managing director Greg Campbell said he was surprised by the decision and was seeking clarity around the government's concerns and the deal's parameters.

"To be honest I didn't think this would be the outcome," he told national radio.

"The Kidman family have been patient investors in the Australian cattle industry for 116 years and what we find this morning is that they're not at liberty to accept the best price for their business."

Earlier this year, Australia announced plans to tighten scrutiny on overseas purchases of farmland, with any bid by a foreigner that brings their cumulative farmland investments to more than Aus$15 million to be screened by the national regulator.

Previously, the Australian Foreign Investment Board only screened foreign investment for purchases of agricultural land over Aus$252 million.

The move followed warnings from politicians with rural constituencies against selling farming land to foreigners, including to Australia's top trading partner China, amid concerns about the nation's food security.

A study by the Rural Industries Research and Development Corporation in early 2012 showed 11 percent of farming land was foreign-owned, a level little changed in 30 years although there has been a spate of more recent purchases by overseas entities, notably from China.