Landcorp signs Crafar farms deal

20:25, Jan 30 2012

Landcorp has lost its last chance to own the Crafar Farms after its board yesterday signed a deal to run the 8000 hectares of dairy farming land for a Chinese conglomerate.

Had Landcorp opted out of the deal, it may have scuppered the Shanghai Pengxin bid and opened the way for the state-owned enterprise to re-enter the race for ownership of the farms.

Landcorp's board yesterday calculated it could miss out on a slice of the farms altogether if it failed to back the Chinese bid.

"It's possible Pengxin could have partnered with another New Zealand organisation and still applied and still bought the farms with the same money, in which case not only would we not have bought the farms but we would have been out of everything totally," Landcorp chief executive Chris Kelly said.

Ministers approved the sale of the 16 Crafar farms to Shanghai Pengxin late last week, conditional on a deal being struck with Landcorp to run the farms. The Government has been criticised for agreeing to the sale, but insists it was simply following the law.

Under the terms of two agreements signed by Landcorp yesterday, a joint venture farm management company will be set up with directors from Landcorp and Shanghai Pengxin as well as one independent director.

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Landcorp will get a share of the milk cheque from Fonterra and its staff will run the farms.

The two parties have been in talks since September, when an agreement was signed to pursue the deal finally reached yesterday.

Since the farms went in to receivership in October 2009, "a minimum amount of money" had been spent keeping the farms ticking over, Mr Kelly said.

"It is fair to say the farms are reasonably tired and do need upgrade. Within five years, they'll be quite different farms to what they are now."

He had not been surprised or concerned by public reaction to the deal.

"New Zealanders feel the way they do. I'm quite agnostic as to who happens to own these farms – we've just been given the opportunity to run them and it just so happens to be the Chinese," Mr Kelly said.

Prime Minister John Key yesterday defended the deal, saying any further changes to foreign ownership laws would be a "knee-jerk reaction". However, the Government would reconsider if sales accelerated and public concern grew.

Mr Key and the Overseas Investment Office have suggested that declining the Chinese bid could have compromised the free trade agreement with China, which was signed under Labour in 2008.

Labour finance spokesman David Parker said the FTA did not affect New Zealand's ability to turn down foreign applications for land sales.

"The FTA does not mean that China or New Zealand gave up control of investments in their countries."

The Dominion Post