Crunch time in Crafar farms saga

JOHN HARTEVELT

The sale of the Crafar farms to a Chinese global conglomerate could be sealed as early as today, with the state-owned Landcorp poised to run the 16 farms for its new Shanghai business partners.

A rival group, led by Kiwi businessman Sir Michael Fay, heads to court today in a bid to block the sale.

But ministerial approval for the Shanghai Pengxin bid is expected today or tomorrow, handing the multibillion-dollar conglomerate 8000 hectares of North Island farmland if it can strike a deal with Landcorp to manage the farms.

The Fay group, which has had its bid for the farms declined by receiver KordaMentha, would probably keep up its legal fight if the Pengxin bid was finally approved today. The Chinese bid may also hang on Landcorp agreeing on a deal with Pengxin to manage the farms.

If a Landcorp board meeting on Monday decided against managing the farms for Pengxin, the Chinese could be out of the running and Landcorp itself back in the fray as a possible buyer. Pengxin could also lose out if ministers do not make their call today and blow a January 31 deadline set by KordaMentha for Government approval of the bid.

Landcorp chief executive Chris Kelly said last night that despite the "extremely busy" timeframe, a deal to manage the farms under Pengxin ownership was "a good commercial opportunity".

It is understood Pengxin has been conditionally approved to buy the farms, and management by Landcorp is thought to be among the conditions.

"We are in play, as we speak, doing due diligence on those farms," Mr Kelly said. "We will then attempt to enter into a management contract. If we can't, then that's the end of the story. It's extremely busy, but we've been asked by Pengxin to do our best and that's what we'll do."

There was minimal risk to Landcorp in the deal. The only capital investment was likely to be in farm equipment and stock, which could all be absorbed back into the business if things fell apart.

New commercial opportunities in China could also open up later on as a result of the deal, Mr Kelly said.

Investigations into Pengxin are believed to have shown it to be a reputable trader with access to cheap credit from the Chinese Government.

"They're not a Mickey Mouse outfit. What they're doing is, without any question, advancing Chinese Government policy," a source familiar with the company said.

Pengxin's application to the Overseas Investment Office says the company is "targeting the farms being within the top 10 per cent in terms of performance in productivity and sustainability measures".

Mr Kelly said he thought it was "unlikely" that Sir Michael's bid would be successful, but the consortium will be in the High Court at Wellington today arguing a statement of claim to try to force a judicial review of the Pengxin decision.

There have been suggestions that the Fay group could also benefit from ministers blowing the January 31 deadline, which could nullify the Pengxin bid.

Prime Minister John Key yesterday said the deciding ministers – Maurice Williamson and Jonathan Coleman – would have the deadline "in mind" but he refused to say if they would meet it.

Labour leader David Shearer, who visited one of the Crafar farms yesterday, said he supported the Fay-led bid, which included iwi interests.

"My feeling is that New Zealanders should be able to buy their own land and we should at least give them the first option to be able to buy it," Mr Shearer said.

"With the sale to Pengxin you will have foreign owners and Landcorp effectively running the farms, which means we will be tenant farmers in our own land."

WHAT THE POSSIBILITIES ARE

The Pengxin bid is accepted and Landcorp agrees to run the farms.

The Pengxin bid is accepted but Landcorp declines to agree to run the farms, effectively scuttling it.

There is no ministerial decision before the receiver's January 31 deadline and the Pengxin bid fails, opening the way for the Sir Michael Fay-led syndicate to lead renewed bidding for the farms. Landcorp would probably re-enter the bidding with an improved offer in this scenario.

Ministers fail to meet the January 31 deadline, but the receiver extends its deadline, keeping the Pengxin bid alive.

The Pengxin bid is declined by ministers, despite OIO approval.

WHAT IS PENGXIN?

Pengxin Shanghai is a Chinese conglomerate, set up 1997. It has interests across more than 40 subsidiaries worldwide in real estate development, mining, infrastructure and agribusiness. Its total assets are worth more than $2.46 billion.

Pengxin is believed to receive discounted credit from the Chinese Government.

In New Zealand, Pengxin is behind Milk New Zealand Holding. Director of the company is Zhaobai Jiang, one of China's wealthiest businesspeople.

- © Fairfax NZ News