Crafar farms sale to Chinese group approved

JOHN HARTEVELT AND ANDREA FOX

The successful Chinese bid for the Crafar farm estate "well and truly exceeded'' all the Government's conditions for a purchase, Prime Minister John Key says.

Government ministers this morning confirmed approval for the sale of the farms to Shanghai Pengxin. Land Information Minister Maurice Williamson and Associate Minister of Finance Dr Jonathan Coleman said they had accepted the recommendation of the Overseas Investment Office (OIO) to grant consent to Milk New Zealand Holding, a subsidiary of Shanghai Pengxin Group, to acquire the 16 Crafar farms.

Key said the OIO had "quite clearly corrected interpreted the legislation.''

''This is a positive move for those particular farms - as we can see from the bid, there will be significant investment made," Key said.

Key said he "wouldn't want to see enormous tracts of land sold regularly, week after week after week" but that was not the case in New Zealand at the moment.

''I think we should see this for what it can be, which is a positive for some farms that were very badly run in New Zealand, that didn't meet environmental conditions and were in [receivership].''

Key said he expected ''some concern and apprehension'' from the public over the sale.

''But I think that is true whenever a farm is sold to foreign interests. ... Actually as a country, we need foreign investment to grow.''

''We're a country that's capital strapped, we're always going to have some investment from foreigners.''

Key batted away criticism from Labour leader David Shearer and New Zealand First leader Winston Peters, who he said was ''in a state of denial''.

However, former owner Allan Crafar said the sale broke the Government's rules and he has predicted more legal action ahead.

A condition of the sale is that a joint venture company to be owned 50/50 by the Chinese and Landcorp would develop and manage the farms.

The majority of the planning, budgeting and reporting relating to the farms would take place within the joint venture company and Landcorp would operate the farms, providing operational services and advice.

Landcorp would also manage the disposal and acquisition of properties for the Chinese and undertake capital expenditure on its behalf.

Among other special conditions included in the OIO's decision, which it will police, were that Milk New Zealand must:

* Invest a minimum of $14m or more in the properties. This excluded the cost of buying shares in Fonterra and had to be completed by 2017.

* Not buy or have a controlling interest in milk processing facilities in New Zealand unless 50 per cent or more was held by a New Zealand resident.

* Shanghai Pengxin would also employ two New Zealand directors and appoint an independent chairman to the board of Milk New Zealand.

* Establish an on-farm training facility for dairy farm workers by 2014.

* Give two scholarships of not less than $5,000 each year to students of the on-farm training facility. The first two scholarships were to be awarded by 2014.

* Help Landcorp to extend its business and market its products in China.

* Provide public walking access to a number of areas on the properties.

Crafar said this morning he had not given up trying to buy back the farms from the receivers and "someone in an office in Wellington putting a ballpoint pen through our lives" will not deter him.

"We are in the position to offer as much as the Chinese."

The Crafar farms have been in receivership for more than two years.

"There will be other actions, I don't believe this is going to happen," said Crafar.

"It's pretty disappointing that the Government can bow to this sort of [political] pressure, they are breaking their own rules."

LONG ROAD

Shanghai Pengxin says it is "just delighted" to have been given the Government's consent.

"It's been a long long road and certainly much longer than we anticipated when we set out, but the plus side after nine months is that the Overseas Investment Office have done a very thorough job and a scrupulously fair job. They really put us through the hoops," said Cedric Allan.

Pengxin has agreed not to sign for the purchase with receivers KordaMentha until next Friday when a legal challenge by rival a bidder led by Sir Michael Fay would have been heard by the High Court.

But the company was "very relaxed" about next week's court proceedings, Allan said.

Fay's group has filed proceedings seeking a judicial review of the OIO's decision.

Allan said Pengxin had agreed to give Fay's group breathing space to seek the review in the interests of making  sure "everyone" has an opportunity to look at the decision.

"We want everyone to be happy with the decision."

The Crafar Farms Purchase Group, led by Fay, called today's decision "wrong in law."

If the decision was not overturned by its High Court action, it "sets up open season" for any foreign buyer wanting New Zealand land, a group spokesman said.

Fay's group has offered $171.5 million for the 16 dairy farms, a bid rejected by receivers KordaMentha as too cheap compared to Pengxin's preferred offer of $210 million-plus.

BENEFITS FOR NEW ZEALAND

Manager of the OIO Annelies McClure said the sale of New Zealand farm land was "a sensitive topic that many New Zealanders feel very passionate about".

"Consent will only ever be granted for investments that will benefit New Zealand and meet the requirements of New Zealand's investment laws," McClure said.

The OIO felt that Landcorp's involvement made it more likely that the expected benefits would occur.

The approval follows the receivers, KordaMentha's acceptance in late 2010 of Milk New Zealand's bid for the farms.
 
The sale to Shanghai Pengxin would "further support the supply of high quality dairy products" in to the Chinese market and help set the foundations for further economic and export opportunities with China, Williamson said.
 
"Stringent conditions" would ensure that Milk New Zealand's investment led to "substantial and identifiable benefits to New Zealand".

More than $14m would be invested into the farms making them more economically and environmentally sustainable.

The Nga Herenga and the Te Ruaki pa sites would also be protected and there would be improved walking access to the Pureora Forest Park and Te Rere falls.  An on-farm training facility for dairy farm workers would also be established.

No other Chinese investors have bought farmland in New Zealand in the last two years. American (25,306 hectares), British (22,600 hectares) and Swiss investors (9,727 hectares) had been responsible for some of the 357,056 hectares of agricultural land approved for sale in the past two years.

The central and southern North Island farms making up the Crafar estate were the biggest family owned dairy farming enterprise in the country, when the Crafar family's bankers and financiers called in the receivers in October 2009.

The sale of the 16 farms represents 7892 hectares of farmland around the North Island.

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