The Government has vetoed plans by one of Asia's richest men to buy a giant ironsands business in a $250 million deal.
The new Government, which had criticised the Labour administration's decision to block a partial takeover of Auckland airport, sandbagged the deal because of a lack of "substantial and identifiable benefit" to New Zealand.
Australian firm BlueScope Steel owns the business - and says it is considering its legal position after Finance Minister Bill English blocked the sale.
BlueScope had planned to sell the Taharoa ironsands business, south of Auckland, to a company controlled by Hong Kong multibillionaire Li Ka-Shing.
The failed deal could be heading to court after government intervention.
BlueScope said it had received notice from Cheung Kong Infrastructure, controlled by Mr Li, "purporting to cancel the sale and purchase contract".
"BlueScope is considering its position, including its legal position, and will keep the market informed," the Australian steel giant said last night.
Business sources suggest the deal was blocked because of a slump in the world steel market rather than for "national interest" reasons.
Others suggested the move may have been influenced by Maori.
Maori Party co-leader Pita Sharples, who has repeatedly raised concerns about the business operation in Parliament, said his party welcomed the veto but had not lobbied for it.
Cheung Kong bought the Wellington electricity network from New Zealand company Vector in April for $785 million.
Nine months ago National criticised the former government for barring a part takeover of Auckland International Airport under a "national interest test".
A foreign shareholding in strategic assets has to materially benefit New Zealand under regulations Labour introduced early this year.
Mr English said the planned deal had been refused because Cheung Kong Infrastructure Holdings plans did not meet Overseas Investment Act criteria of "substantial and identifiable benefit" to New Zealand.
He said the criteria could not be met because of "current global economic conditions affecting the business operations of the proposed investment".
The Overseas Investment Office said Cheung Kong originally planned to expand the ironsands business.
"However, given the reduced demand for the product [iron sands] and the deteriorating global economic conditions, CKI has come to the decision that plans to expand the business are no longer viable," the OIO report on the decision says.
A business source said foreign investors would do a "double-take" on the decision and raise further concerns about investing in New Zealand following the veto on the Auckland airport deal. "This means a lot more uncertainty [about government decisions]," the source said.
Some Taharoa Maori elders said in September that they were upset the $250 million deal had been agreed without consulting residents.
Peter Bowker, secretary of Maori Incorporation Taharoa C Block, said kaumatua had previously voiced concerned as they wanted to know more about what was happening. In the past Mr Bowker has said there could be major benefits from the sale.
In 1972, Maori Incorporation Taharoa C Block leased the ironsands site to New Zealand Steel for 70 years. BlueScope later bought New Zealand Steel mills and the ironsands lease.
Last night Cheung Kong said it "fully respects" the decision of the Overseas Investment Office and the Government.
It said it would still look for more investments in New Zealand and elsewhere.
- The Dominion Post
Would you cast a tactical vote against your preferred party?Related story: Fringe parties look for deals