Chinese given nod to buy disputed Crafar dairy estate

ANDREA FOX

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A "tired" Crafar farm on the southwestern edge of Hamilton city is one of the more challenging in the dairy farming estate that Landcorp looks set to manage for its Chinese buyer.

After a nine-month wait for a decision, Shanghai Pengxin has been given the Government all-clear to buy the 16 in-receivership North Island Crafar farms - but only if it reaches a formal agreement with the state-owned enterprise Landcorp to manage and operate them.

New Zealand's biggest corporate farmer and the Chinese property development and agribusiness company say they expect to cement their "strong understanding" with formal agreements in the next few days.

In addition to a "challenging" 370 hectare peat-based farm in Collins Rd out of Melville, which is susceptible to drought and heavy weather, in the Waikato region Landcorp would be managing two farms at Bennydale, south of Te Kuiti, a 205ha farm at Atiamuri and a 750ha property north-east of Taupo, it said.

The rest of the farming empire, the biggest family-owned dairy farming operation in New Zealand before the Crafar family of Reporoa near Rotorua lost it to their financiers and receivers in October 2009, is scattered through Taranaki, Whanganui, Central Plateau and Manawatu.

Landcorp chief executive Chris Kelly said if management agreements were settled for the 15,000-cow, 70-staff estate, Landcorp would operate 50/50 sharemilking arrangements.

One of a swag of Government conditions is that Pengxin put at least $14 million into helping Landcorp upgrade the farms. Asked how he would describe the condition of the farms, which Pengxin is set to buy for more than $210m, Mr Kelly said: "The Crafar farms were not the most picture-perfect farms, but the receivers have been in a difficult position. It hasn't been their capital they've been playing with, so they've pretty much managed the farms on the status quo."

The Collins Rd farm, for example, was "pretty tired."

Crafar receiver KordaMentha has collected more than $6m in fees at lastest count last year, while lawyers have notched up more than $4m.

But the two-year saga is not over despite Government consent, with legal challenges ahead next week.

It was also revealed yesterday that Pengxin head Zhaobai Jiang has another purchase already lined up and being considered by the Government.

The OIO is processing a bid from Mr Jiang as part of a joint venture trying to buy "development land" in New Zealand.

Spokesman for Milk New Zealand Cedric Allan said Mr Jiang's other planned investment was "nothing to do with farming" and worth much less than the Crafar deal.

"It is a real estate development and I can't possibly imagine it would be controversial in any way – but that's just my view," Mr Allan said. "What it illustrates is the company has a genuine interest in New Zealand. Zhang Jiabao really loves the country and he's made a good number of visits out here. They have a continuing interest in opportunities in New Zealand and this is one of them. But it's a million miles away from the Crafar Farms."

An application for the real estate purchase had been with the OIO "for some time", Mr Allan said.

"I don't believe the second one is going to raise any eyebrows. It's just a particular property being purchased with a view to being further developed – it's as simple as that."

Mr Jiabao – the 99 per cent shareholder of the company that holds Pengxin – is already registered as a director in two New Zealand companies. He is a co-director with Auckland man Terry Lee, a personal friend, in Nature Pure Ltd. Mr Allan said Mr Jiabao liked to holiday in New Zealand but he did not think he owned property of his own here.

The Crafar purchase was described by the OIO as the start of Pengxin's planned dairy operations in New Zealand.

"It [Pengxin] intends to identify New Zealand dairy processing and development operations which may be appropriate for partnership type arrangements," the OIO recommendation said.

Since all of the legal requirements were met in the bid, a denial would be "likely to send a negative message about New Zealand's attitude towards Chinese investment" and about its commitment to the free-trade agreement with China.

Mr Key said overall foreign ownership in New Zealand farmland was about 1 per cent, but the Campaign Against Foreign Control of Aotearoa (Cafca) said the proportion of productive land held by foreigners was as high as 7 per cent.

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