By James Murray
A bid for Crafar Farms by the Chinese Shang Hai Pengxin Group Co. Limited has been accepted by Land Information Minister Maurice Williamson and Associate Minister of Finance Dr Jonathan Coleman.
The move follows the recommendation of the Overseas Investment Office (OIO) to grant consent.
"It is clear that all criteria under sections 16 and 18 of the Overseas Investment Act 2005 have been met, therefore we accept the recommendation of the OIO to grant consent," Mr Williamson said.
The 16 farms will be bought by Milk New Zealand Holding Limited, a subsidiary of Shanghai Pengxin.
Pengxin is owned by Nangtong Yingxin Investments, a Chinese company owned 99 percent by Zhaobai Jiang, reportedly the richest man in China.
The OIO decision says Zhaobai Jiang does not want to build or own milk processing plans but may invest with joint venture partners in expanding capacity, and intends to increase production at the Crafar farms through heavy investment in the first two years.
According to the Government, the acquisition will “further support the supply of high quality dairy products into the Chinese market and help set the foundations for further economic and export opportunities with China”.
The decision to grant consent is controversial with a New Zealand-owned bid by a Sir Michael Fay-led consortium currently going through a court process seeking to block the sale.
They were in court yesterday but no orders were given as the two sides had reached agreement on three issues.
Belly Gully lawyer David Cooper, representing the Fay consortium, said the application for approval had been provided to his client and the OIO's recommendation made to the ministers would be made available when the decision was made.
It had been agreed with Pengxin's Milk New Zealand Holdings that it would not take steps to settle the transaction before 5pm on Friday, February 3.
The Fay consortium still intends to seek a judicial review if the Chinese consortium gets approval.
However, The $171.5 million bid from the Fay-led consortium, including Maori trusts, is believed to be some $30 million below Pengxin's bid.
The Fay group had its bid for the farms declined by receiver KordaMentha, who called the price "unacceptable".
Mr Coleman and Mr Williamson pointed out that neither they or the OIO were involved in the decision by KordaMentha to not approve the Michael Fay bid.
They declined to comment on the bid as it is currently a matter before the court.
The New Zealand public have been widely reported as being against the sale of the farm to the Chinese with UMR poll last November showed 82 percent of respondents as being against the sale to Pengxin.
However, the same poll did show support for a sale which entailed combined Chinese and New Zealand interests.
As part of the deal Milk New Zealand has agreed that the farms will be managed by Landcorp Farming Limited.
The Government hope this will guarantee expected benefits to the New Zealand economy from the sale to occur.
If Milk New Zealand renege on the deal to use Landcorp they will be require to sell the farms as part of the consent.
Shanghai Pengxin have been granted consent under the following conditions:
- The individuals with control of Milk New Zealand must continue to be of good character
- Milk New Zealand must invest a minimum of NZD $14m in the properties to make them more economically and environmentally sustainable
- Milk New Zealand and their associates must not acquire an ownership or control interest in milk processing facilities in New Zealand unless a 50% or more ownership or control interest in those facilities is held by non-overseas persons
- Milk New Zealand must establish an on-farm training facility for dairy farm workers and must meet the capital cost of establishing this facility
- Milk New Zealand must give two scholarships of not less than NZD $5,000 each year to students of the on-farm training facility with the first two scholarships to be awarded by 31 December 2013
- Milk New Zealand must use reasonable endeavours to assist Landcorp to extend its business to, and market its products, in China Milk New Zealand must provide public walking access over Benneydale Farm and Taharua Station, in consultation with the Department of Conservation and the New Zealand Walking Access Commission
- Milk New Zealand must take reasonable steps to protect and enhance existing areas of significant indigenous vegetation and significant habitats of indigenous fauna and flora on the properties
- Milk New Zealand must register a heritage covenant in respect of the Te Ruaki pa site on Tiwhaiti Farm
- If required by the Office of Treaty Settlements, the Applicant must transfer the Nga Herenga pa site (approximately 1.6ha located on Benneydale Farm) to the Crown for nil consideration.
Read the OIO’s recommendation
Read the OIO’s decision summary
OIO background information
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