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Shanghai Pengxin gets government nod to buy Crafar farms

Friday 20th April 2012

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Chinese firm Shanghai Pengxin’s controversial bid to buy 16 central North Island dairy farms has been approved by Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman.

The ministers approved the Overseas Investment Office’s new recommendation to let holding company Milk New Zealand buy the Crafar family farms, after a High Court judgment sent it back to the bureaucrats in February. Williamson said the OIO sought advice from Crown Law and independent advice from David Goddard QC in making its recommendation.

“We are satisfied that on even the most conservative approach this application meets the criteria set out in the act and is consistent with the High Court’s judgment,” Williamson said in a statement.

The protracted battle for the Crafar farms took an unexpected turn in February when Justice Forrest Miller sent Pengxin’s successful application back to the OIO for consideration, saying the department materially overstated its economic benefits by using an inadequate testing methodology.

As part of the deal, state-owned farm manager Landcorp will be involved in developing Pengxin’s sheep business in China.

The purchase of large blocks of farmland by foreigners has been in the government’s sights after the aborted bid for the Crafar farms in 2010 by Hong Kong Exchange-listed Natural Dairy (NZ).

The government was pushing for looser controls on foreign investment, but ultimately did an about-face and imposed stricter processes amid rising opposition to the sale.

Coleman said the deal requires Milk NZ to invest $16 million in the farms and to protect and enhance heritage sites.

“The combined effect of the benefits being delivered to New Zealand as a result of this transaction is substantial,” he said.

At a general media briefing earlier in the day, a senior political counsellor at the Chinese Embassy in Wellington, Cheng Lei, declined to comment directly on the potential for the Crafar purchase to go through, but stressed New Zealand companies were welcome to invest in China.

“If you are ambitious enough, you can conquer the Chinese market,” he said, citing Fonterra’s plans to create as many as 33 dairy farms in China and the “amazing speed” of its ambitions. “We encourage New Zealand businesses to go to China, and we also encourage good, qualified New Zealand businesses to see opportunities in your country.”

Asked whether he thought New Zealanders were xenophobic about Chinese investment in this country, Lei said “no” and that New Zealanders were “open-minded” and “friendly” and that the country was of interest to many foreign investors, including from Australia and the US.

The newly inked target of an increase in two-way trade to $20 billion by 2015 could potentially be reached early because of the growth in the trade relationship between the two countries, he said.

BusinessDesk.co.nz

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