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Fonterra won't bid for Tasmanian farms as focus stays on factories

Wednesday 26th September 2012

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New Plymouth-owned Tasman Farms, Van Diemen's Land Co's parent, wants to raise up to A$180 million, with at least A$100 million in fresh equity, and has attracted potential suitor from China, but won't see Fonterra Cooperative Group at the negotiating table.

The New Zealand dairy exporter, which reports its annual results today, won't invest in the Tasmanian farm upgrade, which has reportedly attracted interest from China Investment Corp, the US$200 billion sovereign wealth fund.

"Fonterra has a very strong relationship with VDL as their processing partner but our investment interests in Tasmania are focused on our factories at Spreyton and Wynyard, rather than farms," a Fonterra spokeswoman said in an emailed statement.

"We are supportive of any suppliers who are looking to grow and develop their operations." The investment in VDL's Woolnorth farm will be timely for the state after forestry group Gunns went into voluntary administration, putting some 600 jobs at risk.

Tasmanian Premier Lara Giddings this week returned from a trade mission that included pitching agriculture and mining investment opportunities to China Investment Corp. Tasman Farms wants to grow its milk production capability to as much as 15 million to 18 million kilograms of milk solids from 5.76 million kg in the 2012 season.

It is already Australia's biggest dairy farmer and Fonterra's largest supplier on the other side of the Tasman. This week VDL chief executive Michael Guerin said in a statement he was confident the expansion plans would raise enough funds with "a number of investors interested in the project."

Two China Investment Corp executives spent two days visiting Van Diemen's Woolnorth farm, Australia's biggest dairy farm, having already inspected the rival Little Lion dairy operation in Tasmania, Fairfax Media reported. The sovereign wealth fund has approached the Foreign Investment Review Board for preliminary consultations, reports said.

Foreign ownership of land, particularly involving Chinese buyers, has been a thorny issue on both sides of the Tasman with Shanghai Pengxin's purchase of the Crafar family farms in New Zealand set to face a challenge in the Supreme Court, while Australian approval for Shandong Ruyi to buy Queensland cotton farm Cubbie Station attracted heavy criticism from Opposition politicians.

BusinessDesk.co.nz

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