Landcorp's deal may win Crafar farms receiver approval

Thursday 24th June 2010

State-owned Landcorp Farming says its offer to purchase the 16 Crafar family dairy farms is probably easier than an offshore bid, though it won’t necessarily top other offers.

The company confirmed today that it will put in a bid, though it conceded it won’t necessarily top a Chinese or other foreign-backed tender.

Chief executive Chris Kelly says he’s confident that “a clean deal for all the farms, that is not subject to Overseas Investment Office approval, and which would be completed as soon as practical,” may find favour with receiver KordaMentha.

Landcorp, which is New Zealand's largest farmer, will put in its tender offer before the July 7 deadline for the farms in Waikato, King Country, Reporoa, Atiamuri, Taranaki and Manawatu.

Landcorp has carried out due diligence on the farms, for which Chinese company Natural Dairy NZ, fronted by New Zealand-registered UBNZ, is believed to be offering about $210 million. Still, Natural Dairy’s bid requires OIO approval, and the office is yet to receive an application from the company.

Kelly said relevant ministers’ officials had been informed of its intentions to bid, though the government, as Landcorp shareholder, hasn’t been involved in the due diligence process. Officials replied that the potential purchase is an operational matter, “and that is what our board is for,” Kelly said.

Landcorp often buys and sells properties, and having recently sold three farms, the purchase of the Crafar farms would greatly increase the size of its portfolio.

The Crafar farms’ locations have some synergies with Landcorp’s present properties, though one or two outlier farms would be sold if its bid is successful.

“We have management processes and policies we’d put in place, in particular some of the measurement criteria we apply,” Kelly said.

The competition and learning that Landcorp is able to achieve between farms and managers is one way to effectively lift production, while its collective buying power for inputs such as fertiliser also helps in cost containment he said.

“We have a good idea of the farms’ value, and we’ll offer what we believe their current price should be,” Kelly said. “Whether that’s enough to head off the Chinese, who knows?”

Businesswire.co.nz

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