Chinese firm in talks to buy NZ's largest dairy farming group (Update 3)

The joint-owner of New Zealand's largest privately owned dairy farming operation has confirmed it is in talks to sell out to a Chinese company for over NZ$200 million. (Updated with more details on Chinese company, MAF visit to Crafar farm). The sale would make the Chinese interests one of the biggest individual shareholders in Fonterra, but would save two New Zealand banks and PGG Wrightson Finance from taking big losses on loans to the farming group. Allan Crafar told interest.co.nz the family-owned Crafar Farms group had been in discussions with a Chinese firm, which he declined to identify. Due diligence and valuations had been carried out, but no sale agreement had been reached, he said. The sale of the 15 farm group with 30,000 stock, mostly in the Reporoa and central plateau area near Taupo, had now been opened up for wider interest, Crafar said. An industry source told interest.co.nz that a Chinese owned company called NZ Natural Dairy Ltd had inquired in Taupo last month about setting up an office and building a Tetrapak plant there to package and export milk from farms with 25,000 cows. Companies Office records show NZ Natural Dairy was registered last month and is owned by Hong Kong registered China Jin hui Mining Corp and has two directors, Kathy Chan and Jack Chen, who live in Auckland. NZ Natural Dairy has an office registered in central Auckland. Chan and Chen were not immediately available for comment. "It's a shocking day for the country," Crafar said. "They're going to lose one of the most enthusiastic family of dairy farmers in the country and all because everybody thinks they can run these farms better than we can," Crafar said.

Dirty dairying and mistreatment of animals Crafar Farms has been prosecuted several times for releasing effluent into waterways and has been widely criticised by environmental groups as the worst example of 'Dirty Dairying' in the country. It was fined NZ$90,000 last month by the Hamilton District Court due to a "systemic failure" of a problem-plagued effluent system, the Waikato Times reported. Crafar rejected the criticisms and said the environmental legal actions had cost over half a million dollars and were a factor in the decision to sell. Meanwhile, the Ministry of Agriculture and Fisheries said it was called to one of the Crafar farms on Monday and had to put down a number of cattle because they had been poorly treated. MAF spokeswoman Helen Keyes told interest.co.nz late on Wednesday a MAF official visited one of the farms on Monday after a complaint and was forced to destroy some animals. This followed a farm accident with a tractor where one of the workers was injured, Keyes said. Big debts the driver However, the Crafar Farms' debts of close to NZ$200 million were the major reason why the group had decided to sell. "We've never been scared of debt and we've got plenty of it, but so has a big chunk of the New Zealand dairy industry," Crafar said. "We're not the only ones guilty of having a crack and being a bit more go ahead," he said. Crafar confirmed that the group owed more than NZ$150 million to two banks and a further NZ$25 million to PGG Wrightson Finance. Asked what mistakes the family-owned farming group had made, he said: "We were too positive about the dairy industry and we misjudged the forces against us," he said. Crafar said Crafar farms employed almost 200 people and produced half of one percent of New Zealand's entire dairy output, which works out at around 60 million kilograms of milk solids worth NZ$250.3 million at the current expected payout of NZ$4.20 a kg. Crafar said three generations of family farmers had worked to build up the group and were unlikely to receive a cent in equity once the sale was completed, given debt was worth as much or more than the farms. "I would have been better off staying on the dole," he said, adding that the family owners of the group had never taken out more than the value of the dole in salaries from the business over the years. "This idea that we're all a bunch of rich bastards is bloody bullshit," he said. Crafar was complementary about PGG Wrightson Finance, but was critical of the two banks he was dealing with, although he declined to name them. "I'd like to come back in another life as a banker," he said, adding: "New Zealand needs to get back in control of its banking." More detail on Jin Hui Mining Meanwhile, China Jin Hui Mining announced in Hong Kong on Wednesday it had paid NZ$100 million (NZ$480 million) to buy a 20% stake in "New Zealand milk producer" UBNZ Asset Holdings Ltd from UBNZ Trustee Ltd. Here is the full agreement. However, the trail from there is murky. UBNZ Asset Holdings was incorporated in May this by director May Wang with UBNZ Trustee Ltd being the shareholder. Meanwhile a company called UBNZ Funds Management Ltd was created in May last year. It is not clear UBNZ owns any dairy assets. However, UBNZ has been sued by Swiss investment banking group UBS after UBNZ was originally called UBS NZ, NBR reported in March this year. May Wang also has a history. Bob Dey reported in November last year that Equitable Property Holdings had applied to the Auckland High Court to bankrupt May Wang over a NZ$3.4 million summary judgment ordered on August 8 last year. May Wang was not immediately available for comment. Here is a picture of the Crafar family; Robert, Glen, Allan (centre) and Owen Crafar, along with farm worker Gary Adams. More details about the farming group are here.