By Alex Tarrant
Chinese conglomerate Shanghai Pengxin says it will now calmly proceed with taking ownership of the 16 central North Island Crafar Farms after receiving its second approval from the government to buy the properties.
Next up, Pengxin will invest NZ$16 million in the farms to get them up to scratch, and increase milk production which is still going to Fonterra. It says it will get a 50/50 venture with SOE Landcorp, which will manage the farms, up and running, improve protections for environmental and historic sites, and start up an on-farm training facility.
Cedric Allan, Shanghai Pengxin's New Zealand PR man, told interest.co.nz the company hoped it would just be able to get on with what it wanted to do, which was processing high-value dairy products like baby formula, cheese and ice-cream in New Zealand, and then selling that product in Chinese markets.
With the sale finally going through, Pengxin and its subsidiary Milk New Zealand Holdings would become a Fonterra shareholder, "and we’ll be supplying milk to Fonterra in the foreseeable future,” Allan said.
That would continue until Milk New Zealand had its own processing options in place.
“And we’ll be talking to Fonterra about that too. We’ve had discussions already with them on the possibility of them doing some processing for us short-term or long-term,” Allan said.
“We’re also talking to other processors. But we’re getting a bit tired of talking. We’ve had a year of that. We’re now actually going to take possession of the farms, get the joint venture with Landcorp cracking, and get the farm production up," he said.
“We’re going to invest a million dollars in each farm over the next three years. And we want to come to an arrangement with a processor, be it Fonterra or be it another New Zealand processor, and start getting product over to China and into the supermarkets.”
Pengxin’s plans to produce all its products in New Zealand before selling them overseas were still going ahead. Products could start rolling off the production line "very quickly" if a deal was reached with an existing processor.
Pengxin might invest in a processing plant itself. If it were to take this route, it could only own up to 50% in a venture, with conditions of the Crafar Farms sale being the other 50% would have to be held by New Zealand interests.
“That could be a purchase of an existing operation and subsequent expansion of it, or it could be starting from a greenfields situation and building it from the ground up. Obviously those options could take longer,” Allan said.
“But there’s no reason why it has to take years before we’ve got branded product to Chinese supermarkets.”
'Nonsense claims about us'
Meanwhile, an anonymous claim that Shanghai Pengxin chairman Jiang Zhaobai was connected to the Chinese underworld was just one of many made to try and undermine Pengxin’s bid.
“We announced that we had bought these properties, conditional on government approval, in December 2010. There has never been a land transaction in this country subjected to this degree of scrutiny. That includes the scrutiny of the people making the bid," Allan said.
“We have been scrutinised by the OIO, we’ve been scrutinised by the Michael Fay group. No one has come up with one shred of evidence to say that Shanghai Pengxin should be of any concern whatsoever to New Zealand," he said.
“In fact, quite the reverse. This is a company that has an unblemished record, that does what it says it does, which produces cash when it’s needed. If there’s anything wrong with this company people with a vested interest would have found out by now. The claims with links to the underworld, goodness me.
“We’ve heard those claims; we’ve heard claims we’ve got no farming experience, which is ridiculous. We don’t have dairy farming experience, which is why we’ve done the deal with Landcorp. But we’ve been successfully farming since 2005 in Bolivia on a much bigger chunk of land than all the Crafar farms put together.
“We’ll have three million sheep in China in the next few years on our own farms. We’re now being told that we’ve got no business expertise. It just goes on and on. I hope that nonsense just comes to an end now and we can get cracking with actually doing things,” Allan said.
'There isn't an army of Chinese investors coming'
In terms of other investments Pengxin’s chairman currently had an application in front of the OIO with several other parties to buy half of the Gulf Harbour development north of Auckland.
Pengxin itself was also very open to other investment opportunities in New Zealand, Allan said.
“I would say this: There’s not an army of Chinese investors out there trying to buy every dairy farm in New Zealand. There are hundreds of dairy farms for sale in New Zealand, including the Carter Holt farms which have been on the market for more than a year," Allan said.
“This belief that China is about to take over New Zealand’s dairy industry is just founded on nothing more than fear mongering really. There are ten thousand dairy farms in New Zealand, we’ve just bought 16 of them. It’s not the end of the world.”
Fay group looking whether to appeal
Meanwhile, the New Zealand consortium led by controversial merchant banker Michael Fay, which was opposed to Pengxin buying the farms, says it is still too early to say if it will appeal the latest OIO and Ministerial ruling. The group had itself offered NZ$171.5 million for the farms, which was well below Pengxin's rumoured bid of around NZ$210 million.
A PR for the Crafar Farms Independent Purchaser Group, Alan McDonald, told interest.co.nz that the consortium's legal team would trawl through the documents related to the decision.
"But it’s fair to say at first blush we’re not seeing anything new in the economic case to compare to the one that’s already been rejected by Justice Miller.”
While the OIO had increased the amount Pengxin needed to invest in the farms from NZ$14 million to NZ$16 million, CFIPG had indicated it would invest NZ$18 million, McDonald said.
However, in a submission to the OIO, Pengxin had said it believed it would invest NZ$18.7 million in the farms over three years.
CFIPG had not heard back from the OIO on the submission it sent outlining what economic benefits would stem from the farms being in its ownership, McDonald said.
“I think that’s probably a bit of a sore point to be honest. Clearly the negotiation with Shanghai Pengxin’s been carrying on, and we haven’t had a chance to be consulted, or been asked our opinion, or put any counterfactual case at all [to the OIO],” he said.
Meanwhile, McDonald said the anonymous claim that Shanghai Pengxin’s chairman was linked to the Shanghai criminal underworld did not originate from the Kiwi conglomerate.
“Unlike the OIO and Landcorp in this, we’ve been thoroughly up front and transparent, I think. Landcorp’s been telling porkies. They’ve been in this since July last year. We’ve finally got a whole lot of stuff out of the Ombudsman from our Official Information Act request," he said.
“They were denying they were having discussions with [Pengxin] when we talked to them in September/October. All the blacked out material says they’ve been in it since the start of July.”
The future of the consortium, which includes businessmen, farmers and iwi, was uncertain. Whether or not to look at purchasing some other farms had been discussed, “but you never know what the fallout from these things is going to be.”
“It came together with a common purpose. There’s a lot of good will around the table, but I can’t really answer that,” McDonald said.