Fay-led consortium lifts Crafar Farms bid to NZ$171.5 mln, but receivers say they're sticking with higher Pengxin bid

Fay-led consortium lifts Crafar Farms bid to NZ$171.5 mln, but receivers say they're sticking with higher Pengxin bid

Michael Fay.

A syndicate of local iwi and farmers led by Michael Fay have lodged a NZ$171.5 million bid for the Crafar family farms. Fay’s group, who had previously signalled an interest in buying nine of the farms, tabled its bid with receiver KordaMentha today as a back-up to a rival offer from China’s Shanghai Pengxin Group being turned down by the Overseas Investment Office, it said in a statement.

“I firmly believe we must keep our competitive advantage for exports and that advantage is in what we do with our land,” Fay said. “To me that means we must retain New Zealand ownership of our productive land.

”Shanghai Pengxin made an offer to buy the farms in January, saying it plans to spend more than NZ$200 million – some $30 million more than the Fay consortium offer - to acquire and invest in the land, after the OIO knocked back an earlier bid from Hong Kong investment company Natural Dairy (NZ) Holdings.

Shanghai Pengxin has been waiting for an OIO decision since lodging its application in April. The Pengxin bid is being closely watched by would-be Chinese investors in New Zealand assets.

Korda Mentha said they had received the bid from the Fay-led group, but that it remained well below the bid from Pengxin bid. It said it would consider the bid.

"As we have said previously, we have accepted an offer from Pengxin International Group Limited which is by far the best offer we have received following a comprehensive sales campaign," said Brendon Gibson from Korda Mentha.

"We continue to await a response form the OIO which we hope to be successful," he said.

At the recent INFINZ conference of senior financial professionals, senior industry figures suggested failure by Pengxin, especially if turned down by the OIO, would freeze Asian appetite for investment in this country.

The purchase of large farmland by foreigners has been in the government’s sights after the Natural Dairy deal emerged last year, prompting the government to review foreign investment rules and ultimately impose stricter controls.

'A controversial figure'

Fay, a controversial figure for his involvement in state asset privatisations including Telecom and New Zealand Rail, said their offer isn’t subject to OIO approval, and they are hoping to be on the farms before Christmas to get them up to full production for the 2012 season starting in the middle of next year.

Steve Bignell of Stretton’s Chartered Accountants is the lead negotiator for the group of farmers, while Ngati Rerehau’s Tiroa E and Te Hape Be Trusts are one of the iwi investors.

Fay and investment banking partner David Richwhite are better known for playing both sides of state asset sales in the 1980s and 1990s, the most famous being their NZ$400 million purchase of New Zealand Rail with fellow investors Winsconsin Central and Berkshire Hathaway, which later became Tranz Rail.

The subsequent sell-down led to accusations of insider trading by the then-Securities Commission, with Fay and Richwhite’s Midavia Rail Investments and Richwhite settling with the regulator for NZ$20 million.

A further NZ$7.5 million settlement was reached with former Tranz Rail shareholder Berkshire Fund III and former executives Michael Beard and Mark Bloomer.

Fed Farmers sits on fence

Federated Farmers said it welcomed the bid from the Fay-led group, but said the OIO should continue its examination without bias.

Federated Farmers has welcomed a Sir Michael Fay led group upping its bid for the 16 former CraFarms, as being the best opportunity to keep these farms in New Zealand hands.  Yet Federated Farmers also believes that the application by China’s Shanghai Pengxin Group, must complete the Overseas Investment Office (OIO) process without bias.

“As a Kiwi would I like these farms to remain in Kiwi ownership?  You bet I would,” says Robin Barkla, Federated Farmers Dairy Vice-President who farms in the Bay of Plenty.

“While my heart says one thing my head says that because there’s a live OIO application, we need to let it go through all the necessary hoops. 

“The OIO process must be clean for if there’s any hint of favouritism or bias, then we risk becoming a South Seas Venezuela.  Anything like that would spook international investors and dangerously drive up interest rates," Barkla said.

“That said, Sir Michael Fay is doing exactly what Federated Farmers has called for.  Assembling a group of Kiwi investors to make a sizeable but credible bid for these farms. It certainly provides the receiver with a great option should the Pengxin Group bid fall over,” he said.

With Business Desk

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NZ should let Michael Fay invest as much as he likes directly in NZ land based assets. And then it should immediately nationalise them.

The Chinese should be allowed to buy the farms. I suspect National is not keen on allowing this to happen before the election. If Crafars debt was over $200 mil the bankers invloved will want the recievers to accept the highest bid to recover as much money as possible and will not care who ends up owning the properties.

why don't they sell them one at a time, one farm, one buyer. Do we really think that corporate farming will do us any good at all. Sometimes I think the dairy industry will be the ruin of us all.

Interesting seeing Michael Fay play the nationalist card.

New Zealand ownership?

It did not matter when he was merchant banker 'Fay Richwhite', doing the deals.

Obviously the years away have changed the man. 

Perhaps he should be saving his money for his daughter's singing career, rather than using the taxpayer"s.

Fay the loyal Kiwi..what a joke....uses tax havens,  broke the trainset and operates mostly overseas.

We don't need corporate farming, Kiwi or Chinese...we need owner operators who care for the land and can see the long term benefits in doing so.  Fay and his mates will max the land out for all they can drag from it...to hell with the future..

And once he has them, watch them them keep the cream and sell off the less desirable to highest bidder...foreign or otherwise..

beggar all difference between the Fay and Chinese ...option apart from the price offered.

The Property Councils view is:

Property Council chief executive Connal Townsend said debate about the future ownership of the 16 Crafar dairy farms appeared to have tapped a racist vein, when the real issue was New Zealand’s willingness to value its own landholdings and provide certainty to people who can commit capital, generate local employment, and encourage economic growth.

http://www.scoop.co.nz/stories/PO1007/S00062/overseas-investment-necessary-for-new-zealand

Harcourts (Cooper and Co) view is:

“Chinese economy we all know about…
Chinese government says it’s time to grow offshore…..
Let’s take a good selection of New Zealands “products” over….
“We’re all New Zealanders, we all love the country so I think it’s healthy for us to have the debate and make the right decisions for our country…. but hey!…. young people coming through see it as “our planet” rather than “our country”
http://static.radionz.net.nz/assets/audio_item/0011/2385074/mnr-20100824-0842-More_than_800-million_dollars_worth_of_property_on_display-m048.asx

 

Mathew Hootens view is:" If that person can't sell to an overseas person he can't get the best price."
Chris Trotters view is: "People whosold out to foriegners used to be hung drawn and quatered". [RadioNZ]

 

My View is: asset inflation isn't wealth creation, it simply creates a hole that has to be filled (but it's nice to be the one with all the dosh! eh Connal?).

The duplicity and hypocrisy of NZ Elite (ex-elite?)...in one breath saying "we welcome foreign investment to New Zealand " but  "this is the most productive assets and therefore should remain in NZ"....does this mean that foreign investment should only be limited to "unproductive" or "underproductive" assets only??

Dude !! our most productive assets are our educated people...and they are being "bought" by foreigners every day to the tune of 600 per day...!! Not some cows and pastures...

BTW I have a nagging suspicious that Fay and Co will most probably offload this into some chinese hands in the not too distant future with a 49:51 split (so as not to get into OIO eyes) with some backdoor agreement not to take the Chinese for a ride sometime in the future....

 

 

I respect Sir Fay has done alot for NZ and on that basis believe there is the best of intentions for NZ. China are know to strip out the technology and produce at much lower cost. We need to keep control of NZ exports particularly our area of strength - we cant keep selling ourselves down the road.

I'm for the deal even at a lower price! But with conditions the Government must insure the contract does not make the Fays a dynasty controlling all, so his whanau inherit all - Buffets right when he notes - "thats when the rot sets in". It must benefit all New Zealanders.

And that the asset can not be stripped down and sold of as occured in the 80s.

It must be a healthy deal to improve the economic landscape of NZ across the board not a few wealthy.

 

Greed has neither nationality nor loyalty.

Like many Kiwis we don't believe that Michael Fay is the type of character that should be fronting investment of any kind in NZ. Integrity and high business standards are key required attributes - robber barons, asset strippers and business rorts should not be entertained or encouraged with this important and precedent setting deal.  

With you Plan b (should be 'a') and rastus. Corporate farming can go to hell. Sick to death of how corporates now invade every aspect of our lives. And get over yourselves, those who call uis racist, we are against ALL foreign ownership of NZ assets and farms. If these farms go to one foreign purchaser we will not be able to stop this trend at all, and it will only be a matter of time before our farming and of course Fonterra is controlled from overseas. WAKE UP, NOW, NZ. Go to Stop NZ Asset Sales on Facebook and like, lets get this out there, now. This govt is stalling these sales till after the election then, fait accompli

I think that I speak for most of us here , when I say how good it is to see that Sir Michael Fay is  still active in the NZ business scene , stll busy with good deals , and with creation of jobs .

Well done , good Sir .

Cheers !

Could someone please explain why all theses farms have to be sold in one lot?

Sure if they all boundaried each other I could see the reason but they are hundereds of km apart in some instances arent they?

Whats stopping Fay et al ringing RE agents and buying the first 16 dairy farms on their books?

What makes the Crafars farms so special?

is it because....

...they are run down in may cases (and maybe  should not have been converted in the first place) ie not suitable for dairying?

or that the debt on the farms is that high that the lenders (banks) will take a "bath" on them if they were sold for their "real " value? so we  sell only to overseas/corporates who may have other agendas so purchase price isnt as important

I would of thought these farms would be "perfect" for young enthusiastic farmers to have a go at and suceed providing the purchses price was a fair reflection of their potential,but sadly it doesnt look like this will be allowed to happen,,

 

 

 

 

Don M, The role of the reciever is to act under the instruction of the securty holder and as such this will ensure that given the Bank's are already in this to the tune of approximately $230m and increasing by about $10m p.a. not including opportunity cost of having this capital invested in a business where provisioning isn't quite what is necessary for providing capital for a business in default.

Someone is going to take a masisve haircut (unsecured creditors such as Taupo vets already have had a 'number0') ergo, the farms will be sold to the highest bidder.

My take on it is that we should welcome foreign investment - but do we really need to give freehold title to foreign ownership where this cannot be reciprocated - think China people? Most business in the wider world is operated of leasehold - and the value is created in this lease. Keeps investment in the right paradigm (wealth and value creation).

My 2 cents worth...

So does this mean central NI dairy farms are worth $30,000.0/ha? I feel rich, thanks Sir Mike, GB was right you do alot for the greater good.

According to REINZ figures the median selling price last month for dairy land across the whole country was $31,050 per hectare.

Maybe that value should be applied to urban land - would improve housing affordability for sure.

About 8 min's into Ferguson's link on 10@10 he talks about the importance of the land owning middle class, if we go down the corporate rental model, our society will not be as stable as it should be.  It pays to remember Greg Pytels comment on the present crisis.

'We were governed by people of a very low intellectual capacity  '

 

Michael Fay interviewed in front of a cow paddock - I mean really - it's ridiculous.

I say, sell the property to owner-operated farmers - the ban, if any, should be on corporate ownership structures... just like the Crafar one that failed.

 

 

 

Why can’t we stand proud in the Financial Sector?

No way -

Mr Fay coming back to bite us again.

Follow Digi-Tech trial on NBR

Look what they’ve done to SCF, Aorangi & HMF. Jeeper’s, RWC more important than Mrs Hubbard & she’s lost her husband – see Fran O’sullivan in today’s NZH. Bernard, when are getting to the truth???? 

Did anyone else see Fay and the iwi spokesman on Campbell Live last night?  Fay says he will take two farms near the one in Reporoa he already owns, he also indicated the iwi will take those close to the Miraka factory.

Bernard, any way you can find out who the farmers are?

The Chinese have stated that they are keen to work with a processor to develop infant powder etc for the Chinese market.  Word on the street is that they were looking to do a deal with Miraka. Will the chinese be funding the iwi??

 

Do you think this threat is a legitimate reason to support TAF CO?

Sorry, not sure what you are referring to when you say 'threat'. 

On one level TAF appeals to me as I see it finally giving Fonterra shareholders a real choice in whether or not they remain Fonterra suppliers in times when they need/are forced to sell their shares. At present they have no choice but to supply a corporate processor.

Apologies for any ambiguity CO, I may have the wrong end of the stick. However I recall Colin Armer selling TAF to us on the grounds of threat from foreign (Chinese) interest in securing food supply, while being prepared to take a financial loss for years to come. I guess that is how I interpreted your comments.

Good comments about TTAF allowing indebted shareholders the ability to keep supplying, but I think there is legitimate concern it is the end of Fonterra as a genuine co-operative, and the beginning as a corporate, no different to current foreign owned competitors.

Writting in the Taupo Times, Taupo District Council Mayor, Rick "Rewind" Cooper recently celebrated Sir Mikes investment in farming in the Taupo District, welcoming a "bright star" who was going to create jobs, and save our land from falling into the hands of foreigners (I assume he meant the yellow peril), and hopefully offer courses to local farmers on tax minimisation ( i don't think he will be able to add much more than the Crafers in the way of a farming model).

 

 

"( i don't think he will be able to add much more than the Crafers in the way of a farming model)."

Wow...How many convictions for animal welfare violations have they accumulated?..How many convictions for breaching enviromental rules have they collected like it was a game??..rules which i'm sure you manage to work with, without to much bother. The 'Model' they used was simply a family farm 'father and son' operation that got too big for the families ability to manage...I think theres alot Fay can improve on!

I've seen many a cow pat that looks better than Fay...great to see him looking so...err...yurk.

Wolly I understand that the young contract milkers working for him in Reporoa find Fay a good employer.

IMO I would rather see the likes of Fay own a farm outright than the likes of MyFarm.

 

Arhh.... but that was a casual observation on your part CO!

Do MyFarm syndicates make any money for there investors?

Give him a break, how would you expect him to look after 5 or 6 hard years as a tax exile in Switzerland.

I think the farms should be beloted out to young farmers like used to happen Fay and his partner a wile back owned the BNZ and the tax payer had to bail them out to the tune of about 950 million or the farms should go to the highest bidder nothing no one alses in there right mind would sell for millions less than was offrered I would sue the arse off the receivers

I think that is the best comment of the day brilliant what do you think Bernard Brent has nailed it and no Kunst around but that Fay guy is a bit of a Kunst isnt he