Crafar farms receiver KordaMentha rejects Michael Fay-led offer for the 16 dairy farms; says Pengxin offer the best and waiting for OIO decision

Crafar farms receiver KordaMentha rejects Michael Fay-led offer for the 16 dairy farms; says Pengxin offer the best and waiting for OIO decision

Crafar farms receiver KordaMentha has rejected a conditional NZ$171.5 million offer for 16 central North Island dairy farms from a group led by controversial former merchant banker Michael Fay.

KordaMentha's Brendon Gibson said in a brief statement the receiver was sticking with an earlier offer from China's Pengxin International Group, which is "by far the best offer", and continuing to await the Overseas Investment Office's decision on Pengxin's offer.

Meanwhile, in comments in Wellington, Prime Minister John Key said he was not concerned Pengxin had had its "complex" bid in front of the OIO for five months, ahead of a visit from the Chinese Vice-Premier tomorrow.

'Fay & Co's price unacceptable'

"As we have said previously, following the comprehensive sales campaign run last year we have accepted an offer from Pengxin International Group Limited which was by far the best offer at that time and remains so today," Gibson said when rejecting the Fay-led offer.

"Whilst we received the offer from Sir Michael Fay, it was conditional, was a collaboration of several purchasers and was at a price that continues to be unacceptable."

The rejection of Fay's advances comes after he talked up the retention of productive land in  New Zealand hands last week. Fay's group included iwi and farmers. Along with business partner David Richwhite, Fay played a major role in government privatisations - with overseas buyers prominent - in the 1980s and early 1990s.

Headed by its wealthy property developing chairman, Jiang Zhaobai, Pengxin has said it plans to increase milk production on the Crafar farms by 10% and wants to capture a bigger share of the Chinese market with branded, dairy-based consumer products. It says it'll spend more than NZ$200 million to buy and upgrade the farms and then invest a further NZ$100 million on marketing cheeses, ice creams and baby formula for the Chinese market.

Pengxin lodged its application for Overseas Investment Office approval in April and that's the only condition preventing its deal going through.

The Crafar farms group was put into receivership in October 2009 owing about NZ$216 million to its lenders Westpac, Rabobank and PGG Wrightson Finance after revealed animal welfare issues at the farms.

'Not concerned'

Meanwhile, Key said he was not concerned that Pengxin's bid had been sitting with the OIO for five months, as the issues surrounding the bid were complex, after the government altered overseas investment rules to make it harder for foreigners to buy New Zealand land.

Pengxin's bid was made after the government tightened overseas investment rules from the start of the year, having turned down a previous Chinese bid fronted by businesswoman May Wang.

Speaking to media at his post-Cabinet press conference on Monday, Key said he was not concerned by the wait for OIO approval.

“I don’t have a view on why it’s taken that time, they’re independent, they make their call and eventually make a recommendation to Ministers, and I haven’t been involved in that process other than recognising it’s in front of the OIO,” Key said.

Key will be meeting with the Chinese Vice Premier tomorrow (Tuesday), who “might raise” the issue, he said.

“[If he does] I’ll tell him we go through a process in New Zealand, and the government has changed recently the Overseas Investment Act to try and give greater clarity to the outcome we want to see, and that we expect people to work their way through that process. It’s an open process as much as these things are possible, but they take some time,” Key said.

The situation with the bid was a “complex position,” he said.

When asked what was complex about the bid, Key replied:

“You’ll have to go and ask the Overseas Investment Office that.”

When then asked whether the OIO had told him the bid was complex, he said:

“No, they don’t brief me on what they do.”

Asked then how he knew it was complex, Key replied:

“Well, I just know everything in that area is complex.”

(Update adds video and comments from PM Key, more detail, background).

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I can remember NZ Rail !  I guess the chickens now come home to roost!

If Fay's group of investors really want the farms why don't they at least match the Chinese offer? Sentiment about keeping NZ land in NZ hands won't make up for a $30 mil difference in the respective offers.

If NZ farmers and the bankers had not allowed land values to run away on them during the period of 2000-07, NZ agriculture would not be as indebted as it is today and would not need to rely on introduced foreign capital. This deal is symptomatic of where corporate agriculture is heading in NZ as large, well capitalised foreign corporates and governments try to create food security for themselves. If OIO let this go (and they will need a very good reason not to) it is just the beginning...

The impression I get is that because Pengxin have made "by far the best offer" the Fay offer is probably realistic but not what KM have been told they need to get the bank out of its self-dug hole. No sympathy here for Fay or the bank or Crafars for that matter.

All we can hope for is that the OIO pull the plug again

The next question, a very important one, should the Chinese offer succeed is what will be the transfer price for its products to its China market. The IRD should make sure the existing Fonterra pricing is used as a benchmark to stop NZ losing tax money by fancy product undervaluation at the border.

Similarly the other recent deal involving the Synlait products should come under similar scrutiny.

Right on the money BB3. You can guarantee Penguin owned Crafar farms would supply directly to the May Wang Greerton UHT factory in Tauranga and not go anywhere near Fonterra's pricing. For sure.

so when did politicians decide that NZ land should be able to be traded on the open market?

Will this appear in an official history of New Zealand?

Here we go again - this is no different from NZ companies owning lands in other countries ie. Fonterra, Wrighston already owned large chunk of land South America and China for that matter!

''Fonterra, Wrighston already owned large chunk of land South America and China for that matter!''

Really? My understanding is that foreigners are not allowed to own land in China.

That's my understanding as well Andy H - no way for Kiwi's to buy land in China .

Although a Hong-Kong company owns the wellington electricity distribution network, China doesn't allow foreigners to buy more than 20% stakes in their companies.

When will the nats wake up to the trade war that China is engaging with the developed world, and demand equal labour conditions and a floating Chinese yuan before agreeing to so-called (one-sided)  free trade agreements. I for one would be happy to pay a fair price for my t-shirts if the money provided a living wage and 40hr week for the workers.

They are under the joint venture with Chinese company.. but that beside the point!

The land for Fonterra's farms is leased, not owned. You cannot own agricultural land in China.

BUT Fonterra do not determine a transfer price that reduces the local company profit  and tax revenue

Allowing foriegners to buy land is breaking a social contract, especially an agricultural country. Today Professor Roger Bowden (RadioNZ) described NZ as lucky (even luckier than Australia) in this (next) financial crisis as we produce food "and the world will always need milk".

It breaks a social contract because governments are supposed to govern for the benefit of the majority , not interest groups or elites. When the Harcourts man at the Shanghia Symposium said (re the Crafar Farms )

[“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

he's really saying it's o.k. for rich elites to trade in land with rich foriegners and cut out less wealthy locals. This would be akin to a father selling a farm to someones rich kid from down the road rather than his own son.

You can talk free market but that reality is that the human economy exists within, and entirely depends upon Nature and, human population growth is not subject to restraint (yet) and resources are being depleted.

Forget the bloody justifications and "well researched" arguments, stuff it! Nothing wrong with us NZers insisting that this sell off to foregn owners of farms and (particularly) utilitiesstop, Let's just say NO because we do not want to be tenants in our own land, surely that is powerful enough reason. The banks can go and take their portion of the medicine for throwing so much money at these farms

Meanwhile, German interests are still buying dairy farms -