It is highly likely the Overseas Investment Office will provide a recommendation to the government on Chinese company Shanghai Pengxin's bid to buy the Crafar farms by January 31, the deadline set by the farms' receiver for Pengxin to go unconditional on the purchase.
Receiver KordaMentha has accepted Pengxin's bid for the 16 central North Island farms conditional on Overseas Investment Office and Cabinet approval. The bid has languished in front of the OIO for nine months as the OIO said it waited for additional information to be provided by the company, which it recently had received.
In December, KordaMentha announced the January 31 deadline for Pengxin's bid, meaning if the OIO did not approve the sale by that date, the agreement for Pengxin to buy the farms would be dropped. This would open up an opportunity for a consortium led by investment banker Michael Fay to seek to purchase the farms.
Fay bid NZ$171.5 million in September for the Crafar farms, which is thought to be at least NZ$30 million below the price Pengxin has offered to pay. Fay has since launched an attack on SOE Landcorp for agreeing to run the farms for Pengxin, should the Chinese company's offer be accepted.
In his latest move, Fay yesterday threatened to seek a judicial review of the OIO's process if it recommended the farms be sold to Pengxin.
The Crafar farms were tipped into receivership by lenders Westpac, Rabobank and PGG Wrightson in October 2009 who were then owed about NZ$216 million.
"It is highly likely that the Ministers will receive the OIO's recommendation by January 31," a spokesman for the OIO told interest.co.nz about the Pengxin bid on Friday morning.
In 2010 Ministers were given more flexibility to reject foreign bids for New Zealand assets following public outrage over the initial bid to buy the Crafar Farms by a company fronted by Chinese-backed businesswoman May Wang, who was investigated by the Serious Fraud Office and subsequently charged in Hong Kong over her involvement in the bid. That bid was turned down under New Zealand's old overseas investment rules for failing a 'good character' test.
The Pengxin bid fell under the new rules, which allow ministers to consider whether New Zealand’s economic interests are adequately safeguarded and promoted by a foreign purchase of domestic assets.
"This will improve ministerial flexibility to respond to both current and future economic concerns about foreign investment, such as large-scale ownership of farmland," English said when announcing the changes in 2010.
A new “mitigating” factor also enabled ministers to consider whether an overseas investment provided opportunities for New Zealand oversight or involvement – for example, by appointing New Zealand directors or establishing a head office in this country.