A multibillion-dollar global investment fund of Harvard University in the United States is poised to buy the Big Sky Dairy Farm in Central Otago for $28 million.

The offer is subject to Overseas Investment Office (OIO) approval.

Big Sky, one of the country's most ambitious dairying proposals, has been in receivership, owing about $30 million, for more than three years. Subsequently, it has been mired in legal action.

The $28 million sale price has been confirmed by several industry sources.

If the OIO approves the sale, Harvard will combine Big Sky's annual output of 1.1 million kg of milk solids (kg/ms) with another dairy farm it owns in the district to produce about 1.8 million kg a year by 2013.

It is understood Harvard's endowment fund, which was valued last year at US$26 billion ($36.4 billion), will shortly be notified by the OIO if it has gained approval.

In 2003, it gained OIO approval for a $1 billion North Island forestry purchase.

Big Sky's sale ends a chapter of animosity and litigation between its former partners - farm-founder Ewan Carr and Auckland-based Rodney Humphries - after it was placed in receivership in March 2007 by the BNZ, owing the bank more than $17 million.

Harvard's investment representative in New Zealand, former Dunedin-based forestry consultant Philip Langston, said the Harvard fund had "executed a sale-and-purchase agreement, but it's still subject to OIO approval", for Big Sky.

He would not comment on the OIO application's status, or confirm the sale price, which is subject to a confidentiality agreement.

Mr Langston was asked what level of development the fund was considering, given that Big Sky was first mooted as an up to 6000-cow proposal.

The fund's future investment was intended to be "incremental" and "system improvements" would boost output from both farms to 1.8 million kg/ms within three years.

It hoped to achieve this by combining the outputs of the 3000-cow, 1300ha Big Sky farm, with that of its other farm in the district, which runs 1100 cows on 450ha.

It has operated the 450ha farm for the past financial year.

The $28 million Big Sky price tag is understood to cover land and improvements, stock, plant and Fonterra shares. The two farms would be owned by a US-registered company and separately managed by a contracted New Zealand company, with the intention all staff would be retained.

Mr Langston said there were adequate water rights available to meet Big Sky's development plans.

The Harvard fund's acquisition of Big Sky mirrors that of its $1 billion, 184,000ha Kaingaroa forest purchase in the Central North Island in late-2003, which also followed a partnership fall-out and receivership.

The forest has been described as the largest single man-made forestry block in the world.

The Harvard fund was initially the forest's second-biggest owner, but later sold more than a third of its forest estate to the New Zealand Super Fund.

It is understood that under the Big Sky receivership, about $16 million would be paid to the secured creditor and instigator of receivership, the BNZ, which has already been paid several million dollars in interest.

- Otago Daily Times