Chinese dairy bid hits snag

Landcorp, the state-owned farming enterprise, is believed to be back in the running to buy the Crafar farms. Photo / Brett Phibbs

A Chinese bid to buy 20 New Zealand farms will be rejected or severely restricted after a review by the Overseas Investment Office, the Herald understands.

Landcorp, the state-owned farming enterprise, is believed to be back in the running to buy the Crafar farms, as the future looks increasingly murky for an offer from Hong Kong company Natural Dairy.

It is understood the Overseas Investment Office has nearly completed its review of Natural Dairy's application to buy 20 farms owned by the Crafar family in the central and lower North Island, and that it has either rejected the application or suggested significant constraints on it.

The Government will have the final say on whether the deal will go ahead.

It has nominated Land Information Minister Maurice Williamson and Conservation Minister Kate Wilkinson to make the decision.

While there have been mixed messages from the National Party about its position on the issue, Prime Minister John Key has made it clear the Government has sympathy with widespread public concern about such a sizeable sale of dairy farms to foreign owners.

A Herald investigation also revealed concerns about the credibility of the investors backing the bid.

Chris Kelly, chief executive of Landcorp - whose bid for the Crafar empire was rejected by receivership firm KordaMentha after tenders closed in July - declined to comment.

But it and other bidders vying with Natural Dairy to buy the farms are believed to be optimistic that they are back in the picture.

That means the banks owed more than $216 million by the Crafar family for 16 of the farms could lose a big chunk of their money.

High Court documents show Natural Dairy has agreed to pay $213 million for the farms.

But the price of rural land has dropped since then and it is understood the other buyers are offering around $130 million.

Natural Dairy spokesman Bill Ralston said yesterday that the company had a "well-developed plan B" should the Government reject its bid.

"They will continue with an altered form of trading in New Zealand. It would not automatically mean a pull-out," he said.

The company has distanced itself from Auckland businesswoman May Wang, with whom it has a deal to export at least 150 million packets of UHT milk from New Zealand to China.

But Ms Wang is proceeding with plans for a dairy factory in Tauranga, using milk mostly from Fonterra.

In Hong Kong, trading in Natural Dairy shares has again been suspended on the local stock exchange, pending a price-sensitive announcement.

Trading in the shares was suspended for five months this year, as the market waited for details about its plans to spend $1.5 billion establishing a dairy business in New Zealand.

The details never came, and last week it said it was shelving ambitious plans beyond the Crafar farms.

Trading resumed for seven days - allowing around $250 million worth of bonds raised by the company to be converted to shares - before it was suspended again.

Natural Dairy originally said it hoped to raise the $1.5 billion from investors to finance its plans.

Mr Ralston said he understood the company would be making an announcement within 48 hours.

The Overseas Investment Office issued a statement today challenging aspects of this story. It reads: Today the New Zealand Herald reported that it understands the Overseas Investment Office (OIO) has nearly completed its review of Natural Dairy (NZ) Holdings Limited's application for consent. It also states that the OIO has either declined consent or suggested significant constraints. Annelies McClure, Manager of the OIO, said: "The information published by the New Zealand Herald is completely incorrect,". "The OIO has not rejected nor suggested or imposed significant constraints on the application or Natural Dairy." The OIO continues to assess Natural Dairy's application against the requirements of the Overseas Investment Act 2005 and no decisions have been made. "The application from Natural Dairy to acquire an 80 per cent shareholding in UBNZ Assets Holdings Limited is extremely complex," said Ms McClure. "The OIO is still assessing the application, and due to its complexity, it cannot be specific in terms of when a decision will be made. We have written to Natural Dairy seeking further information and have yet to receive its response." Once the OIO completes its assessment of the application, it will provide a recommendation to Ministers, who will decide on whether or not to grant consent. There is no statutory timeframe within which a decision must be made. The Herald stands by its story.