Fay group doesn't budge on Crafar bid, promises to invest $18m

Photo / Christine Cornege

The Crafar Farms Independent Purchaser Group (CFIPG), the rival bidder for the Crafar family farms led by former investment banker Michael Fay, won't raise its $171.5 million offer for the land but is promising to spend $18 million upgrading the land.

CFIPG would spend the funds over three years and buy additional shares in the farmer-owned Fonterra as production rises, Bell Gully partner David Cooper said in a submission to the Overseas Investment Office on behalf of the group.

That will lead to an extra 13 or 14 employees on the farms, based on an estimated 25 per cent to 30 per cent lift in production.

The new submission comes after Justice Forrest Miller sent Shanghai Pengxin's successful application back to the OIO for consideration, saying the department "materially overstated" the economic benefits of the sale for New Zealand.
Pengxin reportedly offered more than $210 million for the farms, and would spend $14 million over four years improving the degraded farm land.

The OIO has insisted it will make a new decision within days of the judgement earlier this week, and the farms' receiver, KordaMentha, has given Pengxin until Wednesday next week to regain approval.

CFIPG said it would meet the same environmental and cultural commitments Pengxin offered.

The submission pooh-poohed any benefit Pengxin's proposed investment will bring to New Zealand, saying its "argument cannot survive a proper counterfactual analysis and so the economic aspects of the benefit test - which are the majority of those factors which the OIO is directed to treat as matters of high relative importance - are not met."

CFIPG based its productivity forecasts on Fay's Baytown Investment's acquisition of the Broadlands Farm in Reporoa last year. More than $2 million was spent on capital expenditure and it's on track to boost productivity by 85 percent in the first year, the submission said.

The 16 Crafar farms would be split up among the CFIPG, with Taharua Farm acquired by Tauhara Hapu Trust, Ferry View Farm and Tiwhaiti Farm by an unnamed "lifelong responsible dairy farmer with a close connection to the land." Plateau Farm would be bought by an unnamed party and controlled by a different entity which "has an outstanding environmental farming record".

The submission talked down the importance of Pengxin helping government-owned Landcorp extend its business and market its products into China, saying the iwi members of CFIPG are already in discussions with Chinese companies to tap that market and Landcorp isn't an exporter.

The farms will probably be operated through continued sharemilking arrangements rather than employing farm managers, the submission said.