The Overseas Investment Office faces an unprecedented public examination of its process for approving sales of New Zealand farmland to foreign investors if it approves the bid by China's Shanghai Pengxin Corporation for the 16 farms formerly run by the Crafar family.
A rival New Zealand consortium, involving merchant banker Michael Fay and including Maori investors, threatened today to seek a judicial review if the OIO recommends in favour of the $210 million from Pengxin, a conglomerate with extensive Chinese and international holdings, including in agriculture.
In receivership since 2009, the Crafar farms became a bellwether for New Zealand's foreign investment regime, after the OIO rejected a $230 million initial bid from another Chinese bidder in 2010, on the basis that they failed the "good character" test.
The OIO has been examining the Pengxin bid for nine months, while the Crafar receivers, KordaMentha, have set a deadline of January 31 for Pengxin to make its bid unconditional.
So far, KordaMentha has declined to examine the Fay bid because it already has the better offer from Pengxin.
"The legal approach seems to be the only avenue to bring some transparency to the application information and the process behind the approval," said Alan McDonald for the Fay bid.
"Without legal action we will never know how the OIO reached their recommendation to approve the sale of the farms.
The Fay bidders intend to argue that since Pengxin doesn't run dairy farms, it cannot meet the Overseas Investment Act requirement that the bidder "must have business acumen and experience relevant to the investment," McDonald told BusinessDesk.
Pengxin appears to intend circumventing that requirement by having state-owned farmer Landcorp manage the Crafar properties for them - an approach already permitted under OIO guidelines and approved for other non-farming foreign buyers.
The Fay consortium has retained law firm Bell Gully, which last week advised the OIO of the "commitment" to seek judicial review and asking for a copy of the Shanghai Pengxin application for consent or other relevant information.
The OIO has yet to respond, Bell Gully partner David Cooper said.
The OIO confirmed to BusinessDesk that no judicial review has ever previously been launched against one of its decisions, since its re-establishment as a division of Land Information New Zealand in 2005.