The Chinese company behind a bid to buy Lochinver Station is going to court to challenge the Government's decision to block the sale.
Pure 100, a subsidiary of Shanghai Pengxin, will seek a judicial review of the Government ministers' decision, claiming that the wrong test was applied when considering the bid under the Overseas Investment Act.
The 13,800ha property near Taupo is one of the country's most valuable farms with a rateable value of more than $70 million.
Last month, ministers Paula Bennett and Louise Upston rejected the bid, estimated at about $70 million to $80 million, despite the Overseas Investment Office having recommended it go ahead.
Ms Bennett said the ministers did not believe there was enough benefit to New Zealand to pass the "substantial benefit" test.
In a statement, Shanghai Pengxin representative Gary Romano said the company believed the Overseas Investment Office had applied the wrong test when weighing up the benefits of Pure 100's bid. Going to court to seek clarity on the tests would help restore certainty for overseas investors and sellers.
"The judicial review will seek to obtain clarity for all parties on what constitutes a viable counterfactual and this will, we believe, do a great deal to restore confidence and certainty amongst investors and sellers."
This week another Shanghai Pengxin company - Dakang - pulled out of a $42 million agreement to buy the 3300ha Pinney farms in Northland. At the time, Mr Romano, who is the chief executive of Hunan Dakang Pasture Farming, said that was partly because of the Lochinver decision and the long delays in getting applications decided.
Mr Romano said yesterday that regarding the Lochinver decision, the company believed the OIO had considered the wrong scenario when it applied a test of whether Pure 100's proposal offered more than another New Zealand buyer would.
He believed it should have considered what would have happened if the land stayed with the present owners, the Stevenson Group.
Since a court ruling on the sale of the Crafar farms to Shanghai Pengxin, the Overseas Investment Office and ministers have to weigh up whether a foreign buyer of farmland would offer more than a sale to another New Zealander could, or if the present owner were to hold on to the land.
Mr Romano said Pure 100's plan included spending more than $20 million above the purchase price and creating six new jobs as well as promising environmental and community measures, such as donations to a local school.
However, after the OIO considered what a New Zealand buyer might do, the net benefit dropped to just $3 million, one full-time job and some part-time jobs. Had it considered what the current owner would do instead, the benefit offered by Pure 100 would be larger.
"On more than one occasion, the vendor made it clear to the OIO that it required a certain price for the farm to justify its sale ... the vendor also confirmed to the OIO that it would not undertake the capital investment proposed by Pure 100."
That meant the benefit of Pure 100's investment was much greater than the benefit calculated against the hypothetical situation of what another New Zealand buyer might do.
Story so far
• August 1, 2014: It's revealed Pure 100, a subsidiary of Shanghai Pengxin, is seeking approval from the Overseas Investment Office (OIO) to buy Lochinver Station.
• September 16: Ministers Paula Bennett and Louise Upston reject the bid as they do not believe there is enough benefit to New Zealand in areas such as jobs, despite the OIO recommending it go ahead.
• Monday: In a separate deal, another subsidiary of the company withdraws its agreement to buy 10 farms in Northland for about $42.7 million, citing delays and uncertainty from the OIO.
• Today: Pure 100 announce they will seek a judicial review.