A New Zealand dairy empire is the target of what is thought to be the biggest farm purchase by an overseas buyer, with a Hong Kong company reported to be offering $1.5 billion.

Natural Dairy (NZ) Holdings - previously known as the China Jin Hui Mining Corporation - yesterday told the Hong Kong Stock Exchange it had agreed to buy the Crafar family farms as well as other assets including farmland, cattle, and milk powder production plants.

Based in Reporoa in the Bay of Plenty, Crafar was New Zealand's biggest privately owned dairy farming business.

It hit the headlines last year for its poor environmental and animal welfare practices. Reportedly mired in over $200 million of debt, it went into receivership in October last year.

Its receivers KordaMentha yesterday said they were in discussions with a number of parties.

Federated Farmers dairy chairman Lachlan McKenzie was sceptical about the reported price, but said if it was correct, it would be the largest overseas single purchase of a New Zealand farming business, and the biggest overseas purchase of any New Zealand assets since the Canada Pension Plan Investment Board's attempt to buy Auckland International Airport.

That transaction was spiked by the Labour Government on the grounds the airport was a strategic asset.

Mr Mckenzie said he had no doubt there would be further big overseas offers for New Zealand farming assets, and the NZ Natural proposal could prove to be a "litmus test" of this country's stance on overseas investment.

"We hear much of 'reputation' and 'brand risk' associated with agriculture and wonder what the Government will make of this.

"While the ball's in the Government's court, assuming this all comes to pass, Federated Farmers wishes to meet Natural Dairy sooner rather than later, to understand its strategic direction."

New Zealand would remain an attractive investment destination and Mr McKenzie believed it was time to develop a national strategy around food production land and assets.

Market commentator Arthur Lim, who has been working with investors wishing to buy dairy properties, said there was a lot of interest from Asia in New Zealand dairy farms.

"Certainly there's plenty of funds the Chinese Government or Chinese corporations have earmarked for buying overseas assets, but the issue has always been one of politics.

"It's one thing to buy one or two farms but once you start buying properties in the hundreds of millions of dollars, it gets into the public arena and it becomes very politicised. That's exactly what's happened here."

The Overseas Investment Office yesterday confirmed it had received an application from Natural Dairy but would not say what assets the company was seeking to buy.

* Listed on the Hong Kong sharemarket.
* Registered in the Cayman Islands.
* A so-called "P chip" company, it is essentially a Chinese company and is run by private sector Chinese businessmen.
* Market capitalisation of HK$1.12b ($205m).
* Reported a net loss last year of HK$127.61m.

* 22 farms totalling 8000ha.
* 20,000 cows and 10,000 other stock.
* Placed in receivership in October with debts of about $200 million to Westpac, RaboBank and PGG Wrightson.