An Overseas Investment Office loophole which has allowed Kiwi money to be used to help fund Westland dairy company's sale to a Chinese conglomerate must be closed, says a group fighting for the release of up to $11 million caught up in the deal.
And Agriculture Minister Damien O'Connor agrees the OIO process around the Westland sale "raises a number of questions that need answering".
Pete Williams, spokesman for a group of former Westland farmers owed share redemption capital and now considered unsecured creditors, said the OIO couldn't help them get the sale delayed until they got their money, but they won't give up fighting for an important principle.
"Something needs to be done where the OIO sits relative to this loophole whereby smart lawyers can achieve the use of Kiwi money to essentially fund a foreign acquisition. It's absolutely wrong," Williams said.
Westland is a distressed sale. The $588m deal only now needs a tick from the High Court, having achieved OIO approval and the support of Westland's 400-or so farmer-owners.
O'Connor said a Government review of the OIO and its processes was under way.
"I, along with thousands of others on the West Coast and across New Zealand share their [the group's] frustration with the outcome of the Westland sale."
Williams said the group would approach O'Connor and NZ First to try to escalate their issue, and was considering legal action with an approach to a QC.
Williams said Westland owed about $11m to farmers who had exited the company before the sale. His group had grown to now comprise about two-thirds of the total number of farmers owed share redemption money. Most had left Westland a year or more ago.
Before the shareholder vote earlier this month, the group unsuccessfully asked the OIO to delay or block the sale until they got their money, which is being held by Westland due to its constitutional edict that exiting shareholders could wait up to five years for the return of share capital. This was to protect Westland's balance sheet against a run of share redemption demands.
The Westland board has refused to pay them out despite the sale. Williams said the group had approached Yili and had received a one-line response deferring to the Westland board. He said Westland had not communicated with the group at all during the sale process.
When approached by the Herald, Yili, which owns the Oceania dairy company in south Canterbury, said its managers were unavailable.
Westland chairman Pete Morrison, a major shareholder, said he "didn't feel the need at all" to communicate with the group.
"I have talked to Pete Williams but only because he rang me. The law is very clear. They are unsecured creditors. Yili has bought the company and all its assets and liabilities and they will pay that liability when it falls due.
"They left the company. They knew the rules when they left, that they would get their money in five years. That's still the case. Nothing has changed."
Morrison said he didn't know when Yili would pay the farmers. "They will pay them when it falls due, I'm sure of that. They are in better position now as unsecured creditors than they were if we'd continued to stand alone [as a cooperative]."
Williams said the Yili conglomerate, reportedly Chinese state-owned, did not need the farmers' money.
"The cost to Yili is nothing. It's fundamentally wrong that they [the dealmakers] are using our money and using the constitution against us. They're using creditors and five years' interest free credit to help fund an acquisition."
Yili offered struggling Westland farmers $3.41 a share. Independent advisor Grant Samuel valued the shares at between 88c and $1.37. Yili will pay shareholders $242m with the rest of the purchase price being assumption of Westland's liabilities and high debt.