Crafar Farms: New Chinese offer 'by far the best'

Shanghai Pengxin proposes boosting production and adding value to milk from Crafar farms. Photo / Christine Cornege

The latest Chinese bidder for the Crafar dairy farms has already begun talks with a local partner about its plans to export millions of dollars worth of dairy products from New Zealand to Asia.

Shanghai Pengxin, a private conglomerate, is hoping to persuade the Overseas Investment Office (OIO) that it meets new, tougher rules for foreign investment brought in after a previous public outcry over the potential sale of the farms to Chinese interests.

Having done months of due diligence on the farms, the company finally revealed its plans yesterday, after lodging its application with the OIO.

According to the company, it has agreed to pay more than $200 million for the 16 farms. Natural Dairy offered $212 million.

Last year, Landcorp and other bidders publicly stated they believed the farms were worth significantly less than that, and receiver Brendon Gibson yesterday confirmed the bid was "by far the best" offer on the table.

Like Natural Dairy, Shanghai Pengxin is emphasising its plans to boost production from the farms, which has fallen while they have been in receivership, and to add value to the raw milk by concentrating on products such as infant formula, icecream, cheese and yoghurt.

It claims it will invest more than $100 million marketing its products across Asia in its first five years. It is also offering scholarships for young New Zealand farmers, and is promising to help other New Zealand companies expand into China.

Spokesman Cedric Allan said yesterday it was irrelevant that the company had no experience in the dairy industry, as it planned to hire local people, including existing employees on the farms, to run the operation.

It had already taken expert advice from an agricultural consultancy in Rotorua, and initial discussions with potential partners in the dairy processing industry had been "very encouraging".

It had also approached two New Zealand directors and "everything is all set to go".

Allan confirmed that the company hoped to eventually expand, possibly by buying more farms, or converting some of the existing drystock farms in the Crafar portfolio to dairying. But it did not want to build its own processing plants, he said.

"Ever since we made our announcement in January, we've had all sorts of people coming out of the woodwork. People wanting to come and work with us; people wanting to process for us; people wanting to pool resources and provide even greater milk supplies."

New Zealand's second-largest dairy company, Open Country, said it had not yet had any talks with Shanghai Pengxin, and in any case did not have any further capacity in the Waikato.

Tatua, based in Morrinsville, also said it had not talked to the company "at all". Other potential partners could include a new factory being built by Maori interests at Mokai, near Taupo. A new $100 million plant has also been proposed at Arapuni, in the Waikato.

Asked yesterday how the company's bid differed from Natural Dairy's, Allan said he was not familiar with Natural Dairy's plans, but noted the only reason the OIO had rejected its bid was because "it didn't believe the people they were dealing with were credible".

Shanghai Pengxin has already set up a holding company in Hong Kong called New Zealand Milk.

Its sole director is Jiang Zhaobai, one of the two brothers who founded the conglomerate. The brothers were supposedly born into poverty but made enough money through property development in Shanghai to put them in the top 50 of China's wealthiest billionaires last year.

Jiang Zhaobai had already visited New Zealand several times "and he's a very nice chap", said Allan.

"There are no skeletons in their cupboard. They are very successful at everything they do, and very professional and very credible. They've got the money and they know what they want to do."

Allan said he understood Jiang had already looked at "one or two" property developments in New Zealand, and it was "common sense" that the company might want to look at other investments as well.

SHANGHAI PENGXIN

* Chinese conglomerate.

* Founded 15 years ago.

* Investments in commercial and residential real estate, infrastructure, mining, finance and agriculture.

* Investing in farming projects in Bolivia, Argentina and Cambodia.