Crafar farm bid approved

Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman have accepted the Overseas Investment Office recommendation to approve the sale of the 16 Crafar farms to  Milk New Zealand Holding Limited (Milk New Zealand), a subsidiary of Shanghai company Pengxin.

“It is clear that all criteria under sections 16 and 18 of the Overseas Investment Act 2005 have been met, therefore we accept the recommendation of the OIO to grant consent,” Mr Williamson said.

“We are satisfied that Milk New Zealand’s application for consent meets the criteria set out in the Act,” Mr Coleman said.

The approval follows the receivers, KordaMentha’s acceptance in late 2010 of Milk New Zealand’s bid for the farms.

Milk New Zealand’s acquisition will further support the supply of high quality dairy products into the Chinese market and help set the foundations for further economic and export opportunities with China.

Stringent conditions policed by the OIO will ensure that Milk New Zealand’s investment delivers substantial and identifiable benefits to New Zealand. These include investing more than $14m into the farms making them more economically and environmentally sustainable; protecting the Nga Herenga  and the Te Ruaki pa sites and improving walking access to the Pureora Forest Park and Te Rere falls.  An on-farm training facility for dairy farm workers will also be established.

If the application meets the Act’s criteria the ministers had little choice but to approve the bid.

But this won’t be the end of the matter:

A press release just issued by the Michael Fay backed Crafar Farms Purchase Group says the decision to approve the farm sale to Shanghai Pengxin Group was “wrong in law and, if not overturned by Judicial Review, sets up open season for any foreign buyers wanting New Zealand land.”

The Group said it is the highest New Zealand bidder ($171.5 million), offering $21.5 million more than the Government’s farming SOE, Landcorp.

The Group confirmed it would proceed with a Judicial Review launched earlier this week to try to stop the land from being sold offshore.

But the Herald puts the purchase of the farms into perspective:

The 16 Crafar farms have a combined area of approximately 7,893 hectares.

In the last two years, consent was granted for overseas persons to acquire 357,056 hectares of agricultural land.

Consents granted involving agricultural land by country of majority ownership, are:

* United States to acquire 25,306 hectares of farm land

* Germany to acquire 6,834 hectares of farm land

* Switzerland 9,727 hectares of farm land

* Australia 3,861 hectares of farm land

* United Kingdom 22,600 hectares of farm land

* Hong Kong to acquire 759 hectares of farm land

I don’t remember any fuss over any of those sales nor over the sale of a total of 650,000 to foreigners approved by Labour in the nine years it was in government.

There are very stringent conditions on the sale:

• The individuals with control of Milk New Zealand must continue to be of good character
• Milk New Zealand must invest a minimum of NZD $14m in the properties
• Milk New Zealand and their associates must not acquire an ownership or control interest in milk processing facilities in New Zealand unless a 50% or more ownership or control interest in those facilities is held by non-overseas persons
• Milk New Zealand must establish an on-farm training facility for dairy farm workers and must meet the capital cost of establishing this facility
• Milk New Zealand must give two scholarships of not less than NZD $5,000 each year to students of the on-farm training facility with the first two scholarships to be awarded by 31 December 2013
• Milk New Zealand must use reasonable endeavours to assist Landcorp to extend its business to, and market its products, in China
• Milk New Zealand must provide public walking access over Benneydale Farm and Taharua Station, in consultation with the Department of Conservation  and the New Zealand Walking Access Commission
• Milk New Zealand must take reasonable steps to protect and enhance existing areas of significant indigenous vegetation and significant habitats of indigenous fauna and flora on the properties
• Milk New Zealand must register a heritage covenant in respect of the Te Ruaki pa site on Tiwhaiti Farm
• If required by the Office of Treaty Settlements, the Applicant must transfer the Nga Herenga pa site (approximately 1.6ha located on Benneydale Farm) to the Crown for nil consideration.

The third point, restricting ownership or control of milk processing here to no more than a 50% share, should allay concerns about food safety and standards.

The OIO’s recommendation is here; the decision summary is here  and background information here.

The only question I’m left with is why the receivers insisted on selling the operation as a whole rather than offering up individual farms.

They say they would not have got as much that way but I find that difficult to believe. The demand for individual farms would have been much greater than it was for the whole operation and therefore the price ought to have been higher.