Pengxin gains extension on Crafar buyout

By Ankush Chibber

- Last updated on GMT

Related tags: New zealand, Milk

Chinese company buys out Crafar New Zealand dairy farms
Chinese company buys out Crafar New Zealand dairy farms
China-based Shanghai Pengxin Group has been granted an extension until February 7 to finalise the purchase of New Zealand Crafar Dairy farms, KordaMentha, the farms’ receivers announced today.

Last week, the Chinese company via its local subsidiary, Milk New Zealand Holdings, had been granted approval to buy the 16 farms in a deal reported to be worth NZ$210m.

The approval was granted by New Zealand’s land information minister, Maurice Williamson, and associate finance minister, Jonathan Coleman, following a recommendation from the country’s Overseas Investment Office (OIO).

KordaMentha said the extension has been granted for the Chinese company to finalise OIO consent conditions.

Crafar went into receivership in 2009 as the recession bit and payments dropped from Fonterra.

A controversy steeped in protectionism

The deal has been attacked by conservatives as well as a local consortium of companies and farmers.

So controversial is it in fact that a body called the Crafar Farms Purchase Group - led by businessman Sir Michael Fay - is challenging the ministerial decision in court.

Fay and the group had made a NZ$171.5m offer for the farms back in September, which was declined by KordaMentha, and since then it has been threatening to take the government to the court over the sale.

Farmers back the deal

However those directly affected - the farmers - have backed the buyout by Shanghai Pengxin. In a statement, the Federated Farmers said that it backed the OIO decision.

“The OIO needs to follow its own rules and processes without fear or favour. Fay's legal challenge will put overseas investment rules and processes through the judicial wringer. It may provide a much-needed acid test that in the long-run, could add confidence to OIO processes,”​ said Federated Farmers president Bruce Wills.

Wills said that there are advantages for New Zealand in the sale, such as promotion in China.

Big benefits for New Zealand dairy sector, says agri expert

Professor Jacqueline Rowarth, director, Massey Agriculture, Massey University told FoodNavigator-Asia the sale opened up opportunities for the New Zealand entity.

“The good thing is that with Landcorp management and Fonterra processing, NZ still has control of the NZ brand,”​ she pointed out.

“However, Fonterra already has products in China [infant formula and Anlene] and so to maximise potential there needs to be considerable research, perhaps by the Chinese company on market niche i.e. product and packaging size,” ​she remarked.

Rowarth was more concerned about actual manufacturing businesses “like milk factories being purchased by overseas investors as that means potentially losing the NZ brand.”

“Whether this means further sales are easier is unlikely as the hurdles aren't being eased - it just might be that there isn't such a splash in the media.”

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