Jan. 27 (Bloomberg) -- Shanghai Pengxin Group Co., a Chinese property developer seeking to export dairy products to Asia, won approval to buy 16 New Zealand dairy farms amid local objections to rising foreign ownership of assets.
Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman approved the deal on recommendation of the Overseas Investment Office, which assesses foreign bids for sensitive New Zealand assets, according to a statement. KordaMentha, which is administering the farms after they were put into receivership, accepted the offer a year ago, conditional on regulatory clearance.
New Zealand farmer groups and opposition politicians have objected to selling farmland to overseas buyers amid concern that key industries were being bought by foreigners. Four months ago, KordaMentha rejected a NZ$171.5 million ($141 million) rival bid from a group of New Zealand dairy farmers led by local businessman Michael Fay, saying the price was unacceptable. The Shanghai Pengxin bid wasn’t disclosed.
“Approving the sale of these 16 farms and selling our other valuable assets will leave New Zealand poorer. Kiwis understand that -- it is why they are so overwhelmingly against it,” David Shearer, leader of the main opposition Labour Party, said in a statement shortly after the decision was announced.
Fay’s group, the Crafar Farms Purchase Group, said it will proceed with a judicial review of the government decision to try to stop the land from being sold to overseas interests, according to an e-mailed statement today.
The properties are a total of 8,000 hectares (19,800 acres) and are capable of supporting 25,000 dairy cattle. They were owned by Crafar family interests before their company was placed in receivership in 2009. Shanghai Pengxin lodged its application in April, indicating it may spend as much as NZ$200 million on the properties in the first two years.
“We accept the recommendation of the OIO to grant consent” to Milk New Zealand Holding Ltd., a unit of Shanghai Pengxin, Williamson said in his statement. The purchase will 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, according to the statement.
Landcorp Farming, a New Zealand government-owned company, was in talks about operating the farms on Shanghai Pengxin’s behalf, the New Zealand Herald reported in January, citing Landcorp Chief Executive Officer Chris Kelly.
Shanghai Pengxin’s offer followed government rejection of an earlier bid by China’s Natural Dairy (NZ) Holdings Ltd. and UBNZ Funds Management Ltd. The Overseas Investment Office said Natural Dairy failed to meet “good character” criteria.
The government gave ministers greater power to quash sales of large farm blocks and other sensitive land to foreign buyers in 2010. The tightened rules require buyers to show how acquisitions benefit the economy.
Shanghai Pengxin owns a 930 hectare sheep breeding farm in China’s Shandong province and purchased a majority interest in a soybean and corn farm in Bolivia for $20 million in 2005.
China’s dairy imports have surged after milk powder in the country was found in 2008 to be tainted with melamine, an industrial chemical. At least six infants died, and more than 54,000 people were hospitalized, after 22 companies including Sanlu Group sold formula made from contaminated milk.
The nation’s dairy market will rise by more than 10 percent a year in value in the next few years, according to Fonterra Cooperative Group Ltd., the world’s largest dairy exporter. New Zealand is the world’s biggest dairy shipper.
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