Associate Finance Minister Paula Bennett & Land Information Minister Louise Upston said yesterday they’d turned down Shanghai Pengxin Group Co Ltd’s application to buy Lochinver Station “because the benefits to New Zealand are not substantial & identifiable”.
Pengxin, given its performance after buying the Crafar family’s portfolio of 16 farms, and Stevenson Group Ltd, after an extensive marketing campaign before selling Lochinver, were bewildered by an apparent change in Government stance.
In 2012, ministers approved the sale of the Crafar family’s portfolio of 16 farms to a Shanghai Pengxin subsidiary, Hong Kong-incorporated Milk NZ Holding Ltd. Shanghai Pengxin, headed by Jiang Zhaobai, is also majority shareholder in Synlait Farms Ltd.
Shanghai Pengxin overcame an appeal by iwi & Sir Michael Fay against its Crafar farms purchase on the basis of a Court of Appeal finding that “generic business skills & acumen” held by the directors of the local holding company.
Another subsidiary, Pure 100 Farm Ltd, signed an agreement in July last year to buy the 13,843ha Lochinver Station in the central North Island from the Stevenson Group family for $88 million.
But Mrs Bennett said: “Because Lochinver Station is classified by law as sensitive land, ministers must consider whether the application meets the requirements set out in the Overseas Investment Act.
“While we recognise & support the importance of overseas investment, the Overseas Investment Act states it is a privilege for overseas people to own sensitive New Zealand assets and therefore requires such investments to meet statutory criteria for consent.
“After detailed & careful individual consideration, we are not satisfied there will be, or is likely to be, a substantial benefit to New Zealand – a key requirement for applications of sensitive land of this size.”
The Overseas Investment Office recommended approving the application, saying the question of whether the benefits of the potential investment to New Zealand were or could be substantial & identifiable was finely balanced.
Ms Upston said: “We agreed parts of the proposed investment could benefit New Zealand but, in our judgment on the overall balance of evidence, the benefits are not likely to be substantial & identifiable.
“This proposed sale didn’t pass a test we are required to exercise ministerial judgment on. This is an example of our system working well. The Overseas Investment Office conducted a thorough investigation before making a finely balanced recommendation. Ministers carefully assessed the evidence and ultimately came to a different view.”
The Stevenson family bought its first 5260ha at Lochinver, 32km from Taupo, in 1958 and, from 1961-82 under Sir William Stevenson, 12,500ha of scrubland was converted to productive farming.
Shanghai Pengxin began as a commercial property developer in 1997 and expanded into farming in China, South America & Cambodia and copper mining in the Congo since 2005.
Shanghai Pengxin said the improvements it had made to existing assets were well known: “Pengxin has spent more than $18 million since settlement to improve the productivity & environment of the former Crafar farms to new historical levels. We are surprised & extremely disappointed with the decision and will be considering our options.”
Stevenson Group chief executive Mark Franklin was disappointed by the process & the outcome: “At this stage I am not sure we agree with the assumptions used or the way the criteria has been applied. Certainly the assumptions that have been used do not reflect our reality – we carried out extensive marketing of the farm and the hypothetical New Zealand purchaser did not come out of that process.
“We are concerned that this process has taken 14 months, with the end result that we have been deprived of our property rights to sell to the highest value bidder for some vague national benefit which has not been defined.
“We are unclear as to why this property is different to the many others that have been approved through the Overseas Investment Office process, given the obvious benefits both to the farm and to Stevenson Group.
“Beyond this transaction, this decision will have significant economic ramifications for the New Zealand economy, particularly in the areas of international relations, uncertainty of foreign investment and rural land prices.”
3 August 2014: Craig reveals Pengxin purchase of Lochinver Station
10 August 2012: Court finds Pengxin boss’s general skills & acumen enough to allow Crafar farms purchase
23 April 2012: Shanghai Pengxin gets OK to buy Crafar farms
Attribution: Ministerial, Pengxin & Stevenson releases.