Supreme Court tosses out Iwi attempt to overturn Shanghai Pengxin’s bid for Crafar Farms

The Supreme Court has rejected a bid by two North Island iwis to overturn Shanghai Pengxin’s successful bid for the Crafar farms.

The court’s decision to reject the iwi’s appeal against the recent Court of Appeal’s judgment upholding Shanghai Pengxin as having the requisite business acumen and experience to run the dairy farm business is good news for all other successful offshore investors in NZ agricultural businesses

At the inaugural China Business Summit on October 3, Shanghai Pengxin CEO Jiang Lei was asked by Fran O’Sullivan to comment on the Supreme Court appeal.

Jiang made four points:-

  1. Shanghai Pengxin “respected the New Zealand judicial system”;
  2. The main reason for the litigation was that “Pengxin directors didn’t know how to milk cows” – in other words did not have the relevant experience and business acumen to successfully own and operate the Crafar farms dairy business. Said Jiang, ” I was born in a farm family. I started in business in real estate. We have invested in residential, commercial, hotels, infrastructure, mining and agriculture. If we haven’t tried something new to diversify our investment I would still be a farmer. It would be impossible for me to come to Auckland and meet the audience here.”
  3. Innovation and entrepreneurship is the core spirit of a company. Without them, it is impossible for a company to grow. Our slogan is ‘better than expected’. We truly believe the purpose of legislation on foreign investment is not only to regulate overseas investment, but also and most importantly, to open the door to foreign companies who meet the criteria and are innovative in leading the way.”
  4. We believe the Supreme Court will make the right decision. This decision is important for Pengxin and for New Zealand’s future economic development.”

 

Shanghai Pengxin’s press statement reads:

Chinese buyers of Crafar farm l ook forward to increasing milk production and deciding on processing options

Shanghai Pengxin, the Chinese company which spent the last 18 months waiting for final approval to buy the 16 North Island Crafar farms, says it is delighted the Supreme Court has refused to allow a further legal appeal by iwi, and that there is  now no obstacle to the purchase being concluded before the end of the year.

The company says the purchase has been an unbelievably protracted process, but it never considered giving up at any stage, and looks forward to a positive relationship with the dairy industry and the local communities in which it will shortly be a corporate dairy farmer.

“Over time, we hope we will demonstrate many benefits in New Zealand and China working together and maximising the opportunities available for New Zealand’s largest industry in China,” says the company.

The purchase will be in the name of Milk New Zealand Holding Ltd, a subsidiary of Shanghai Pengxin. The farms will be managed by a joint venture company, Milk New Zealand Farm Management Ltd (“MNZFML”) a 50/50 joint venture with Government-owned Landcorp, which will be the managing partner.

Landcorp chief executive Chris Kelly says the next stage is a period of due diligence where an inventory of the physical assets of each farm will be checked and the herds reviewed. The various management contracts and sharemilking contracts which the company will take over from the Receiver, will be activated before the transaction is settled.

“All going well, we expect to take over the running of all the farms early in December,” says Chris Kelly.” Our early priority will be to begin the upgrades necessary if we are to meet our increased production targets and to commence the environmental upgrades which have been agreed with the Overseas Investment Office.  We are also required to establish a dairy training school on one of the properties so will be involved in planning that.”

Kelly said MNZFML intends to spend some $15.7 million on the properties in the first three years.

For the time being, Milk New Zealand will continue to supply the milk production from its farms to Fonterra.

But , with finality of ownership now achieved, Milk New Zealand Holding is able to make progress on its options to process milk production from the farms and create a range of high value consumer products for sale in China. Spokesman Cedric Allan said this may be a contract arrangement with a New Zealand supplier or a joint venture with a New Zealand company. Milk New Zealand Holding has set aside a marketing budget of $100 million in China in the first five years.

Final steps will now be taken to form MNZFML and appoint directors and a Chairman, who will be announced shortly.

Allan said Milk New Zealand remained interested in acquiring further dairy farms if the right opportunities arose, and is still prepared to continue discussions with the iwi wishing to buy two of the Crafar farms.

“We’re prepared to talk, but it has to be on a commercially realistic basis. We have no interest at all in conducting negotiations through the media.

‘We are inviting a Maori business delegation to visit China this year talking about more opportunities with wider iwi.

‘Milk New Zealand will set up a head office in Auckland soon.

“We thank all the individual New Zealanders who have supported us and encouraged us and we look forward to working and partnering with talented New Zealanders and organisations to create a brighter future for the New Zealand dairy industry.”

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