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Hot Topic NBR Focus: GMO
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Cabinet ministers torpedo Lochinver sale to Chinese

 UPDATED: Shanghai Pengxin subsidiary Pure 100 Farm considers options I Stevenson Group slams decision.
Labour Finance Spokesperson Grant Robertson talks about the Lochinver sale on NBR Radio and on demand on MyNBR Radio.

Sally Lindsay
Thu, 17 Sep 2015

See also: Tough job to re-market Lochinver

UPDATE: As widely expected, Associate Finance Minister Paula Bennett and Land Information Minister Louise Upston have torpedoed the sale of Lochinver Station to Chinese firm Shanghai Pengxin.

Ms Bennett says ministers are not satisfied there will be substantial benefit to New Zealand in the $88 million deal.

“After detailed and 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," Ms Bennett said in a joint statement with Ms Upston. 

The decision ends a long wait for Shanghai Pengxin, the diversified investor owned by Chinese billionaire Jiang Zhaobai,  which agreed to buy the 13,843 hectare farm near Lake Taupo from concrete, quarrying and engineering firm Stevenson Group last year. The deal required approval from the Overseas Investment Office, which had given the green light, but the recommendation sat for months on ministerial desks before today's announcement.

Read the full decision here.

Documents released today show the minister had asked the OIO to get expert advice on the deal from economist John Small as part of its consideration. The ministers expected Lochinver would be sold whether or not the Shanghai Pengxin deal went ahead because there was an alternative New Zealand-based buyer looking at the property.

Shanghai Pengxin had agreed to buy Lochinver through its Pure 100 Farm subsidiary. The Shanghai-based group already owns the 8000ha Crafar farms and a controlling stake in SFL Holdings, which bought 4000ha of Canterbury farms from Synlait Farms. Lochinver had a rateable value of more than $70 million.

The Stevenson family has owned Lochinver for 60 years but started as a drain-laying business in 1912, expanding into quarrying and construction in the late 1930s, and making concrete blocks from 1946. The original 5260ha Lochinver farm was acquired in 1958 and the family expanded to 16,595 ha "breaking the wild country into farming land" with "an enormous amount of hard work."

Ramifications for New Zealand

Stevenson Group chief executive Mark Franklin
 issued a statement expressing disappointment at both the process and 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 buyer 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 from the many others that have been approved through the OIO 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.”

Chinese may appeal

Meanwhile, Pengxin-subsidiary Pure 100 is considering its options following the rejection.

“The improvements we have made to existing assets are well known.  Pengxin has spent more than $18 million, since settlement, to improve the productivity and environment of the former Crafar farms to new historical levels. 

“We are surprised and extremely disappointed with the decision and will be considering our options.”

EARLIER: Associate Finance Minister Paula Bennett is to make an announcement at 11am on the $88 million sale of Lochinver Station to Chinese billionaire Jiang Zhaobai's Shanghai Pengxin subsidiary Pure 100 Farm.

It is believed Ms Bennett and Land Information Minister Louise Upston have torpedoed the controversial sale because of strong opposition to the deal, which was announced in the run up to last year's general election.

The current owner, the Stevenson Group, has extended the sale deadline a number of times since the original  application by Shanghai Pengxin to buy the 13,837 hectare station was filed with the Overseas Investment Office (OIO) in July last year. The OIO’s decision is reported to have been sent to the Ministers before Easter this year for a decision.

During the application process Shanghai Pengxin rearranged its structure and Chinese-listed Hunan Dakang Pastoral Farming Co would have eventually become of the owner of the station if Pure 100 Farm was given the green light to buy it.

Hunan Dakang, which is 51% owned by Shanghai Pengxin, is in the process of buying the New Zealand assets from An Yuan Dairy, another Shanghai Pengxin subsidiary and has filed for OIO approval. Those assets include the Crafar Farm Holdings and other dairy farms currently being assessed by the OIO.

It has also filed  applications to acquire the management rights over share in SFL Holdings, which owns 73.91% of Canterbury’s Synlait Farms and also to buy 3600ha in various titles near Kaikohe in Northland.

Ms Bennett says she has no comment to make on the Lochinver OIO approval before making the announcement.

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Sally Lindsay
Thu, 17 Sep 2015
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Cabinet ministers torpedo Lochinver sale to Chinese