Landcorp to pay Chinese millions in rent for Crafar farms says rival bidder

Government-owned Landcorp will pay China’s Pengxin $18 million in rent every year if parties’ joint bid for the Crafar farms is successful.

That’s the latest claim from the farmer group also wanting to buy the farms. And it's a claim Landcorp chief executive is rubbishing.

"I don't know where they dreamt that figure up from. Clearly they don't understand share milking," Chris Kelly told NBR, adding that only brief discussions on partnership arrangements had been held with Pengxin and details would not be finalised until after any approval of the planned purchased.

Hardie Peni, one of several investors in a central North Island-based farmers’ group also seeking to purchase the farms, thinks otherwise, saying "from what we’re hearing Landcorp have negotiated a deal [with Pengxin] that is the standard 50-50 sharemilking deal familiar to the wider dairy industry."

On current Fonterra payout numbers, he says, and based on Landcorp’s plan to produce 5.2 million kilograms of milksolids per annum, Landcorp will pay the Chinese sitting in Shanghai, $18 million in rent per year to be tenants on what was New Zealand farm land.

“No matter which way you look at a deal like that it just seems stupid when there are New Zealand farmers ready willing and able to buy these farms and keep producing milk for the benefit of our local and national economies,” Mr Peni says.

Mr Kelly told NBR no deal has been negotiated and that paying rent was not an option.

"[The partnership details] will depend on receiving OIO approval and on any conditions that might include," he says.

Mr Peni says the fact that OIO figures show approvals for sales of land are increasing should be a concern to all New Zealanders and is a matter of national sovereignty.

“New Zealand farmers can’t buy land in China but overseas buyers are snapping up farms and other valuable land in New Zealand at a rate of more than 107,000 hectares per year for the past five years (2006-2011 OIO figures). That’s 10 Crafar Farm transactions every year.”

Mr Peni said his farming group believed Shanghai Pengxin Group failed the OIO’s key test to buy land because Pengxin is “clearly nothing more than a passive investor … a construction and mining company that admits they don’t know how to farm.”

It is state-owned farmer Landcorp’s involvement that could allow Pengxin to get approval from the Overseas Investment Office.

That decision has not yet been released.

Mr Peni continued his attack saying “the only publicly available information shows Shanghai Pengxin Group has a very high level of debt but has somehow found the backing to make a $200 million deal for the Crafar Farms.”

He says he’s heard that backing comes from a major Chinese dairy company that is a direct competitor to Fonterra.

“If that’s the case Landcorp is not only competing against New Zealand farmers for land, it’s also helping our rivals compete against New Zealand’s most successful export earning company. Is that what the taxpayer wants from our tax dollars? “ 

Mr Peni is part of a syndicate of local iwi and farmers who made a $171.5 million offer (lower than the Pengxin bid) for the Crafar farms last year.

A decision whether Chinese conglomerate the Shanghai Pengxin Group will be able to buy the farms of collapsed Crafar dairying group is in limbo, more than 11 months after an application was made to the Overseas Investment Office. Shanghai Pengxin announced its intentions to by the farming group in February, but the OIO has yet to make a decision on its bid despite having a non-binding 50 day deadline.