Crafar farms base for growth by Chinese richlister   27 Jan 2012

The purchase of 16 farms in New Zealand is a base for expansion in dairying by Jiang Zhaobai, one of China’s wealthiest men, according to the Overseas Investment Office (OIO) decision.

The OIO recommended the sale of the so-called Crafar farms to Shanghai Pengxin Group (SPGL) and associated companies and Associate Finance Minister Jonathan Coleman and Land Information Minister Maurice Williamson have approved it.

The sale by receivers KordaMentha has stoked anti-foreign investment sentiment and a rival consortium led by New Zealand businessman Michael Fay is promising a legal challenge.

The OIO decision does not reveal the sale price but says the buyer wants to invest more in New Zealand and will spend more than $NZ100 million in the next five years to promote New Zealand diary products in China.

SPGL has extensive business interests and is owned by Nangtong Yingxin Investments, a Chinese company owned 99 percent by Zhaobai Jiang and his brother Jiang Lei owns 1 percent.

Jiang Zhaobai is a Chinese and Hong Kong citizen. The professional engineer founded a real estate construction company in 1988 and is listed on the 2010 Forbes List as the wealthiest person in China.

The OIO decision says he intends to identify dairying and processing operations in New Zealand which may be appropriate for partnerships.

He does not want to build or own milk processing plans but may invest with joint venture partners in expanding capacity if it is required.

He intends to increase production at the Crafar farms, which have suffered from under investment and poor pasture quality, by investing $NZ15.75 million in the first two years. A breakdown with spending blanked out includes investment in effluent systems. The production goals in a business plan are also blanked out in the decision.

The new owner intends to sell its milk to dairy co-operative Fonterra. The size of the shareholding acquired in Fonterra via farm ownership is blanked out.

“The applicant would be interested in offering expertise from China to collaborate to develop new dairy products for the Asian, and particularly the Chinese, market such as baby formula.”

This decision suggests processing would be in New Zealand.

Jiang Zhaobai is also investing in a farm school on one of the acquired farms to be operated by New Zealand’s state-owned Landcorp, which will manage the farms purchased.

Landcorp will also help develop the applicant’s sheep business in China.

The applicant submitted that a refusal of his application may adversely affect New Zealand’s trade relations in China. The countries have a free-trade agreement.

“SPGL is a credible and well respected business in China with strong business acumen and ability,” the OIO said.

The new owner has to provide public walking access to some areas.

A joint venture owned 50 percent by Landcorp and 50 percent by the Chinese acquirer will develop and manage the farms. Landcorp is a provider of farm management services.

Forbes has Jiang Zhaobai as the 284th richest person in China.

(BusinessDesk)

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