Hong Kong's Natural Dairy backers fail 'good character' test, Crafar bid rejected
Dec. 22 (BusinessDesk) - The backers for Natural Dairy (NZ) Holdings of Hong Kong have failed the 'good character' test of New Zealand's foreign investment regulator, which rejected an application to buy the Crafar farms.
The decision rested with ministers Maurice Williamson and Kate Wilkinson, who accepted the Overseas Investment Office recommendation that the consent be declined. The Hong Kong-based company had already suffered a setback when its New Zealand-based front-women, May Wang, was bankrupted after her business group failed.
Natural Dairy had vowed to persevere with its application to buy the farms left in the hands of receivers for the Crafar family. The Crafar's fell into public ignominy when footage of ill-treated calves was made public and then the $200 million debt overhang of their central North Island dairy empire sank the business.
Annelies McClure, the OIO's manager, of the Overseas Investment Office (OIO), said ministers had rejected the proposal on the "good character" test which states that a foreign investor must be of good character to meet the requirements of the OIO Act.
“The Ministers were not satisfied that all of the individuals with control of Natural Dairy were of good character," McClure said. "Accordingly, consent was declined.”
Natural Dairy, whose shareholders dumped vice-chairman Graham Chin earlier this month, was hoping to break into China’s high-end dairy products, where demand for quality goods has surged amid the melamine scandal in 2008, in what was to be a $1.5 billion buy-up of land and processing facilities, though the failure to immediately secure the Crafar farms scaled back those plans.
The case provoked a public backlash and forced the government to back down on opening up foreign investment rules, which instead clamped down on the Overseas Investment Office, particularly on farm sales. That came even while deals such as the sale of shares in Synlait to China’s Bright Dairy have passed unscathed.
The company's Chinese subsidiary, Jiangxi Natural Dairy, previously entered into a 12-month agreement with Wang's UBNZ Funds Management Ltd. to supply and process about 37.5 million litres of UHT milk for some $105 million.
UBNZ Funds will have to source about 39 million litres of raw milk from Fonterra Cooperative Group, and has told Natural Dairy it has leased a vacant factory and sourced three UHT milk production lines.
Still, the fate of the UBNZ group of companies, which also hold a stake in Genesis Research & Development Corp., is up in the air after Wang’s bankruptcy