Government scuttles Shanghai Pengxin's $88M Lochinver Station purchase on benefit test
By Jonathan Underhill
Sept. 17 (BusinessDesk) - The government has scuttled Shanghai Pengxin's $88 million purchase of Lochinver Station, which it would have added to a portfolio including the Crafar farms, saying the transaction failed on the test of providing a substantial benefit to New Zealand.
“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," said associate Finance Minister Paula Bennett in a joint statement with Land Information Minister Louise 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 after the recommendation had sat for months on ministerial desks before today's announcement.
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 purchaser looking at the property.
Shanghai Pengxin had agreed to buy Lochinver through its Pure 100 Farm subsidiary. The Shanghai-based group already owns the 8,000 ha Crafar farms and a controlling stake in SFL Holdings, which bought 4,000 ha of Canterbury farms from Synlait Farms. Lochinver had a rateable value of more than $70 million.
Gary Romano, chief executive of Pengxin International, and Mark Franklin of Stevenson Group couldn't immediately be reached for comment.
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 5,260 ha 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."
Set up in 1997 as a commercial property developer, Shanghai Pengxin began diversifying into agricultural assets in 2005. According to the website of its Milk New Zealand subsidiary, it now controls more than 12,000 hectares of land in South America, Cambodia and China, farming wheat, corn, soybeans and sheep.
It said the company wants to utilise its contacts to help the New Zealand dairy industry sell into China and may in time become involved in exporting non-dairy products from New Zealand too.
Milk New Zealand reported an increased profit of $32.8 million in December for the year ended June 30, 2014, up from $11.1 million a year earlier. It has signed a supply and purchase agreement with Miraka for ultra-heat treated milk.
Through its farming operations, Milk New Zealand owns shares valued at $23 million in dairy cooperative Fonterra and $827,569 in fertiliser cooperative Balance Agri-Nutrients.
Jiang, ranked 91 on the Forbes Rich List with estimated wealth of US$1.7 billion, has also bought commercial properties and invested in a number of tourism assets in New Zealand.