The Crafar Farms saga has entered yet another chapter, with King Country iwi Ngati Rereahu launching a challenge through the Supreme Court to stop the sale of the 16 farms to Chinese company Shanghai Pengxin.
At 4:50 on Tuesday afternoon, Landcorp CEO Chris Kelly thought his team would be carrying out due diligence on the state of the farms next Monday as it prepares to take up a management contract on the farms for Pengxin.
That was until the registrar at the Supreme Court phoned, 10 minutes before the appeal deadline, to tell him the iwi's Tiroa E and Te Hape B trusts had filed papers at the Court to challenge a decision by the Court of Appeal, which last month dismissed a bid to stop the sale.
The Court of Appeal case had been brought by the Crafar Farms Independent Purchaser Group, led by controversial merchant banker Michael Fay, and which included the two trusts. The Group had wanted to buy the farms itself - for NZ$171.5 million, well below the reported NZ$210 million Pengxin was willing to pay.
Two of the farms would have gone to the trusts.
NZ Herald reports the trusts are again challenging the Overseas Investment Office's ruling that Shanghai Pengxin had the necessary business acumen to allow them to purchase the farms. The Court of Appeal upheld this ruling, with the involvement of Landcorp a factor in the decision.
The Herald reported a "mystery benefactor" was bankrolling the legal challenge, and that it was not Fay.
Landcorp's Chris Kelly told interest.co.nz that Landcorp had pulled the plug on its due diligence plans following news of the appeal, as Pengxin had still not bought the farms.
If should be known by Christmas whether the Supreme Court would hear the case, he said. If it did, then it could take until halfway through 2013 before Landcorp got on the farms.
Landcorp was eager to do so, he said. The farms’ receivers had been in a very difficult position maintaining them. While the receivers were minimising their spending, they had not been spending one cent more than was necessary.
Despite the constant disruptions, Landcorp was "committed to this through to the end," Kelly said.
The Crafar farms were tipped into receivership by lenders Westpac, Rabobank and PGG Wrightson Finance, who were then owed about NZ$216 million, in October 2009 with KordaMentha appointed receiver. The receivership came after interest.co.nz revealed animal welfare issues at the farms.
10 Comments
I will certainly be watching this case with much interest. While the challenge is over the necessary business acumen, I would like to have seen the economic benefit to NZ also challenged again. Repatriation of profits should be part of the economic loss NZ incurrs when off-shore companies invest here. Yet this appears not to be recognised.
Agreed. If the govt and banks insist that these strategic assets must be sold to the highest offshore bidder, then it should be within a model that develops domestic capital that is more robust than a top heavy corporate (landcorp) with no particularly outstanding skills that sets it apart from 'traditional' farmers, acting as a 'sharemilker'. There is no guarentee that landcorp will turn a profit as a sharemilker, particularly with operating cost inflation.
The profit will be in controlling the product (milk) being sold into China, and NZ should make sure it gets a slice of that pie ad infinitum. Then we may have a chance of buying it back outright when as GBH predicts the Chinese throw in the towel.
"There is no guarentee that landcorp will turn a profit as a sharemilker, particularly with operating cost inflation"
I think that with ROC sitting somewhere above 20% in normal times, it would take a pretty shoddy effort to not make money from the proposed sharemilking deal. They have a good source of organic growth from existing herds to stock the farms with ensuring they aren't forced to buy at a premium and they will not be under usual sharemilker terms (3 years) so being forced to market at the end of contact (key sharemilking risk) shouldn't be an issue either.
Frankly, it is a licence to print money.
It seems I may have to eat humble pie and agree, my xenophobic ignorance clouded what rational ability I have in judgement. In the right conditions it's a licence to print money, but not everyone is laughing to the bank
http://www.stuff.co.nz/waikato-times/opinion/columnists/lyn-webster/6915165/Sharemilkers-shafted-on-TAF-deal
However if Synlait (Bright Dairy) are selling infant formula for $90 a can, then Landcorp on a 50:50 deal with Pengxin will have a licence to print money. It does seem win win. I would like ITYS to qualify normal times though.
Omno - that link you put up shows nothing more than the writers lack of business skills and I feel was written as only half a story for entertainment value.
*No one 'suddenly' loses a 50/50 job.
*I am aware of 50/50 sharemilkers that don't get a share of the dividend receiving 51% of the milk cheque to make up for it. Sharemilkers I speak to are aware of this.
*Owners can sell all or part of their shares to the 50/50 sharemilker - some Maori Trusts used to make this a condition of contract.
*Under taf sharemilkers will be able to buy units and convert them to shares if they later buy a farm.
*50/50 sharemilking agreements are negotiated - if you don't like the terms, don't take the job.
*I'm a silent partner in a sharemilking operation and the cash flow in that, is much better than what I have as a farm owner with a 50/50 sharemilker. :-)
Possibly a bit of entertainment CO, but I think her grievences are probably legitimate. Certainly the sharemilking industry is not as strong and healthy as it once was. 20%ROC wonders why you'd waste your time dreaming of buting a farm, makes all sharemilkers appear to lack business skills. 20% ROC, bet a few stars would have to line up to get that CO, not least a favorable contract.
Kia Ora everyone supporters and or just interested readers.
Yes l must say that l too am very happy with the 2 Hapu's placing there challenge some 10 mins prior to the deadline closure, and that my heart goes out too the Putea benefactor Kia Ora to you or them without that injection we wouldn't have been able to have this very important right of redress.
I do wonder that because the National party is so keen to get into bed with the Chinaman that they didn't offer to them Landcorp Farms l mean to say this Govt Farm is NZ's single biggest Farming operator ever, like they are so wanting to put them into this we should share with you package, why not sell Landcorp Farms, a 50/50 deal can still be arranged we still keep folk working we still get our returns financially, so what's the problem.
Can someone or some expert comment on that and also do note that Landcorp Farms due to the strong banking base that they have as SOE, they tend too make it that much harder for the Typical kiwi farmer to buy a Farm, cause if they want they will always out bid others why you may ask they have the funds to do so.
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