Shanghai Pengxin receive offers for 'legitimate' farm sale

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Jiang Zhaobai, billionaire chairman of Shanghai-based Pengxin Group.

Stuff | 28 Jul 2015

Shanghai Pengxin receive offers for 'legitimate' farm sale

GERARD HUTCHING

Bidders have made offers for what Shanghai Pengxin says is the "legitimate" sale of its dairy farms in south Waikato.

However company chief executive Gary Romano has refused to say who made the bids for the former Crafar farms, or what kind of bids they were.

Shanghai Pengxin owner, Chinese billionaire Jiang Zhaobai, has offered for sale on Trade Me its total farm assets, which include its dairy farms in south Waikato for which it paid $200 million, and a conditional agreement to buy Lochinver Station.

He has to do so because he wants to sell down his interest in Shanghai Pengxin from 99 to 55 per cent, to Chinese company Hunan Dakang,.

Part of the sale also includes management rights over the Synlait Farms in the South Island.

The Overseas Investment Office (OIO) requires all of Shanghai Pengxin's assets be offered to New Zealanders if the company is restructured.

By Tuesday, the Trade Me site had been viewed 2624 times. The farms were put on sale on July 19, and have to be advertised for 20 working days.

Asked if Shanghai Pengxin was just going through the motions of selling, Romano said it was a "legitimate" sale.

"The OIO require a bona fide process to be gone through where legitimate bidders for those assets are found and we are doing that, the assets are genuinely for sale. We'll see what happens," Romano said.

"All sorts of bids" had come in which were being "professionally evaluated and assessed", he said.

The fact that so many people had viewed the Trade Me site showed it was an effective medium, and it was now well known within New Zealand that the assets were for sale.

A representative of one of the iwi involved in a failed bid for the farms in 2012, Hardie Peni, questioned whether the latest sale was serious.

"If it is a genuine sale we would think of making an offer. But where is an independent assessment and audit of the process?" Peni said. He heads the Tiroa E Trust, based in Te Kuiti.

Sir Michael Fay challenged the original decision to sell the farms to Shanghai Pengxin in 2012, in the hope that a lower $171.5 million bid for the 16 farms would win out.

Fay could not be contacted for comment as to whether he was again interested in buying them.

Another potential bidder who has opted out of making a play for the farms is Tainui Group Holdings. Chairman Sir Henry van der Heyden, who has recently not ruled out future dairy farm purchases, said Tainui would not be bidding for the farms.

Romano said companies restructured all the time.

"The reasons are numerous and varied but would include access to the Chinese capital markets so that there is then more capital available to develop those farms.

"Jiang Zhaobai wants to get it effectively down from 99 per cent [ownership] - his brother owns 1 per cent -  and he'd like to put it into a publicly listed vehicle in which he is also a major shareholder.

"But under New Zealand law you effectively are selling these assets to an offshore entity and because you are doing that, you need to offer those same assets to New Zealanders to enable them to bid for them."

The sell down of assets was not a sign of lack of confidence from Jiang in the dairy industry.

As well as having to put all its assets up for sale, Shanghai Pengxin also has to apply to the OIO for new consents to run the farms.

That means it must prove that it its management will be more beneficial to New Zealand than the best local offer, economically as well as environmentally, socially and culturally.

Romano said he did not know how long that would take. Under the OIO rules, a new owner would have to hand over a business plan and set out its intentions for the assets.

"All I can tell you is we put in a business plan, we tell the government through the OIO what we are going to do over the next five years, every year we provide a status report of what we have done, and our commitments, we try to run the farms according to best practice, in terms of performance, environment, the way we look after people and animals."

Hunan Dakang is an investment vehicle, which also has pig breeding and sheep farming interests in China.

Romano said it was trying to become a broader based agricultural company and so had expanded into dairy farming.

Hunan Dakang shares fell by 6 per cent on Monday. They reached a year high of 11.65 yuan in June but have since dropped to 7.63 yuan.

 - Stuff

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