Court Halts Sale of New Zealand Farm to Chinese


WELLINGTON—New Zealand's High Court ordered the government to reconsider a Chinese company's purchase of farms, highlighting growing concerns over Chinese investment in land in this agriculturally dependent nation.

The ruling was made after a group of farmers and Maori trusts sought to block the sale of 16 dairy and drystock farms to Shanghai Pengxin Group Co.'s Milk New Zealand Holdings Ltd. unit, approved earlier this year by Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman. Messrs. Williamson and Coleman weren't immediately available for comment.

The plaintiffs are members of a consortium known as the Crafar Farmers Independent Purchase Group that offered $171.5 million New Zealand dollars (US$143.5 million) for the farms. Pengxin was awarded the sale after making the highest offer, saying it will invest more than NZ$200 million to buy the properties and related assets and upgrade the farms. The deal is contingent on government approval.

The consortium's spokesman, Alan McDonald, welcomed Wednesday's ruling.

"Our view was that Shanghai Pengxin's offer brought no real economic benefit to New Zealand and it was not in the best interests of New Zealanders," he said.

A Shanghai Pengxin spokeswoman said that the company is keeping an eye on this development. "We just want to develop the farms well," she said.

Under current legislation, overseas investment in farm land is permitted only if the acquisition benefits New Zealand, and the court ruling by Justice Forrest Miller said that the economic benefits to the country from a Pengxin purchase were overstated.

"If a given benefit will happen anyway, it cannot easily be described as a substantial consequence of the overseas investment," the ruling states.

China is New Zealand's second-largest market after Australia, and New Zealand was the first developed nation to sign a free-trade agreement with Beijing, though recent investments have caused anxiety among some groups in the island nation.

New Zealanders have become increasingly concerned about land sales as higher agricultural prices and a tightening of credit availability make it more difficult for local farmers to buy property. Meanwhile, overseas interest in New Zealand land is growing as foreign entities look to shore up their supply chains.

Data from the Overseas Investment Office show a net 68,054 hectares of land was approved for sale to foreign investors in 2011, compared with 17,040 hectares the previous year.

New Zealand's agricultural sector contributes about 60% of the country's export income. Most local family-owned farms also contribute to and are shareholders of New Zealand's largest company, dairy cooperative Fonterra Co-operative Group Ltd.

The Overseas Investment Office said it will apply the approach directed by the High Court and make a new recommendation to the ministers in a matter of days.

The 16 farms concerned, covering a combined 19,501 acres, were put up for sale by receivers KordaMentha after the owner was placed into receivership.


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