Richard Meadows at Stuff reports:
Represented by legal heavyweights Alan Galbraith QC and Bell Gully, the group filed proceedings in the High Court at Wellington to try and get the Official Investment Office’s (OIO) recommendation to be made public. A final decision on the OIO recommendation will be made by Government because it involves sensitive land.
There is no chance of this court action succeeding, in my opinion. The legal action is being done as part of a PR strategy designed to allow Sir Michael to pick up the Crafar farms cheaply.
Fay is a very crafty investor and businessman who has made hundreds of millions out of cunning deals, and is cleverly manipulating Labour’s xenophobia and public opinion to get a a great bargain. Good luck to him with that, but let’s be clear about the motives.
Fay’s alternative purchase group comprises several trusts as well as Aitchison Farms, Donovan Group and Brent Cook. The group had offered $171.5 million for the 16 central and southern North Island dairy farms, which KordaMentha rejected as too low.
Pengxin, which applied to the OIO to buy the farms nine months ago, is the preferred bidder with an offer believed to be around $210m.
So the Fay group is trying to pick up the farms for $40m less than others are willing to pay. What a great bargain, and definitely worth spending a few hundred thousand on PR and law suits, to pressure the Government into making the receiver sell them the farms at a $40m discount.
And here is the interesting thing. If the Fay group do pick up the farms, they will not have any obligations or conditions around their purchase. In fact they will be at total liberty to sell the farms a few months later – including to foreign investors. If they sell them one farm at a time, there will be less of a hurdle with OIO approval, and they’ll make a very tidy profit. So the end result will be the farms end up (inevitably) with those willing to pay the most for them, but the extra $40 million goes to Sir Michael and colleagues rather than the existing owners of the farms.
You can see why Sir Michael is such a cunning businessman, who has made so much money. And good on him – nothing wrong with that. What I am less clear on is why Labour are so keen to help him make a $40m profit at the expense of the actual owners?
New Labour leader David Shearer will visit one of the 16 Crafar farms in Taupo today and is throwing down the gauntlet as the Government prepares to make a decision on the politically charged sale.
“We believe foreign investment should add value to New Zealand. We don’t believe this does,” Mr Shearer said yesterday on the eve of a two-day caucus retreat.
“It asks a fundamental question about who owns New Zealand.”
No it does not. Labour during their nine years in office approved the equivalent of the Crafar farms being sold to foreign owners every single month! Yes the Crafar farms are around 9,000 hectares and Labour approved 650,000 hectares – equal to 75 Crafar farms.
So this is not a huge chuck of NZ land. It is not a fundamental question on anything.
And the politicians often neglect to mention the rights of the owner to get the best price they can for their land. If the owners are forced to accept an inferior offer which is $40m less than their best offer, then those owners have $40m less to invest elsewhere. That $40m may have ended up capital for a couple of small businesses employing 100 people each. It may have been used to invest in an Australian company, hence bringing dividend flows back into NZ.
I should state my view on the Pengxin bid. It is:
- Ministers should follow the recommendations of the Overseas Investment Office. If they recommend approval, they should approve it and if they recommend it is declined, they should decline it. Ministers should not over-rule decisions based on the law, because of a PR campaign by Sir Michael Fay and Labour.
- The current criteria for approving purchases by foreign owners, being that it be in the national interest, seems sound to me. But I’m not against some modification to the criteria for future decisions – however they can not be retrospective, and hence the Pengxin bid should be judged on the current law, not what the law might be changed to.
- The free trade agreement with China has been hugely beneficial to New Zealand. Our exports to China have soared in the last three years, and it has reduced our trade and current account deficits. The xenophobia against this bid has dangerous economic risks. We all know that if this was a British company bidding, it wouldn’t have had one tenth the publicity. It seems silly to spit in the face of our largest growing export market.
- With regards to (3) this does not mean the bid should be accepted if the OIO say it does not meet the criteria set down under law. It means that the bid should be judged on its economic case, not on the colour of the skin of the proposed investors.