NZ government blocks Shanghai Pengxin Lochinver farm buy

The New Zealand government has blocked Shanghai Pengxin’s purchase of the country’s largest dairy farm, halting the Chinese conglomerate’s ambition to build a NZ$1bn farm empire.

The New Zealand government has blocked a deal by Chinese conglomerate Shanghai Pengxin to buy the NZ$70m ($45m, €39m) Lochinver dairy farm, scuppering the country’s largest single farm sale and sending a warning to acquisitive foreign groups.

New Zealand ministers rejected the sale by mining-to-farming group Stevenson due to the sheer size of the 14,000-hectare farm near Taupo on the North Island, as well as a lack of benefits for the country. The decision overturns the previous decision by the Overseas Investment Office to allow the sale after months of deliberations. Pengxin, through its Pure 100 subsidiary, agreed to buy the farm in August last year after Stevenson put the property up for sale to raise capital for its quarrying projects.

“As Lochinver is 35 times bigger than other dairy farms, we see this as sensitive land but also of real significance,” Associate Minister of Finance Paula Bennett told press following the decision.

While the New Zealand government has said it supports foreign acquisitions of land in New Zealand, the rejection of the deal follows growing concerns of land grabs by overseas buyers.

Shanghai Pengxin paid NZ$200 million for the Crafar group of 16 dairy farms in 2012 through its subsidiary Milk New Zealand. It also bought a further 13 Synlait farms through a joint venture with that company’s management. Andy Macleod, chief executive of the Pengxin New Zealand Farm Group, was quoted earlier this year as saying that the Shanghai group wanted to double its assets in the country to NZ$1 billion within five years.

The firm, controlled by billionaire Jiang Zhaobai, is also reported to be interested in Australian cattle ranch Kidman Estate, the largest privately-owned farm in the world not controlled by a monarch, as well as Consolidated Pastoral, bought by private equity firm Terra Firma in 2009. It is just one of group of Chinese groups being encouraged to invest overseas to help satisfy growing domestic demand for meat and dairy produce.

Shanghai Pengxin said in a statement that was it was “surprised and extremely disappointed with the decision and will be considering our options”. Stevenson has also expressed disappointment at the decision.