Ministers Decline Natural Dairy Application for Crafar Farms

22 December 2010

Hon Maurice Williamson and Hon Kate Wilkinson have today declined consent to the application by Natural Dairy (NZ) Holdings Limited (Natural Dairy) to acquire the Crafar farms.

Annelies McClure, Manager of the Overseas Investment Office (OIO), said the Ministers concurred with the OIO’s recommendation that consent should be declined.

Under the Overseas Investment Act 2005, decision-making Ministers must decline consent if they are not satisfied that all of the relevant criteria for consent under the Act have been met.

“One of the criteria for consent is that Ministers must be satisfied that all of the individuals with control of an overseas person are of good character,” said Ms McClure.

“The Ministers were not satisfied that all of the individuals with control of Natural Dairy were of good character. Accordingly, consent was declined.”

Read a Summary of the Decision (attachment below).

Questions & answers

Which Ministers made the decision?
The deciding Ministers were Hon Maurice Williamson, the Minister for Land Information, and Hon Kate Wilkinson, acting for the Minister of Finance.
When was the decision made?
Hon Maurice Williamson and Hon Kate Wilkinson made their decision on 22 December 2010.
What did the OIO recommend to the Ministers?
The OIO recommended to Ministers that they decline consent.
What led the OIO to its recommendation to the Ministers?
Under the Overseas Investment Act 2005, decision-making Ministers must decline consent if they are not satisfied that all of the relevant criteria for consent under the Act have been met. One of those criteria for consent is that Ministers must be satisfied that all of the individuals with control of the overseas persons are of good character.

For the purposes of assessing good character, decision-making Ministers must decide who the relevant individuals exercising control over the relevant overseas person are.

In relation to the purchase of 16 dairy farms by UBNZ Assets Holdings Limited, and the purchase of 80 percent of the shares in UBNZ Assets Holdings Limited by Natural Dairy (NZ) Holdings Limited (from UBNZ Trustee Limited), the OIO recommended to the Ministers that they determine the directors of Natural Dairy (NZ) Holdings Limited to be the relevant individuals with control.

The OIO believed that the directors’ good character could be affected by ongoing investigations into transactions associated with its applications for consent.

In relation to the retrospective application for consent, the OIO considered that both the UBNZ Trust and Natural Dairy (NZ) Holdings Limited were the relevant overseas persons. The OIO recommended to the Ministers that they determine May Wang to be the individual in control of the UBNZ Trust.

The OIO considered that the charges Ms Wang currently faces and the possibility of further charges cast doubt on her good character. In addition, her reported conduct in the context of her bankruptcy proceeding raised further concerns.
What did Natural Dairy (NZ) Holdings Limited, UBNZ Assets Holdings Limited and UBNZ Trustee Limited apply for consent for?
Consent was sought under the Overseas Investment Act 2005 for the following transactions:
  1. The purchase of 16 dairy farms by UBNZ Assets Holdings Limited.
  2. The purchase of 80 percent of the shares in UBNZ Assets Holdings Limited by Natural Dairy (NZ) Holdings Limited from UBNZ Trustee Limited.
In addition, retrospective consent was sought for the following transactions:
  1. The purchase of four dairy farms in February 2010 by UBNZ Funds Management Limited.
  2. The subsequent purchase, also in February 2010, of the four dairy farms by UBNZ Assets Holdings Limited from UBNZ Funds Management Limited.
  3. The purchase, also in February 2010, of 20 percent of the shares in UBNZ Assets Holdings Limited by Natural Dairy (NZ) Holdings Limited from UBNZ Trustee Limited. Note, consent was required because, as a result of the transaction, Natural Dairy (NZ) Holdings Limited and its associate UBNZ Trustee Limited held a 25 percent or more control interest in UBNZ Assets Holdings Limited.
  4. A mortgage granted in May 2010 by UBNZ Assets Holdings Limited to UBNZ Trustee Limited. The mortgage was secured over the four dairy farms purchased by UBNZ Assets Holdings Limited.
Why did Natural Dairy (NZ) Holdings Limited and UBNZ Assets Holdings Limited, UBNZ Funds Management Limited and UBNZ Trustee Limited need consent in the first place?
Natural Dairy (NZ) Holdings Limited is defined as an overseas person by the Overseas Investment Act 2005, as it is incorporated in the Cayman Islands.

The OIO considers that UBNZ Assets Holdings Limited, UBNZ Funds Management Limited and UBNZ Trustee Limited are associates of Natural Dairy (NZ) Holdings Limited. Associates of overseas persons are also required under the Overseas Investment Act 2005 to apply for consent to acquire an interest in sensitive New Zealand assets.
Why did the OIO make its recommendation ahead of the findings of the Serious Fraud Office’s Part 1 investigation?
The applicants had sought a decision ahead of the completion of the Serious Fraud Office’s Part 1 investigation.
Did news reports that May Wang would no longer be fronting Natural Dairy (NZ) Holdings Limited’s bid for the farms affect the OIO’s recommendation to the Ministers?
No. The applications and applicants on which the OIO based its recommendation to the Ministers did not change.
What will now happen with the four Crafar farms purchased by UBNZ Funds Management Limited and UBNZ Assets Holdings Limited?
The OIO will consider its options in relation to the four farms. One option is for the OIO to apply to the High Court to have the farms sold.
What happens to the OIO’s investigation into the acquisition of the four Crafar farms?
As consent was declined for the acquisition of the four farms, the OIO will now conclude its investigation.
What was the focus of the OIO’s investigation?
The purpose of the OIO’s investigation was to determine whether or not each of UBNZ Assets Holdings Limited, UBNZ Funds Management Limited and UBNZ Trustee Limited was an associate of an overseas person (Natural Dairy (NZ) Holdings Limited).

The OIO considers that each company is an associate of Natural Dairy (NZ) Holdings Limited, and therefore consent was required to acquire the four farms and the mortgage over the properties.
When did the OIO receive the applications?
The OIO received the application for consent for the purchase of 16 dairy farms by UBNZ Assets Holdings Limited, and the purchase of 80 percent of the shares in UBNZ Assets Holdings Limited by Natural Dairy (NZ) Holdings Limited from UBNZ Trustee Limited, on 7 July 2010. The retrospective application for consent was received on 10 August 2010.

Media queries: Brad Young, Senior Communications Advisor, ph +64 4 460 0147 or +64 27 277 1267, email media@linz.govt.nz.