Birth woes
OPINION: What does the birth rate in China have to do with stock trading? Just ask a2 Milk Company.
In its report 'Overseas Investment in New Zealand's Dairy Land', KPMG analyses foreign direct investment (FID) decisions by the Overseas Investment Office (OIO) during 2013-2014.
It shows that the US was the largest investor in dairy land during that two-year period – accounting for 56% of the freehold hectares sold and 26% of payment for land by foreign investors.
Justin Ensor, KPMG deal advisory partner, says this highlights a common misconception about offshore investment in our dairy farms.
"There is a widespread perception that it's a thin market of Chinese and Hong Kong investors who are buying NZ dairy land," he says. "In reality, though, the market has a broad base of investors."
China accounted for only one of the 24 transactions for dairy land approved by the Overseas Investment Office (OIO). That was the major acquisition of Synlait Farms, which accounted for 12% of hectares sold and 21.3% of money paid.
Earlier this year, the Government rejected an $88 million bid from Pure 100 Farm Ltd, a subsidiary of Chinese-owned Shanghai Pengxin, to buy Lochinver Station because the benefits to NZ were not "substantial and identifiable".
A Shanghai Pengxin-controlled company also recently withdrew from of a $42.7 million deal to buy a cluster of Bay of Islands farms, saying it will not put the sellers through the "frustration and pain" of a Lochinver Station-type experience.
Dakang New Zealand Farm Group, 55% owned by Shanghai Pengxin, applied to the Overseas Investment Office in April this year for consent to buy 3300ha from Northland's Pinny family.
Six months on, the company said it had yet to receive advice that the OIO had considered the sale or made a recommendation to the Government.
Dakang chief executive Gary Romano said the decision to cancel the Pinny sale and purchase agreement was "somewhat" based on the company's experience with its 2014 sale and purchase agreement to buy the Lochinver cattle and sheep station near Taupo.
Key findings from KPMG
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- The US accounted for 55.9% total freehold hectares purchased by overseas investors in 2013-2014. This was followed by China (12.0%), Sweden (6.1%) and the remainder in 11 other countries.
- The US accounted for 26.5% of payment for dairy land, followed closely by China (21.3%).
- Total disclosed payment during the period was about $297 million.
