Published 5 June 2010
Justice Rhys Harrison reserved his decision yesterday on an application by UBNZ Funds Management Ltd (May Wang) for a declaration that its setup wouldn’t put it in breach of overseas investment regulations if it bought 16 of the Crafar family’s farms from their receivers.
The judge said he hoped to be able to produce a decision by next Friday.
UBNZ wants a ruling to enable it legally to buy the farms. The receivers, Michael Stiassny & Brendon Gibson (KordaMentha Ltd), were appointed last October, entered negotiations with Ms Wang on $200 million of farms then, in April, launched a tender through Bayleys, which closes on Wednesday 23 June. However, on 22 May, the receivers said they had a conditional agreement to sell the farms to interests Ms Wang represents, with Overseas Investment Office approval as a condition.
UBNZ’s case, as presented in court by Bruce Gray QC yesterday, revolves around it & Natural Dairy’s ownership intentions. The Overseas Investment Office says UBNZ has been shifting around trying to get past the Overseas Investment Act, but would still be in breach.
Ms Wang has an appointment with the bankruptcy court next Tuesday over an unpaid bill for $620,000. When that case entered the courtroom in May, she staved off bankruptcy with a debt-compromise scheme which still hadn’t been filed and supposedly offers her creditors 6c:$1.
Ms Wang has 3 UBNZ companies – UBNZ Funds Management & UBNZ Trustee Ltd (she’s sole director of both and holds all the shares in each company in several parcels) and UBNZ Assets Holdings Ltd (she was joined on the board in March by Sir Ralph (Ngatata) Love & ex-KPMG partner Keith Rushbrook; Mr Rushbrook resigned 14 May).
UBNZ Trustee owns 80% of UBNZ Assets, Natural Dairy (NZ) Holdings Ltd 20%. Natural Dairy, incorporated in the Cayman Islands and listed in Hong Kong, bought its 20% stake for $100 million in February.
The Overseas Investment Office said on 7 May it had launched an investigation into the purchases by interests fronted by Ms Wang of 4 farms previously owned by Crafar family interests. Under the Overseas Investment Act, overseas persons & their associates who intend to buy sensitive New Zealand land require consent from the Overseas Investment Office. The office considered the land in question to be sensitive land under the act.
2 of the acquisitions were from the receivers of Nugen Farms Ltd (Robert Crafar, son of Crafarms’ Allan Crafar), John Whittfield & Dennis Wood of McDonald Vague. Mr Whittfield said UBNZ Funds Management bought 2 farms in February for a total $10.1 million, including stock, then onsold the same day to UBNZ Assets Holdings, which Overseas Investment Office manager Annelies McClure said was controlled by Natural Dairy.
Ms McClure said the land titles register revealed UBNZ Funds bought 2 more farms 4 days later, again onselling to Natural Dairy.
In court, Mr Gray said UBNZ wanted to acquire the farms, while Natural Dairy saw an opportunity to sell longlife milk in China under a structure which would enable it to control the product from cow to customer.
Under the earlier structure, Natural Dairy had intended to become the owner of all UBNZ Assets’ shares, and thereby owner of all the farms.
“For various reasons the proposal that a foreign company acquire the volume of farms proposed in this exercise has become politicised and Natural Dairy has come to the conclusion now is not the time to make the application.” He described it as a “modest but significant” transaction.
In place of that scheme, UBNZ had created a series of capitalised structures, with a circuit breaker: “The documents show that UBNZ Assets has been capitalised so it can purchase and it can afford to hold farms – own them in its own right for the foreseeable future. And we say that UBNZ Assets is not subject to control by Natural Dairy or any other overseas person. None of the normal indicia of control are present. Natural Dairy has no right to appoint directors (unless there are 5, in which case it can appoint one), there are no negative pledges and no constraints on the directors of UBNZ Assets on the way in which they manage the company.
“If it be said that there might be arrangements between Natural Dairy & UBNZ Assets which are outside the agreements so the agreements do not reflect the arrangements between the companies and are effectively a sham…”
Justice Harrison interrupted:”No, the issue for determination is whether or not the relationship is of an associate between Natural Dairy and one or more of the UBNZ companies. “
Mr Gray: “We accept that Natural Dairy & UBNZ Assets have a relationship, have had in the past and will have in the future. And we think it likely that when section 8 of the Overseas Investment Act is considered,