Natural Dairy contracts Fonterra milk ahead of Crafar deal

Tuesday 6th July 2010

The Hong Kong investment group seeking to buy the Crafar family farms says it already has contracts in place to buy Fonterra milk and manufacture UHT milk for export through a Tauranga-based processor.

Natural Dairy (NZ) Holdings also announced today that it has finally lodged an application with the Overseas Investment Office (OIO) to buy the Crafar family farms. Receivers for the Crafar family empire, Korda Mentha, are due to announce a preferred buyer tomorrow, with at least one rival bid coming from state-owned farmer Landcorp.

While Landcorp says its bid is likely to be lower than NDNZ's, it has the advantage of not requiring OIO approval, which is inevitably some months away for NDNZ, assuming it is granted at all. The diversified Hong Kong investor lodged the application after its New Zealand subsidiary, UBNZ Assets Holdings, made an unsuccessful bid in the High Court to skirt around OIO to buy the farms, a decision which has been appealed.

Natural Dairy vice chairman Graham Chin released details about how the company will operate in New Zealand, saying the manufacturing agreement for 150 million packs of UHT milk that has previously been announced will be supplied by Fonterra Cooperative Group and processed in Tauranga.

"As proof of its commitment, prior to assuming ownership of these farms, the company has already negotiated a contract to produce and export 150 million packs of UHT milk, using Fonterra supplied milk and a local New Zealand processing operation," said NDNZ in a statement.

Natural Dairy subsidiary Guo Yuan Natural Dairy (Jiangxi) will pay 70 cents a package, including a $21 million deposit to UBNZ Funds Management, and engage the firm on a non-exclusive basis. Chin said the investment will add 60 jobs to the Crafar portfolio of farms and will boost the country's exports by at least $100 million, due to Natural Dairy's existing food distribution lines into China.

Under a successful Natural Dairy bid, the 14 sharemilkers employed on the farms will have access to a sharemilking fund at discounted rates starting at $1 million. Prime Minister John Key endorsed the Landcorp bid, telling Radio New Zealand it was a sensible move, though he recognised it is a competitive bid with other potential bidders.

Businesswire.co.nz

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