Overseas investment decision for case 201320092 - New Zealand Standard Farm Limited

Consent has been granted to New Zealand Standard Farm Limited becoming the sole shareholder of SFL Holdings Limited, by:

(a) New Zealand Standard Farm Limited acquiring the B and C Shares of SFL Holdings Limited (comprising 26.0855% of the shares of SFL Holdings Limited); and/or
(b) SFL Holdings Limited acquiring its own B and C shares under section 58 of the Companies Act 1993;

which will result in:

(a) an overseas investment in sensitive land, being an increase in New Zealand Standard Farm Limited’s existing 25% or more ownership or control interest in SFL Holdings Limited, which owns or controls:

(i) “B24 Dairies” and “Treevale Farm”: 438.2239 ha freehold;
(ii) “Beacon Dairies”: 379.3591 ha freehold;
(iii) “Colosseum”: 275.3515 ha freehold;
(iv) “Delaborin Dairies”: 375.0146 ha freehold;
(v) “Dunsandel One” and “Dunsandel Two”: 576.9113 ha freehold and 36 ha leasehold;
(vi) “Lighthouse Dairies”: 230.5995 ha freehold;
(vii) “Morton Marsh Dairies”: 308.0581 ha freehold;
(viii) “Riverlands Dairies”: 640.4592 ha freehold;
(ix) “Robindale Dairies”: 586.5238 ha freehold and 51.9141 ha leasehold;
(x) “Tapatoru Farm”: 318.2545 ha freehold; and
(xi) “Waitai Farm”: 343.0962 ha freehold; and

(b) an overseas investment in significant business assets, as the value of the assets of SFL Holdings Limited and its 25% or more subsidiaries is more than $100m.

The Applicant is seeking consent to acquire both sensitive land and significant business assets under the Act.

SFL Holdings Limited, pursuant to application number 201320041, has made a takeover offer under the Takeovers Code for all of the shares in Synlait Farms Limited. Synlait Farms Limited owns 13 dairy farms, comprising approximately 4,559 ha in total (4,471 ha freehold, 88 ha leasehold).

This consent is sought to provide a mechanism by which Mr Penno and Ms Maclean can dispose of their shareholding in SFL Holdings Limited, should they wish to do so. The Overseas Investment Office understands that Ms Maclean and Mr Penno invested in SFL Holdings Limited at the same issue price as the Applicant, with no minority discount issue price applying to their shares, and sought the option to exit the investment, particularly if the relationship between the joint venture partners deteriorates.

The overseas investment transaction has satisfied the criteria in sections 16 and 18 of the Overseas Investment Act 2005. The s16(1)(e)(ii) 'benefit to New Zealand' criterion was satisfied by reference to the following factors:

Overseas Investment Act 2005
17(2)(a)(i) – Creation of jobs
17(2)(a)(iii) – Increased export receipts
17(2)(a)(iv) – Greater productivity
17(2)(a)(v) – Additional investment for development purposes
17(2)(a)(vi) – Increased processing
17(2)(b) – Indigenous vegetation/fauna

Overseas Investment Regulations 2005
28(e) – Previous investments
28(f) – Advance significant Government policy or strategy
28(i) – Economic interests
28(j) – Oversight and participation by New Zealanders

Ministers considered that the benefit under s16(1)(e)(ii) is likely to be substantial and identifiable under s16(1)(e)(iii) having regard to the relevant factors listed above collectively, and having particular regard for the following factors:

• The creation of six and a half full time equivalent jobs and various contracting jobs (s17(2)(a)(i));
• The introduction into New Zealand of $6,012,000 from overseas for development purposes (s17(2)(a)(v));
• Previous investments that have been, or are, of benefit to New Zealand, being Milk New Zealand Holding Limited’s overseas investment in 16 North Island farms and Juliet Maclean and John Penno’s establishment of Synlait Farms Limited and Synlait Milk Limited (r28(e)); and
• The giving effect to or advancement of the NZ Inc China Strategy (a significant Government strategy) (r28(f)).