WELLINGTON, New Zealand (AP) — A Hong Kong-based investment group says it wants to invest up to $1.1 billion in New Zealand's dairy industry to make high-quality infant formula and long-life milk products for the Chinese market.
The move comes two years after China's 2008 tainted milk scandal that left six children dead and more than 300,000 sickened when dairy suppliers added the industrial chemical melamine to milk to boost its apparent protein content. More than 20 dairy companies were closed by authorities and two men were executed for their part in the scam.
Natural Dairy (NZ) Holdings Ltd., formerly China Jin Hui Mining Corp. Ltd., has already struck a deal to buy four New Zealand farms and is negotiating with Crafar Farms, which is in receivership, for 24 others, said Kerry Knight, a lawyer acting for Natural Dairy.
Natural Dairy has raised $105 million in initial capital, and said its total investment in New Zealand could reach New Zealand dollars 1.5 billion ($1.1 billion) for "farms, livestock and milk powder production plants."
Michael Stiassny of KordaMentha, the receiver for the 24 Crafar farms, confirmed the Chinese offer. "It's an attractive offer for us and we're doing what we can to bring it to a conclusion," Stiassny told National Radio.
Any deals need New Zealand Overseas Investment Office approval.
Knight said Natural Dairy wants to produce its own milk and was not interested in buying New Zealand milk powder and packaging it for Chinese consumers.
"What they want to do is control the entire process ... from the farm gate to the consumer's mouth," he told National Radio. "That's their marketing edge in China, so they can promote the fact they're covering every stage of production."
"They have looked at this as a long-term opportunity that will grow and grow and grow as the demand for milk products obviously grows in China," he said.
New Zealand's Green Party warned the country's dairy industry risks falling into the hands of overseas investors if the government continued to loosen overseas investment rules.
"If large sectors of our export industry are allowed to be owned by large transnational corporations or overseas governments, then our (trade) deficit will get worse as the profits from these companies are sent back to their overseas owners," co-leader Russel Norman said in a statement.
The chief executive of Fonterra, the New Zealand farmer-owned dairy cooperative that exports 95 percent of the country's dairy products, said the country had to be awake to the fact many people were going to be interested in investing in its food industries.
"Our government does have to be aware of the fact that there should be extensive foreign interest over time in investing in New Zealand farms, and we've got to think of this from a policy perspective," CEO Andrew Ferrier said.
In turn, Fonterra was building farms in China because the Chinese were asking it to do that, he said. "We're putting in farms to supply safe, healthy milk to our customers in China which complements the New Zealand milk that we're shipping to them," he told National Radio.
In 2008 Fonterra was the 42 percent minority shareholder in Sanlu Group Co, based in the northern Chinese city of Shijiazhuang, one of at least 22 Chinese dairy companies shut down by authorities after their products were found to contain high levels of melamine.
Fonterra, which alerted authorities to the contaminated milk scam, already owns one model dairy farm with more than 5,000 cows in China, and now controls its China-made products from pasture to point of sale.
