Crafar deal ordered to reconsideration

Stuff reports:

The High Court has ordered Government ministers who agreed to a Chinese company buying the Crafar farms to reconsider the application.

The judgement of Justice Miller follows a successful application by a group of New Zealand farmers and iwi, led by Sir Michael Fay, to block the sale of the 16 in-receivership farms.

The group had sought a judicial review of the Overseas Investment recommendation for approval for the $210 million purchase by Shanghai Pengxin and the Government’s support for that recommendation.

Justice Miller said the application for review was granted and the decision by Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman was set aside.

The judge directed that the ministers reconsider the application by Shanghai Pengxin subsidiary Milk New Zealand.

It will be interesting to see the full decision, but it suggests that the OIO and Ministers did not consider one or more of the criteria properly. This will not be helpful for the Government as it keeps the issue alive longer, and suggests that there may have been grounds to turn the application down. It doesn’t mean that there were grounds – just that there might have been,

I will be surprised if Sir Michael and associates ends up with the farms at the end of this, but it is possible if a different decision is arrived at.

The Herald has the judgement here. I found this part interesting:

CFIPG (Fay etc) came late to the sale process and has still to commit itself to a formal offer … it has nominated a price, albeit one that the receivers  claim to find unworthy of acknowledgement.

So Fay has yet to even make a formal offer. If he can knock Pengxin out, then he can lower his bid even further, so his gain may be greater than even the $40m between the so called bids.

In terms of the judgement, the claim that Pengxin were not experienced enough was not upheld. Where the court has ruled that the OIO and Ministers erred was in assessing benefits vs a counter-factual.

The OIO used a counter-factual of the status quo (farms run down), and the argument was that the counter-factual should be a NZ company buying the farms and also investing in them.

The OIO argued against this on the grounds that this would require a hugely complex analysis of not just every application, but to model what a rival bidder may do. However they lost the argument.

My 2c is that it would be better for an analysis to be against a counter-factual which is based on a rival bidder – but that this may well be hugely impractical in many cases.