Thursday, July 7, 2022

Global investors get okay for $12.5m dairy purchase

A global investment fund is going dairying in a patch of Southland, with daily operations guided partly by New Zealanders. Tim Fulton reports the local and international links in the deal.

Insight Global Farmland Fund Limited has an all-go from the Overseas Investment Office (OIO) to pay New Zealand-owned South Quest farm Limited just over $12.5 million for a freehold on 358ha at Wreys Bush, Mossburn Road, Opio.

Documents supplied to The New Zealand Farmers Weekly by the OIO say the farming fund has been formed to acquire, develop and operate farmland, farm businesses and the agricultural commodities.

Its bases include Australia, NZ, Brazil, Chile, Romania and Poland.

While the OIO deems Insight Global the official applicant for the Wreys Bush property, it says the investment will be held by its 100% subsidiary, Thames Dairy Limited, a NZ registered company.

In one of several twists in this venture, Thames is directed by a Paul Bartlett from England and a Trevor Ash from Guernsey, as well as New Zealander Vaughan Templeton.

Such links are noteworthy because the OIO reports that while Thames Dairy is expected to operate the Southland farm to the highest standards, Insight Global Farmland aims to eventually exit its investment either by selling the shares in Thames Dairy or have Thames sell the land and wind up the company.

Meantime, though, Thames itself won’t operate the farm day to day. This task will be delegated to AGI Asset Management, whose directors are prominent NZ agribusiness operator Andrew Watters and his MyFarm colleague Grant Rowan.

Under AGI’s farm management agreement Southland farm supervisor Terry Carr “will be the individual primarily responsible for performing AGI’s obligations”.

Responsibility for this scramble of agreements, subsidiary operations and investment interests goes in all directions.

Neither Insight Global Farmland Fund nor Thames Dairy will directly monitor AGI’s performance in running the farm.

That job will fall to an entity called Insight Investment Management Global Limited. The OIO clarifies, perhaps with good reason, that while the applicant and the latter company both have the word “Insight” in their names, “they are independent companies with no ownership interest in each other”.

Further, the OIO says, “Insight Investment Management will have no ownership interest in the investment, nor will it control the investment. However, Insight will oversee the investment on behalf of the applicant and provide advice to the applicant concerning the investment.”

Insight Investment Management is one of the largest portfolio managers, with a client base including pension funds, local authorities, charities, foundations, corporates, insurance companies and the public sector. It is currently responsible for US$200 billion of assets and is a wholly owned subsidiary of BNY Mellon Asset Management, part of the Bank of New York Mellon Corporation.

In approving Insight Global’s application for the Opio property the OIO says the applicant has identified farmland as an attractive investment due to its expected returns and benefits from diversification.

NZ dairying, of which the upgraded Wreys Bush farm will be part, has been selected “as an ideal investment opportunity” because of this country’s comparative production advantage and the global dairy outlook.

The OIO says further it has sought sufficient information for it to be assured about the accuracy of the information supplied, and has sought sufficient evidence from the applicant for it to judge whether investment criteria have been met.

It did not “consider it necessary” to seek input from third parties in order to verify the information or evidence gathered.

The OIO raised no concerns about the expertise or character of the directors or management involved in the acquisition. The application also satisfied the OIO in terms of various benefits to NZ, including stimulus for new technology, creation of jobs and increased export returns. Just under $NZ1.5 million has been budgeted for development of the land and the milk from it will be supplied to Fonterra.

The applicant aims to increase milksolids production per hectare by about 11% within five years, reaching 1296kg/MS per hectare within that time.

Based on this, it was likely that export receipts generated from the land would be about $6.5m from the 2016-17 season. This would represent an increase of NZ$1.19m on the receipts earned in 2010-11.

Another routine consideration for the OIO is whether refusing an application will “adversely affect, or likely affect”, NZ’s image overseas or its trade or international relations, or result in NZ breaching any of its international obligations.

Having considered the Overseas Investment Regulations 2005, the OIO says its decision will affect European investors’ views of NZ as a country receptive to investment.

“If the application is refused, this is likely to result in future investments by the applicant being directed elsewhere in the world. This could ultimately impact negatively on investment into NZ.”

Global Insight disclosed in its application to buy the Wreys Bush farm that it was looking to make further NZ dairy investments, notably a 204ha farm at Te Tipua, between Gore and Invercargill, where it would invest about NZ$2m to convert a sheep and beef farm to a 600-cow dairy. This capital would not include the cost of livestock.

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