MARTIN VAN BEYNEN //A $100 million Waimate dairy factory owned by Russian investors, and now being eyed by Chinese interests, will keep processing despite the Russians’ parent company collapsing, an adviser says.
Nutrinvestholding, the parent company of Russian baby-food producer Nutritek, was declared bankrupt late last month by the Commercial Court in Moscow.
Nutritek owns a dairy factory at Studholme, near Waimate, employing about 60 people. It acquired the factory in 2008 by buying shares in New Zealand Dairies Ltd, investing about $150m.
Nutritek had other dairy factories and farms in Russia, Estonia and Ukraine.
The purchase was approved by the Overseas Investment Commission, which named the beneficial owners of Nutritek as the Russian public (58.4 per cent), George Sazhinov (20.8 per cent) and Konstantin Malofeev (20.8 per cent), both of Moscow.
Principals of the diary giant met government officials in 2009. Sazhinov is a former Russian deputy minister of agriculture.
The Waimate factory has been on the market since November 2010 and receives funding from Russian bank and Nutritek creditor VTB Capital.
A financial study of the factory operation leaked to the media this year doubted the factory could survive without a substantial injection of capital.
Christchurch company director Richie Smith, who advises the Russian owners, said the factory would carry on as usual and he was hoping for a «positive [sale] outcome» soon. A Chinese company is believed to be in the running to buy the factory.
Smith said the factory, which was in a «holding pattern», was a first-class production facility. It needed a capital injection to equip it to make higher-quality products like baby formula.
The dealings with the Russians showed foreign investors needed support to execute their investment plans.
«It’s all well and good inviting investors to come in here, but once they have made the investment, the country lacks a bit of support,» Smith said.
«If they had had some more robust advice around them and some better interface between New Zealand and Russia, it would have been helpful.»
Nutritek’s founder, Sazhinov, is said to own 40 per cent of Nutritek, while Malofeev, through his investment fund, Marshall Capital, owns 35 per cent.
In another side of its international difficulties, Nutritek and Marshall Capital are being sued by VTB Capital over a US$225m (NZ$275m) loan VTB made to a Russian agriculture company in 2007 so the company could buy Nutritek’s six Russian diary plants and three associated companies.
VTB Capital alleges it is was «fraudulently» misled into believing the farming company was independent of Nutritek and claims the plants were grossly overvalued.
In November last year, VTB asked the English courts to hear the case, but Justice Arnold, in the High Court in London, said the dispute should be heard in Moscow as Russia was the natural forum.
The bank contended Nutritek was controlled by Malofeev through his Marshall Capital entities and he «orchestrated the fraud». Malofeev disputed the contention.
Justice Arnold also lifted a worldwide freezing order on Malofeev’s assets after disagreeing a real risk existed Malofeev would dissipate his assets.
VTB claimed it had an Ernst & Young report dated February 2010 which, it said, provided strong evidence Malofeev and others operated Nutritek and a web of companies in Russia and offshore to conceal the true position of Nutritek and «misappropriate monies of the Nutritek Group».
Justice Arnold took a dim view of VTB failing to disclose to a previous court it had hidden a transaction fee and equity fee because the sham arrangement was designed to avoid tax.
Malofeev is a director of Svyazinvest, Russia’s largest telecommunication company.
FOREIGN INVESTOR LESSON
Waimate District Mayor John Coles says Russian investment in a South Canterbury dairy factory has lessons for New Zealand in how it handles foreign investment.
Coles said Nutritek’s investment in the New Zealand Dairies plant in Studholme had been welcomed as it was thought the investment would allow the factory, which was designed to be added to, to expand.
The investment then stalled because of Nutritek’s problems overseas, he said.
«When the Russians came in we thought, `Great; this is something we are going to treasure’. It does raise the question of how well they were vetted and how well you know what is going on for the company in other areas,» he said.
The factory was important to the Waimate economy because of the jobs it provided and the returns for suppliers of its milk.
«You work really hard to get them in your district and it would be a real shame if it was lost.»
Coles said he had met the prospective Chinese buyers of the factory in the past couple of months and had thought the deal was nearly finalised.
He would not name the Chinese firm but said it bought New Zealand dairy products.
– Â© Fairfax NZ News