Hong Kong investors target NZ vineyards

Several large New Zealand vineyards could soon be owned by Hong Kong-based interests after a takeover offer for ASX-listed Challenger Wine Trust.

Challenger has extensive vineyard holdings on both sides of the Tasman, including four vineyards in this country with a total area of 748ha. The vineyards occupy prime viticultural land in Marlborough and Hawke's Bay and all four are leased to NZX-listed wine producer Delegat's Group.

Challenger has been hit hard by the wine industry slump, with an international wine glut forcing down the prices of grapes, which has in turn sharply reduced the valuations of Challengers' vineyards.

This put Challenger at risk of breaching the loan to valuation ratios of its banking covenants and with some of its bank loans nearing their maturity date, the trust was forced to look at capital raising options.

Challenger has received an offer from Hong Kong-based CK Life Sciences International to acquire all of the units in the trust not owned by 27.7 percent unit holder Challenger Life Company, which has indicated it intends to remain a co-owner with CK Life.

If the deal is approved it will privatise the trust's assets, but if Challenger's New Zealand-based vineyards are included in the deal it will need to be approved by the Overseas Investment Office.

Commenting on the background to the proposal Challenger's fund manager Nick Gill said the oversupply of grapes in both Australia and New Zealand was continuing.

''While 8000ha of vines in Australia have been been removed or abandoned, the Winemakers Federation of Australia believes another 10,000 to 32,000ha may need to be removed for the industry to return to supply/demand balance. They predict that this could take up to four years to achieve,"  he said.

''The short to medium term outlook and expected timeframe for the sector remains uncertain. The vineyard sector is increasingly impacted by stronger Australian and New Zealand currencies and wine companies have reduced their grape intake.

''These factors are expected to result in further softening in valuations,'' Gill said.