State-owned Landcorp is considering putting in a bid for 16 Crafar farms that a Chinese investment company wants to buy.
Allan Crafar's family business, which includes 16 central North Island farms, went into receivership in October last year owing $200 million.
Natural Dairy NZ Holdings, based in Hong Kong, says Landcorp's interest looks like the result of political interference.
Landcorp chairman Jim Sutton denies any political interference but says ministerial shareholders have been kept informed. He says the company is doing due diligence on the farms because it is motivated by concern for New Zealand's reputation.
Agriculture Minister David Carter has been censured by the Prime Minister for saying that a sale to Natural Dairy NZ Holdings was unlikely.
Conditional agreement signed
The receivers handling the sale of the farms, KordaMentha, have signed a conditional sale agreement with a New Zealand-based company associated with Natural Dairy, UBNZ Funds Management.
This is conditional on New Zealand's Overseas Investment Office approving an application from Natural Dairy.
Under the sale agreement, KordaMentha has the right to accept a higher bid.
Natural Dairy lawyer Kerry Knight says the farms have been on the market for three years and Landcorp has shown no previous interest.
Mr Knight believes taxpayer funds would be better spent on health and education than on farmland.
Crafar 'surprised' at Landcorp interest
Allan Crafar is surprised that a state-owned company may be interested in buying the farms.
He believes it would be difficult for any corporate to be as efficient as a family-run operation, because, he says, it would not have the emotional or physical investment.
Mr Crafar says he is still negotiating with other investors to pay off his debts and redeem the farms.