Wellington  -  Russia's Nutritek Overseas Pte Limited has been given approval to take over New Zealand Dairies Limited, it was announced on Tuesday.

Finance Minister Michael Cullen said the Overseas Investment Office gave Nutritek, Russia's biggest manufacturer of baby foods and a significant trader in China and South-east Asia, the green light to increase its current stake of 5.65 per cent up to 100 per cent over the next 12 months.

New Zealand Dairies is an independent company founded by a group of South Island farmers and investors to make milk powder for export in competition with the Fonterra Co-operative Group which dominates the local industry.

Nutritek's Singapore-based subsidiary bailed out the company last year when it ran into financial difficulties while building its processing factory at Studholme.

Three of New Zealand Dairies' founding directors later resigned from the board fearing that foreign domination of the company in competition with Fonterra, which is the world's biggest single exporter of dairy products, would not be in the interests of farmers.

Cullen said the Overseas Investment Office was confident that Nutritek's takeover was consistent with New Zealand law which says foreign owners of such companies must create jobs for New Zealanders, increase exports and introduce new technology or business skills.

He said Nutritek aimed to expand its sales into China and South-east Asia and would use substantial volumes of New Zealand milk powder in joint ventures it had established in China. (dpa)