The Chinese businessman bidding for taxpayer-owned Jericho Station has pulled out of the deal.
Wenchen Du and his company Qianlong applied to the Overseas Investment Office (OIO) to buy the Fiordland sheep and beef farm from Landcorp last year for $8.7 million.
The deal was controversial because Southland farmer Ed Pinckney had also bid for the farm – offering just $200,000 less than the foreign buyer.
But 1NEWS understands that Qianlong pulled out of the deal overnight. Mr Pinckney had made a "back-up offer" and it's believed he has been told his bid will now be successful.
Landcorp had accepted Qianlong's $8.7m offer in Jane last year. But it took a further five months for an application to buy the sensitive land to be lodged with the OIO.
Once the OIO had considered it's decision, the deal needed to be signed off by two Government ministers – Eugenie Sage and David Clark.
Late last year, the Government tightened the rules on buying farmland and put greater scrutiny on the benefits of rural land acquisitions.
The 1400ha farm is around 40km from Te Anau. It's understood Mr Pinckney’s offer to Landcorp included a detailed plan for operations and environmental management.
At the time, Landcorp defended the deal – saying it had to get the best price. The state-owned enterprise was selling eight other sheep, beef and deer farms around the country as it looks to diversify its operations. But this was the first time the Government's farmer had struck a deal with an overseas buyer.
In a statement Landcorp say they have "been advised that the purchaser of Jericho farm has withdrawn their application from the Overseas Investment Office (OIO) and is therefore unable to complete the purchase of the farm".
"As such we have proceeded to finalise the sale and purchase of the farm with the party that has made an unconditional back up offer, which does not require OIO approval. We expect the sale of the farm to be completed by the beginning of June.
The Overseas Investment Office has yet to comment.