Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – July 2020 Decisions

Minister Sage Declines Consent For Forestry Conversion By Ernslaw One/Tiong Family

Ernslaw One Ltd (Malaysia 89.9%; Singapore 10.5%) applied for consent to acquire 627 ha. (subject to final survey) in the Waihopai Valley, Marlborough, from Geoffrey Ian Tudor Evans, Elizabeth Mary Evans and Wain & Naysmith Trustees No. 3 Ltd as trustees of the Geoffrey Evans Family Trust (NZ 100%); price withheld.

The OIO states that Ernslaw One is a forestry and timber processing business operating in various locations in NZ. The land is a planned subdivision of a larger sheep and beef farm which the vendor considered uneconomic and which Ernslaw One wishes to convert to forestry, in conjunction with an adjoining forest – see consents of March 2017. The Minister of Finance’s delegate, Stuart Nash, was satisfied that the investment would result in substantial and identifiable benefit to NZ. However, the then Minister for Land Information Eugenie Sage was not satisfied.

Ernslaw One is the Tiong Family of Malaysia, who in October 2019 were NZ’s second largest private landowner. Search our Website for a long series of forestry acquisitions by Ernslaw since the early 1990s. For background on the company, see the Roger Awards for 2004 when Ernslaw One was in third place for Worst Transnational in NZ. In 1993 the Tiong family acquired Neil Construction, buying further land for development. In September 2019 the OIO gave Neil Construction a standing consent for residential developments.

Oceanwood Investments Swaps Tasman Mill And Forests Between Equity Funds

The Minister for Land Information and the Minister of Finance’s delegate, Stuart Nash, have given consent for Oceanwood Investments Master SPC on behalf of the Oceanwood Norske Skog Master Segregated Portfolio (US Public 57%; Australian Public 15.6%; Cayman Islands Public 10.5%; various overseas 9.8%; Saudi Arabian Public 7.1%) to acquire 6.99% of the shares of Malta Co. which has:

13.8341 ha. at Fletcher Avenue and Tamarangi Drive, Kawerau;
10.6229 ha. at 118A Onepu Spring Road, Kawerau;
155.8927 ha. at 2721 State Highway 30 Rotoma;
0.0721 ha. at 45 Rimu Road, Murupara;
0.0207 ha. at Bell Street, Kawerau;
47.9895 ha. at Off Onepu Springs Road, Kawerau;
9.0447 ha. at 261 Hogg Road, Rotoma;
14.1291 ha. at 228 Hogg Road, Rotoma;
9.1103 ha. at 225 Hogg Road, Rotoma;
8.9580 ha. at 217 Hogg Road, Rotoma;
14.5181 ha. at 261 Hogg Road, Rotoma; and
71.8391 ha. at State Highway 30, Rotoma.

The vendor is Oceanwood Special Situations Malta Ltd, Crown Managed Accounts SPC, and Oceanwood Opportunities Master Fund (US Public 49.8%; various overseas persons 21.2%; Australian Public 21.2%; Saudi Arabian Public 7.8%), and the price is $20.8 million. The OIO states that Oceanwood is an investment banking group headquartered in the UK, which manages a number of funds for institutional investors. It has an existing investment in Norske Skog Tasman Ltd which owns approximately 380 ha. of sensitive land, including the Tasman pulp and paper mill in Kawerau.

This investment represents less than 1% of the Oceanwood investment portfolio. The funds managed by Oceanwood are continually rebalanced due to ongoing subscriptions and redemptions, which will trigger the Overseas Investment Act if any individual fund acquires a 25% or more indirect interest or increases an existing 25% or more indirect interest in sensitive land. These transactions occur far upstream of any NZ connection.

Oceanwood sought consent to undertake rebalancing transactions on the basis that because the investment funds are widely held and no individual investor has any control over any fund it would be administratively unworkable for it to comply with its obligations under the Overseas Investment Act. It also sought consent for a technical change to its management entity. Ministers granted consent to future rebalancing within the Oceanwood funds subject to conditions which will ensure that the overall ownership by any client of Oceanwood will not exceed the 25% ownership threshold.

Any individual client in a fund (last sentence), or any individual fund (fourth sentence) mustn’t be more than 25%? Unclear. Oh well, it’s all decided “far upstream” of NZ and it’s only 1% of their money, so we certainly shouldn’t expect them to bother telling little us who now owns and benefits from our largest paper mill and our forests! Originally built and planted by us and our taxes. For the consents by which Fletcher Paper and the Tasman mill got gobbled up by Norske Skog and Norske Skog got gobbled up by private equity funds, see our commentaries of May 2005 and August 2018.

Oji Buys More Shares In Southland Plantation Forests

Oji Holdings Corp. , Japanese Public 74.6%; US Public 11.7%; UK Public 6.4%; various overseas 6.1%; Belgium Public 1.3%) has consent to acquire an additional 19% of the shares of Southland Plantation Forest Company of NZ Ltd, which owns sensitive land from Fuji Xerox Co., Ltd (Japan 100%). Price withheld.

The OIO states that Oji has held a majority interest in Southland Plantation Forest Ltd since the early 1990s. It intends to acquire a further 19% of shares currently owned by another overseas person, thereby increasing its ownership from 51% to 70%. Southland Plantation Forests has mainly freehold interests (along with four forestry rights) in 38 separate Eucalyptus Niten forests in the South Otago/Southland region. It uses the land for forestry activities, and will continue to do so after this share acquisition. When harvested, logs are processed into wood chips in Invercargill and exported to the Oji Group for paper manufacturing.

In 2019 Southland Plantation was No.28 on the RNZ list of top 50 private owners of NZ land. Oji Holding Corporation is a Tokyo-listed manufacturer of paper products. Wikipedia states that in 2012 it was the third largest company in the global forest, paper and packaging industry. See consents of August 2014 for Oji buying the Carter Holt Harvey mills. In August 2007 it got consent for full ownership of Pan Pac Forest Products in Hawkes Bay, with more Hawkes Bay forests in October 2018. See also consents for forestry land under a former subsidiary name Southern Plantation Forests. See also May 2020 and March 2019 for Oji’s most recent acquisition of forests.

Advent Private Equity Fund Buys NZ Pharmaceutical Bile Products From Archer Capital

AI Lamb (NZ) Ltd and AI ICE & Cy SCA have consent to acquire 100% of the shares of Elviti Holdings Ltd. AI Lamb NZ and AI ICE & Cy SCA are ultimately majority-owned by the GPE IX Funds managed by Advent International Corp., a Boston-based global private equity firm. Elviti Holdings Ltd is majority owned by a fund managed by Archer Capital, an Australian private equity firm.

The OIO states that the applicants are part of the Industrial Chimica Emiliana Group (ICE Group), a global leading manufacturer of ursodeoxycholic acid (UDCA), an active ingredient primarily used in pharmaceuticals to treat liver diseases and gallstones. Elviti is the holding company for NZ Pharmaceuticals Group, a manufacturer of pharmaceutical products including high purity bile acids which are used in the manufacture of UDCA.

Advent International is global private equity firm with $US54 billion in funds under management. It has completed more than 335 buyout transactions in 41 countries – see Wikipedia for its complex history of acquisitions in various industries, opposition, monopoly investigations and the Airbus scandal. Archer Capital is an Sydney-based private equity investment firm which targets mid-market leveraged buyouts in Australia and NZ. Previous investments in NZ have included MYOB, Rebel Sport and Repco.

ICE Group is or was an Italian company founded in 1947 by a pair of doctors that gradually expanded globally to source ox and pig bile as ingredients. NZ Pharmaceuticals was established in 1971 to make biochemicals from by-products of the NZ meat industry which is now supplies pharmaceutical manufacturers in Asia, Europe and North America. See our commentary of March 2016 for Elvita/Archer’s acquisition of NZ Pharmaceuticals.

Central North Island Fibre Network Bought By Aus/Ca/Japanese Investor Funds

First Sentier Funds, First Fibre Midco Ltd and First Fibre Bidco NZ Ltd (Australia 57%; Canada 26.7%; Japan 12.1%; various 4.1%) has consent to acquire 100% of the ordinary shares in UFF Holdings Ltd , and the acquisition or redemption of redeemable convertible preference shares, each of which would exceed $100m in value. The vendors are WEL Networks Ltd and Waipa Networks Ltd (NZ 100%) and the price approximately $854 million.

The OIO states that First Sentier Funds are institutional investors. UFF Holdings Ltd is the holding company of Ultrafast Fibre Ltd, which is responsible for building, maintaining, and operating the fibre network in the Waikato, Taranaki, Bay of Plenty, and Manawat&umacr;-Whanganui regions. Certain of the applicants may also acquire the redeemable convertible preference shares that will be issued to WEL Networks Ltd following the share acquisition above.

Ultrafast Fibre’s Website says it is owned by Crown Fibre Holdings, WEL Networks and Waipa Networks, and is building 13.7% of NZ’s ultrafast broadband (UFB). It doesn’t sell services directly but works through retail providers. WEL Networks is an electricity supply company “serving the Waikato for 100 years”, now also providing fibre cable and electric vehicle charge stations and, more oddly, was involved in the Waikato expressway. Waipa Networks dates back to 1919 at Te Awamutu, where it was the NZ’s first Electric Power Board, and its network is branching out into solar powered micro-grids. You’d think this would count as “critical infrastructure” and “strategically important”, warranting a National Interest test.

Wikipedia describes First Sentier Investors (until 2019 called Colonial First State Global Asset Management in Australia and First State Investments elsewhere) as a global asset management business that manages $A2.15 billion in assets on behalf of institutional investors, pension funds, wholesale distributors, investment platforms, financial advisers and clients worldwide.

The name change follows the August 2019 acquisition of First State Investments by Mitsubishi UFJ Trust and Banking Corporation, a wholly owned subsidiary of Mitsubishi UFJ Financial Group, Inc. from Commonwealth Bank of Australia (CBA), with Financial Review (24/5/20) reporting subsequent changes in top management

PRNewswire (23/9/20) quoted First Sentier reporting heightened attention from investors in its direct and listed infrastructure strategies, US high yield funds, and global and regional equity capabilities, managed by its affiliate brands FSSA Investment Managers and Stewart Investors.

UDC Finance “Securitises” Your Car Loan…

UDC Finance Ltd (Endurance Fishing Co. Ltd (Australia 97.5%; NZ 1.4%; various overseas 1.1%) and NZGT (UDC) Trustee Ltd as trustee of the UDC Endeavour Auto Finance Trust and the UDC Endeavour Equipment Finance Trust (NZ 100%) has consent to acquire significant business assets, being each applicant’s acquisition of property in NZ that exceeds $100 million as part of a receivables-backed securitisation programme established by UDC Finance Ltd. This involves receivable assets and related rights, the value of which will exceed $100m and may increase further over time. The sellers are themselves.

The OIO states that the applicants are involved in a receivables-backed securitisation programme. UDC Finance Ltd provides financing products to retail and business customers. NZGT (UDC) Trustee, a wholly-owned subsidiary of the NZ Guardian Trust Co. Ltd, will act as trustee for the trusts formed as part of the securitisation programme.

The trusts can acquire receivable assets and related rights from UDC Finance Ltd and UDC Finance Ltd can reacquire the receivable assets and related rights from the trusts. They have satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and financial commitment has been demonstrated.

Securitisation is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, car loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as “securities” (Wikipedia).

You may remember in the 2008 crash, these kinds of sliced-and-repackaged “collateralised debt obligations” were bid up in the markets, although sellers and buyers no longer understood the underlying industries and their risks (see Hay, “Other People’s Money” and Lanchester, “Whoops!””). UDC’s arrangement here seems to spread loan risks and related flows across and between UDC Finance now owned by Shinsei Bank and the Trust owned by the Guardian Trust Co. Having been made into securitised financial products, will they be sold on to other parties?

UDC is NZ’s largest non-bank provider of car and equipment loans. From 1980 UDC was owned by ANZ NZ Ltd (Australia), which tried for years to sell it. In December 2017 the OIO declined consent for a sale due to insufficient information about the Chinese buyer (documents made available). It has now been bought by the Shinsei Bank Group – see next consent. See also February 2018 for a similar car loan securitising deal involving the Guardian Trust and Eclipz Fleet Holding (Australia).

…And Is Sold To Shinsei Bank, Japan

Shinsei Bank Ltd (Japanese Public 46.4%; US Public 39.1%; UK Public 6.1%; various overseas 5%; Norway Public 2.4%; Netherlands Public 1%) has consent to acquire 100% of the shares on issue in UDC Finance Ltd from ANZ Bank NZ Ltd (Australian Public 97.5%; NZ Public 1.4%; various overseas 1.1%) for $762 million.

The OIO states that Shinsei Bank is a widely-held Japanese bank listed on the Tokyo exchange. It considers UDC will complement its existing portfolio of credit and lending businesses. It has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and financial commitment has been demonstrated.

UDC’s Website describes Shinsei as a diversified financial group that operates asset financing as well as vehicle and consumer lending businesses in Japan and offshore. See Wikipedia for Shinsei’s interesting history. A 1/9/20 media release by ANZ says that, under Shinsei, UDC will continue to operate as an independent finance option, operating mainly in construction, aviation, road freight, forestry and the automotive industry.

It has 82,000 borrowers with loans totalling over $NZ3.3 billion and employs 225 staff. Stuff (2/6/20) reports that UDC made an interim net profit of $24.5m in the six months to 31 March 2020, down from $34.7m in 2019. For ANZ, the sale will release over $2 billion of funding, further strengthening its balance sheet in NZ.

Fletcher Residential’s Second Use Of Rubber Stamp Beachlands, Auckland

Fletcher Residential Ltd (NZ Public 19.9%; Australian Public 49.1%; various overseas 31%) has exercised its standing consent (NZ 100%) to acquire approximately 0.6581 ha. at Angiangi Crescent and Cadwil Drive, Beachlands, Auckland, from Beachlands Avenues Ltd. Price withheld. The OIO states that this standing consent of 18 April 2019 was based on the Increased Housing/Non-Residential Use tests and permits 200 ha of residential land in 12 transactions by 1 May 2022.

Fletchers must increase the number of dwellings on the land and divest all interests in it within ten years. Fletchers intends to construct a new residential home on each of seven residential lots. Beachlands Avenues is an NZ company for “land development or subdivision (excluding construction)”, registered in April 2013.

Kiwi Property’s First Use Of Rubber Stamp At Undisclosed Auckland Location

Kiwi Property Group Ltd & associated entities (NZ Public 60.1%; North American Public 13.7%; Australian Public 17.2%; various overseas 9%) has exercised its standing consent to acquire a single residential property in the Auckland region. Location, vendor and price withheld. The OIO states that Kiwi Property’s standing consent on 28 January 2020 was based on the Increased Housing/Non-Residential Use tests, and allows it to acquire up to six ha. in 19 transactions by 31 January 2023.

It must increase the number of dwellings, or use the land for non-residential purposes (may include retail, commercial, entertainment, car parking and community spaces). In this first acquisition, Kiwi Property intends to use the land primarily to construct new residential dwellings, which will then be rented or leased to third parties.

The difference between the two above standing consents (other than the mystery location) is that Kiwi Property can continue to own residential property it builds and rent it out, and Fletchers cannot. This relates to wobbles in the recent rules related to overseas ownership. The 25% definition of overseas ownership is no longer a “bright line” rule; it’s more about how “Kiwi” you are perceived to be by the OIO.

Woolworths Leases Land For Countdown Supermarket In Wiri

General Distributors Ltd (Australian Public 99.5%; NZ Public 0.4%; various overseas 0.2%) has consent for a 45-year lease on approximately 4.399 ha. at Wiri Station Road, Auckland, from AS NZ Property (Wiri) Pty Ltd (AustralianSuper Pty Ltd 100%). Price withheld. The OIO states that General Distributors is the property owning and leasing vehicle for Woolworths NZ Ltd, which owns and operates the Countdown supermarkets in NZ. General Distributors plans to subdivide and create a separate title for the land (currently bare), and build a temperature-controlled storage facility for its supermarket business.

It has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and financial commitment has been demonstrated. General Distributors got a standing consent in November 2019, but this is not mentioned as one of its ten transactions, perhaps because the land is leasehold. I didn’t know that a lessee, rather than the owner, could subdivide land – ?

Cloudy Bay/LVMH Diageo Buys Another Vineyard

The Minister for Land Information and the Minister of Finance’s delegate, Stuart Nash, gave consent for Cloudy Bay Vineyards Ltd (Diageo Plc , UK 34%; LVMH Moët Hennessy Louis Vuitton SA France 66%) to acquire 9.5213 ha. at 164 Jacksons Road, Rapaura, from Barbara Mary Muir (33.3%), Nathan Paul Muir (33.3%) and Wisheart Macnab & Partners Trustee Co. Ltd (33.4%). Price withheld.

The OIO states that Cloudy Bay Vineyards is an established NZ winemaker, known for sauvignon blanc wine which is approximately 78% of its output and 98% of which is exported. Cloudy Bay is ultimately 66% owned by LVMH Moët Hennessy Louis Vuitton SA, a transnational luxury brand conglomerate, and 34% owned by Diageo plc, a UK-based alcohol beverage company. Cloudy Bay seeks to acquire the land, which is currently planted 6.3 hectares in sauvignon blanc grapes and 1.3 hectares in pinot gris grapes, to bolster its production of sauvignon blanc.

It plans to replant the 1.3 hectares of pinot gris grapes into sauvignon blanc and apply to the land its labour-intensive harvesting techniques. Cloudy Bay’s long track record of wine production and its existing global distribution networks will assist in its ability to command a premium overseas, as compared to average NZ sauvignon blanc prices. Ministers considered that the benefit established in relation to the size and nature of the land was “substantial and identifiable”, and therefore that consent should be granted.

LVMH Moët Hennessy Louis Vuitton, still a family run group (2019 revenue €53.7 billion), is a 1987 merger of a fashion house with a 1971 merger of a wine and brandy company. Diageo is currently the second largest global alcohol company (recent annual revenue $US56.36 billion); No. 1 is AB Inbev, a 2008 merger of the other two of the then top three, plus SABMiller, the globally biggest beer producer.

Around that time NZ’s traditional alcohol duopoly Lion and DB disappeared into the Kirin Group (Japan). Our wine industry is about half consolidated into overseas ownership. See May 2020 for E&J Gallo buying part of Constellation’s share. See April and December 2014, June 2015 and November 2016 for other Cloudy Bay consents to buy land.

NZ/UK Partners To Build Apartments By Orakei Basin, Auckland

Teal Developments Ltd Partnership and Teal GP Ltd (NZ 50%; UK 50%) and MCT NZ Property Ltd (UK 100%) have consent to acquire 0.1277 ha. at 1 and 3 Purewa Road, Meadowbank, Auckland, fromMcConnell Developments Ltd (NZ 100%). Price withheld. The OIO states that, to meet the increased housing test, the applicants propose demolishing two existing dwellings on the land and constructing a new apartment building known as Teal on Orakei Basin which will contain at least 20 new residential dwellings. It considers this is likely to meet one or more of the increased housing requirements, and the sell-on and non-occupation requirements, by 31 March 2024.

The overseas bits of these companies are a bit hard to pin down. Teal Developments Ltd is registered in the UK – no Website presence but, in the US, I discovered lots of Teal company Websites, it’s a philosophy about self-evolutionary business organisations. Teal GP is registered in NZ and half owned by MCT Holdings in Singapore. MCT is a pretty big building company next door in Malaysia, which in 2018 was subject to a takeover in by Ayala Land, a listed Philippines real estate company.

There is an MCT Properties Ltd registered in Leicester, UK, but without the NZ bit. The other half of Teal GP is owned by Teal Apartments Ltd which is owned by McConnell Developments Holdings Ltd – that’s the NZ bit, two guys who live nearby who are the stated vendors. And oh look, their Teal on Orakei Basin is already built! 26 luxury waterfront apartments for sale via a gorgeous video.

Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.