April 1996 decisions

April 1996 decisions

Radio New Zealand commercial network sold to O’Reilly

The commercial stations of Radio New Zealand, which were set up for privatisation as the company Radio Company Ltd, have been sold to three companies closely associated with Irish magnate, Tony O’Reilly, for $89 million. The purchaser is New Zealand Radio Network Ltd, which is owned 33.3% each by Wilson and Horton Ltd, Australian Provincial Newspapers Holdings Ltd, and Clear Channel Communications Inc. Wilson and Horton is 45% owned by O’Reilly interests; APN is more than 50% owned by Independent Newspapers Plc of Ireland which is 30% owned by the O’Reilly family (Press, 4/4/96, “RNZ stations sold for $89 million”, p.3); and CCC (no relation of Clear Communications, the phone company) is a San Antonio, Texas based broadcasting company which is on the acquisition path in the U.S.A. Its O’Reilly connection is that it and APN each owns 50% of the eight station Australian Radio Network. For more on the O’Reilly empire, see our commentary on his takeover of Wilson and Horton in June 1995.

According to a 14/6/96 prospectus lodged by CCC (ref. World Wide Web http://www.sec.gov/Archives/edgar/data/739708/0000950134-96-002916.txt) with the U.S. Securities and Exchange Commission, Clear Channel Communications began operations in 1972 and currently owns or operates 72 radio stations and 16 television stations in 27 domestic [U.S.] markets. In addition, to its interest in the Australian Radio Network, it has a 21.3% interest in Heftel Broadcasting Corporation, a U.S. Spanish-language broadcaster which CCC is currently fully taking over. CCC has acquisitions pending for 33 radio stations, including nine stations which the company already operates, and one television station in 14 domestic markets. After the acquisitions and the divestiture of one station, CCC will own or operate 44 AM and 68 FM radio stations and 17 television stations in 37 U.S. markets. It has assets of $US980 million and has had phenomenal growth in the last few years. According to the prospectus,

“Since 1991, the Company has achieved compounded annual growth rates of approximately 39% in net broadcasting revenue, approximately 55% in broadcast cash flow … and approximately 66% in after-tax cash flow …

On February 8, 1996, the [U.S.] Telecommunications Act of 1996 was signed into law. The 1996 Act represents the most sweeping overhaul of the country’s telecommunications laws since the Communications Act of 1934. The 1996 Act relaxes the broadcast ownership rules and simplifies the process for renewal of broadcast station licenses. Accordingly, the Company has acted to capitalize on the opportunities provided by the 1996 Act. Since the 1996 Act became effective, the Company has closed or entered into agreements to acquire approximately $580,970,000 of broadcast properties.”

CCC is the fifth biggest radio group in the U.S.A. by number of stations (R&R, 9/2/96, World Wide Web http://www.rronline.com/telec4.htm) and second only to CBS by revenues (World Wide Web http://www.idsonline.com/biahome, 28/6/96).

The sale of the network in Aotearoa included three pieces of land: 6 hectares at Taupo, 11 hectares at Christchurch, and 0.5 hectares at Timaru. Accordingly the consent of the OIC should have been subject to national interest criteria. They claim those benefits “include”: “The supply of technical and management expertise to the New Zealand broadcasting industry; the introduction into New Zealand of additional investment for the development of RCL’s business; the depth of the consortium’s expertise will ensure the efficiency and competitiveness of RCL with resultant benefits for advertisers and listeners.”

Not mentioned are effects on employment and the growing power in the hands of O’Reilly through his ownership of both the country’s biggest newspaper and its biggest radio network (41 stations plus the Radio Bureau – an advertising production studio – and Radio New Zealand Sport).

Even though the new owners says they “plan no significant involuntary redundancies before 1997”, job losses are clearly on the cards. In the year to June 1995, the network made a $2.8 million profit. On the $89 million price he paid, O’Reilly will want to triple that profit. This is a reflection of the fact that the price expected was between $20 and $40 million.

The Commerce Commission cleared the takeover, but its terms of reference guard against only the most extreme: dominance by one group. Clearly O’Reilly’s Wilson and Horton and associates now take a much stronger position in setting the news, advertising and entertainment agenda. As the head of the University of Canterbury journalism school, Jim Tully, said:

“If a news organisation owned both a newspaper and radio station in the same area there was a potential for it to rationalise its news services, and reduce the news choice available to newspaper readers and radio listeners. There’s a potential to be able to quite effectively create a uniform newsroom which is serving both (the newspaper and radio station) … From a commercial point of view it would be crazy for a news organisation in this position not to rationalise … But in principle the fewer the owners the more concerns we should have. A concentration of media ownership also made it more difficult for other organisations to set up in competition to existing news services.” (Press, 19/2/96, “Radio bid raises warning on cross-media issue”, p.4.)

It is difficult to imagine such a group allowing an open discussion of the disadvantages of foreign control of our news media for example! The majority of our main newspapers and radio stations, and one out of our three national free-to-air TV channels are now overseas owned. This is a situation that is unique in the world, for good reason: no other country wants to allow its news sources, and one of the most important means to nurture its language and culture, to be outside its control. Even the U.S.A. has very tight restrictions as CCC’s Prospectus outlined:

“The Communications Act restricts the ability of foreign entities or individuals to own or hold certain interests in broadcast licenses. Foreign governments, representatives of foreign governments, non-U.S. citizens, representatives of non-U.S. citizens, and corporations or partnerships organized under the laws of a foreign nation are barred from holding broadcast licenses. Non-U.S. citizens, collectively, may directly or indirectly own or vote up to twenty percent of the capital stock of a licensee. In addition, a broadcast license may not be granted to or held by any corporation that is controlled, directly or indirectly, by any other corporation more than one-fourth of whose capital stock is owned or voted by non-U.S. citizens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations, if the FCC finds that the public interest will be served by the refusal or revocation of such license. The FCC has interpreted this provision of the Communications Act to require an affirmative public interest finding before a broadcast license may be granted to or held by any such corporation, and the FCC has made such an affirmative finding only in limited circumstances.”

Neither did the OIC consider the effect on Maori language and culture. A number of leading Maori organisations including the Maori Council, Maori Congress, Maori Women’s Welfare League and Wellington Maori Language Board tried to take out an injunction to stop the sale, on the grounds that the Crown had failed to meet its Treaty of Waitangi obligations to promote and protect the Maori language through broadcasting. The challenge failed, though not before one High Court judge, Justice McGechan, agreed that there was a “strong case” that the Crown had indeed failed. He said that Maori radio, the only medium carrying Maori language to any appreciable degree, had been left in serious financial crisis. Given the improved economy, the Crown could no longer cry poor (Listener, 27/4/96, “Maori fight radio sale”, p.20). In June, the Court of Appeal accepted the Crown’s arguments that the language could be protected without stopping the sale. If regulation was required, it should apply to all radio stations as it would lead to loss of audiences, advertising revenue, profitability and company value. If funding or subsidisation was favoured, it should be freely available, or on a favourable basis to private radio (Press, 14/6/96, “Radio sale appeal dismissed”, p.2).

Whether the consortium’s “depth of expertise” will “ensure resultant benefits for advertisers and listeners” is also open to doubt. Perhaps advertisers; but listeners are unlikely to hear much new. Some small community radio stations may be sold. The eight stations of Australian Radio Network are largely automated all-music broadcasters: very cheap, but hardly a thrill for listeners. CCC’s stations (as listed in its prospectus) sound very similar to what we already have here, with the obvious omission of National Radio and the Concert Program:

Other concerns included the Listener’s (“Comment: Radio Silence”, 9/3/96, p.7) of excessive secrecy in the bidding process and the Labour Party’s, that “the Government had actively shut out New Zealand bidders from the sale process”. There was also concern that former Radio New Zealand Chief Executive, Nigel Milan, who now runs ARN, gave the successful consortium insider knowledge.

O’Reilly was not the hot tip to be the successful bidder. The other bidders were reported by the Listener to have included a Paul Holmes-Lester Levy-Austereo Ltd consortium (eliminated early on); Great Western Radio (GWR, which bought Brierley’s Prospect Radio instead – see March 1996 decisions); CanWest, the owner of TV3 though with little experience in radio; and Jacor, another major U.S.A. network also on the expansion trail (Listener, 9/3/96, “Going once, going twice …”, pp.24-25).

IES International of the U.S.A. sets up shop

Approval is given for IES New Zealand Ltd, a subsidiary of IES International Inc of the U.S.A., to set up shop in Aotearoa with “establishment costs of approximately $10 million”. IES “wishes to extend its activity of equity investment to various New Zealand companies”. Beyond that, the application does not make clear who IES is. However the following information indicates that IES is probably looking at being another TransAlta or UtiliCorp, planning to buy some electricity generation or supply assets in Aotearoa. It could even be planning to build its third nuclear power station. On 11/11/95,

“IES Industries Inc., Interstate Power Company and WPL Holdings, Inc. … announced the signing of a merger agreement providing for the combination of the three companies. The resulting holding company will be known as Interstate Energy Corporation.

The strategic combination has been approved by the respective companies’ boards of directors and will result in a corporation with a market capitalization of approximately $US2 billion and assets of nearly $US4 billion. Interstate Energy Corporation will rank 34th in the nation among utility holding companies, based on 1994 revenues…

After the combination, Wisconsin Power and Light Company, IES Utilities, and Interstate Power Company will continue to operate under those names as the principal subsidiaries of Interstate Energy Corporation. WPL Holdings will change its name to Interstate Energy Corporation. IES Diversified and Heartland Development Corporation will be combined under one entity to manage the diversified operations at Interstate Energy Corporation …

The combination of these three quality utilities with similar service territory characteristics will provide substantial competitive and operational advantages within the region in the face of utility deregulation …

The new, combined organization will serve more than 850,000 electric and 360,000 natural gas customers in Iowa, Illinois, Minnesota and Wisconsin. In addition WPL Holdings, through its Heartland Development Corporation subsidiaries, has offices in 25 states and two foreign countries. IES Diversified has non-regulated energy businesses with eight offices in six states and interests in a utility in New Zealand. The new holding company will consist of utility and non-utility operations.”

(ref: http://www.wpl.com/wplh/news/nov11.html)

The group’s company profiles boast:

“IES Industries Inc. was created in July, 1991 by the merger of two utility holding companies – I.E. Industries Inc. and Iowa Southern Inc. The subsidiary utility of IES Industries Inc. – IES Utility – was created following the December 31, 1993, merger of Iowa Electric Light and Power Co. and Iowa Southern Utilities Co. IES Industries is a diversified holding company with two wholly-owned subsidiaries, IES Utilities and IES Diversified. IES Utilities serves 330,000 electric customers and 173,000 natural gas customers in more than 500 communities across 23,000 square miles of Iowa. It also provides wholesale electrical service to 30 municipal utilities. IES Diversified has interests in energy, telecommunications and transportation businesses.

IES Utilities has a peak generating capacity of 1,875 megawatts. Fifty percent comes from fossil fuel, 26 percent from the nuclear powered Duane Arnold Energy Center and 24 percent from purchased power. The company’s combined operating revenues for 1994 were $785,864,000 with net income of $66,818,000 and assets of more than $1.8 billion. IES Industries is headquartered in Cedar Rapids.

Interstate Power Company

Interstate Power Company is a combined gas and electric utility which serves approximately 10,000 square miles of territory in northwest Illinois, northeast Iowa and southern Minnesota. It has 162,000 retail electric and 48,600 natural gas customers in 242 communities. The company also serves 19 wholesale municipal utilities throughout the region and is headquartered in Dubuque, Iowa.

Interstate Power has a peak generating capability of approximately 1,300 megawatts. Sixty-two percent of its energy comes from fossil fuels, with the remainder coming from purchased sources. The company’s 1994 operating revenues were $307,650,612 with net income of $20,666,612 and assets of more than $600 million.

WPL Holdings, Inc.

WPL Holdings, Inc., with headquarters in Madison is the parent company of Wisconsin Power and Light and Heartland Development Corporation. Under its utility subsidiary, the company serves 370,000 electric retail and 140,000 natural gas customers in more than 600 communities over 16,000 square miles of territory in south central Wisconsin. It also serves 30 municipal and cooperative utilities with wholesale power. Wisconsin Power and Light has a generating capacity of 2,200 megawatts. Approximately 65 percent of its energy comes from fossil fuel sources, 14 percent from the Kewaunee Energy Center nuclear facility, 2 percent from hydro and about 19 percent from purchased sources.

The company’s non-regulated subsidiary, Heartland Development Corporation has investments in energy, affordable housing and environmental businesses, with offices in 25 states and in two foreign countries.

WPL Holdings’ combined operating revenues for 1994 was $816,159,000 with net income of $65,250,000 The company had combined assets of $1.6 billion.”

(ref: http://www.wpl.com/wplh/news/profiles.html)

Macquarie Gilt Edge starts up

Macquarie Investment Services Ltd of Australia is establishing its Macquarie Gilt Edge Access Account Trust which it will manage, the Trustee being National Mutual Trustees Ltd. The Trust will “offer units to the public primarily in New Zealand. The applicants state that the aim of the Trust is to provide investors with competitive returns from investments in the professional money markets in New Zealand.”

Waste Management buys 29 hectares of Redvale land for extending landfill

Waste Management New Zealand Ltd, which is “approximately 62%” owned by WMX Technologies of the U.S.A. is buying 29 hectares of land in Richards Road, Redvale, North Auckland, adjoining its existing landfill site. It “will be used as a site for the temporary storage of cleanfill” which “it is claimed … will lessen the damage which might otherwise occur to Highway One and secondary roads within the Rodney District Council who fully support the proposal.” The price was originally suppressed but was released on appeal in April 1997: it is $900,000.

Power New Zealand and Tauhara geothermal power station joint venture

In March we reported: Rotokawa Generation Ltd, a subsidiary of Power New Zealand Ltd, which in turn is 27% owned by Utilicorp United of the U.S.A. has approval to construct and operate a geothermal power station at Rotokawa near Taupo. The station will use “less than five hectares” of land which will be leased from Tauhara North Number Two Trust “as part of a joint venture” for a suppressed amount. The construction of the station will be by Ormat Industries Ltd of Israel.

Plans appear to have changed somewhat. Rotokawa Joint Venture Ltd, owned 50% by Power New Zealand Ltd and 50% by Tauhara Development Ltd which is owned by a statutory Maori Trust, is leasing 15 hectares of land at Rotokawa for “development of a geothermal steamfield facility”. The lease is for “an initial term of 30 years” at $9,500 per annum subject to five yearly review.

Australian Pratt Group subsidiary buys seven hectares of land for factory

In a decision released by the OIC only on appeal, Visy Board (NZ) Ltd, owned by the Pratt “Group” of Companies of Australia, has approval to acquire seven hectares of land at 234 Roscommon Road, Wiri, Auckland for $1,670,000 to build a “green field corrugated packaging operation in Auckland”. The company claims the plant would employ “approximately 40 permanent staff” plus temporary employment. The land is being purchased from Jomac Construction Ltd.

Tiongs sell 23 hectares of Albany land to St Lukes for shopping centre

Fletchers property spin-off, the publicly listed St Lukes Group Ltd, which is now “approximately 50.4%” owned by BT Funds Management Ltd of Australia, but predominantly owned in the U.S.A., has approval to buy approximately 23 hectares of commercial land in Albany, Auckland for an initially suppressed amount. That amount was released on appeal in April 1997: $23,800,000. The land is being bought from Neil International Ltd which is owned by the Tiong Group of Malaysia. Hence one of “benefits” is listed as moving the land from a wholly overseas owned entity to a company “with New Zealand shareholder interests”. St Lukes propose developing a shopping centre on the land.

Land for forestry

• Deborah Miller of Brookfields, Auckland is on to the second round of selling land for forestry development. In August 1993 her company, Far North Afforestation (NZ) Ltd sold 20 hectares of land at Broadwood, Far North District to Newpark Properties Ltd owned by Te-Hsing Tasi, Li-Ching Shih, Yun-Ying Tsai and Yun-Chen Tsai of Taiwan for $74,250. It was just one of many blocks of land in the area that have since been sold to Taiwan and Hong Kong residents by Ms Miller and her company. All were sold for forestry development managed by the vendor. In this case the OIC was told that the Tsai family were applying for New Zealand permanent residency. This month, the Tsai family’s New Park Properties (sic) are (re)selling 20 hectares at Mangamuka, Northland for $95,000 to Penzance Developments Ltd. We presume this is the same block of land as we have no record of other approvals to the Tsais by the OIC. Penzance was set up for L.S.T. Chan and W.T.K. Chan of Hong Kong, who bought 60 hectares of land in Humphries Road, Northland, last month under the name Asian Power International (NZ) Ltd.
• Ballacurn Ltd which is owned by a U.K. resident, has approval to buy 104 hectares of land at Whangarei, Northland for $244,000 from Forestry Consultants Ltd for forestry development.
• Carter Holt Harvey Ltd, 51% owned by International Papers of the U.S.A., has approval to buy 555 hectares of land from Izard Pastoral Ltd for $1,250,000 for forestry planting. The land is at Wellsford, Northland and “is part of Carter Holt’s purchasing programme to enable it to establish new forest areas to expand its renewable resource and raw materials for the wood processing industry in the future.” “Approximately 125 hectares of the river flats” will be resold, being “more suitable for agricultural purposes”.
• Rayonier New Zealand Ltd of the U.S.A. is buying forestry rights over a number of blocks of land. In each case, it “is acquiring the forestry right for the purpose of protecting its rights to the timber it has agreed to buy” and in each case the price is suppressed. The forest rights purchased by Rayonier, which is already a substantial owner of Aotearoa land, are as follows:
• • over 18 hectares at Waitetuna, Waikato;
  • over 26 hectares for 11 years, at Tikitiki, Gisborne;
  • over 150.4 hectares for 8 years, in Marlborough;
  • and 281 hectares for five years and two months, in the Rai Valley, Nelson.

The price of two was released in February 1998:

• • $1,000,000 for the Marlborough right; and
  • $600,000 for the Waikato right.

• Blakely Pacific Ltd of the U.S.A. has approval to purchase a further 108 hectares of land near Te Puke, Bay of Plenty, from A. Lempriere Ltd, for forestry. The price, originally suppressed, was released on appeal in April 1997: $583,490. Blakely Pacific has previously been given consent to buy 4,673 hectares of land for forestry, including 1,981 hectares as the partner used by Matakana Island Maori to buy back control of the island’s forestry resources from ITT Rayonier (U.S.A.) and Ernslaw One (Malaysia) after their long blockade and court battle (see March 1994). In 1994, Blakely Pacific also bought a 341 hectare “unprofitable sheep and cattle station” at Rotoehu, Bay of Plenty, and 342 hectares near Te Puke. In May 1995 it bought the 2,009 hectare Pentland Hills Station Ltd at Waimate.
• Yaquina Forestry Corporation which is owned by a U.S.A. resident, has approval to buy 319 hectares of land at Otamarakau, in the Bay of Plenty, for $1,200,000 for forestry planting.
• A U.S.A. family, which in June 1995 bought “approximately” 500 hectares of land in Kotare Road, Marumaru, northwest of Wairoa, Gisborne, for $800,000, for forestry development, are exchanging 27 hectares of it for 16 hectares of adjacent land (at an agreed value of $20,000) to formalise the formerly “give and take” boundary with the adjoining owner.
• RII Marlborough Ltd, “predominantly owned by pension funds and on-profitable, charitable and educational institutions from the U.S.A.” is buying further land for forestry development in Marlborough. This time it is 94 hectares at Quayle Creek owned through Quayle Creek Forest Ltd. The price was originally suppressed but was revealed on appeal: $1,600,000.
• Southland Plantation Forest Company of New Zealand Ltd, ultimately owned by New Oji Paper Company Ltd and Itochu Ltd of Japan, has approval to buy 234 hectares of land at Mossburn, Southland for $368,425 for forestry. As usual with its purchases, all forestry activities will be conducted under contract by South Wood Export Ltd, which is owned 66.6% by MK Hunt Foundation Ltd of Aotearoa and 33.3% by C Itoh and Company of Japan.
• A resident of the U.S.A. has approval to acquire 129 hectares of land at Taylors George Road, Southland for $288,000 for forestry.

Other rural land

• A U.S.A. resident has approval to acquire 0.0809 hectares of land at 28 Miami Avenue, Surfdale, Waiheke Island for $140,000. He proposes to effect “substantial repairs” to bring the house to a “tenantable standard”.
• Clearwood Developments Ltd which is 66.6% owned by E.J. Cleary and family of Ireland and 33.3% owned by the RB and KB Lockwood Family Trusts of Aotearoa, has approval to buy 7 hectares of land at Tamahere, Hamilton for $900,000. “It is proposed to develop the property into a number of 0.8 hectare residential sites with a rural flavour.” Mr Cleary has permanent residency and “proposes to move to New Zealand in the near future”.
• Malbeth Developments Ltd, owned by five residents of Singapore and one of Malaysia, has approval to buy 145 hectares in the Rakaia Gorge, Canterbury, for $1,115,000 from the Adrian Gerard Family Trust. They say that “the productive farm land is only approximately 62 hectares” and they intend to convert that land to a deer farm. A further 42 hectares is terraced and will be planted for forestry.
• A couple currently resident in Japan but who “intend to take up residency in New Zealand and are buying the property with the intention of erecting a dwelling on the land and using it as a lifestyle block” have approval to buy 49 hectares of land at Closeburn, near Queenstown, Otago, for $400,000. The land is said to be “of limited use for farming due to its steep nature and has been left vacant for some time.” No indication is given of how the national interest criteria might have been satisfied.