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Drug company mergers and residential subdivisions are favourites this month. But first … Works Corp privatised to Paul Y-ITC (Hong Kong) and Kinta Kellas (Malaysia) The Works and Development Services Corporation (NZ) Ltd has sold two of its subsidiaries as part of its privatisation. Downer Construction (New Zealand) Ltd which is owned by Paul Y-ITC Group of Hong Kong has approval to buy Works Geothermal Ltd from the Crown for an initially suppressed amount. The price was released only on appeal, in February 1997, and it was not surprising it was hidden from public view: $100 for the purchase of shares, plus $4,604,000 in repayment of shareholder advances (i.e. loans from the Government). Effectively, the Government got nothing from the sale. The sale includes 15 hectares of land at Wairakei. Works Geothermal was owned by Works Civil Construction, which itself was sold in August to Downers, although the approval by the OIC does not appear this month. According to news reports, the Geothermal sale took place in June – two months before the OIC’s approval. Kinta Kellas Public Limited Company is buying Works Consultancy Services Ltd for $45,838,000 plus “approximately $4,200,000” in “repayment of shareholders’ advances” (in other words repaying a Government loan). Kinta Kellas is a U.K. public listed company which is 62% owned by United Engineers (Malaysia) Berhad, itself in turn 33% owned by Renong Berhad, both of Malaysia. Works and Development Services Corporation was the corporatised remnant of the former Ministry of Works and Development. After the announcement of the sale, the former Auckland district commissioner of works, A.W. Aitken, in a letter to the New Zealand Herald (“Passing of the MoW”, 6/9/96), wrote that the Ministry of Works was
Bids for the Corporation, which closed in the middle of August, were expected from Fulton Hogan (Shell controlled), Fletcher Challenge, Bitumix (B.P. owned), Beca Carter Hollings and Ferner, Graeme Hart and Bruce Hancox, Green and McCahill, the Technic Group and a number of overseas companies including Bechtel, though not all eventuated. Bids could be made either for the whole corporation, or for its parts which included Works Civil Construction, one of only two nationwide road building and maintenance companies, and Works Consultancy, the largest design and engineering consultancy company in the country. In the year ended June 1995, Works Corporation had revenue of $280 million, an after-tax profit of $12 million, and assets of $157 million. It employs 2,635 people (New Zealand Herald, 15/8/96, “Big players shy away from Works Corp sale”). Media reports put the sale price of the Corporation at $108 million. It had shareholders’ funds at the time of the sale of $83 million. Works Civil Construction was sold for $44 million to Downers, including a $14 million repayment of advances. A few months after the sale, the Corporation announced a net profit of $16.6 million, paying a dividend of $16 million to the Crown. That is a rate of return of 15% on shareholders’ funds – considerably better than the return on paying off debt, if indeed the proceeds are used for that. Both Downers and Kinta Kellas have links to Brierley Investments. Downer was a BIL subsidiary until BIL swapped it for a 10.8% shareholding in Paul Y-ITC in June 1994 (see our commentary for that month). BIL now owns 23% of Paul Y-ITC. Renong Berhad, which eventually controls Kinta Kellas (see above), also owns 12% of Malex Industries which is a 20% shareholder in BIL, replacing Delham Investments. The Government at the announcement of the sale claimed it would be the end of its asset sales programme, but it was condemned by New Zealand First and the Alliance. (Ref: Press, 28/8/96, “Asian firms buy Works”, p.25; New Zealand Herald, 28/8/96, “Brierley linked to successful Works bidders”; Press, 19/10/96, “Works lifts final profit, Landcorp slips to $19m”, p.28.) More of Gourmet Direct, Ernest Adams’ 47% owner, to Mega First of Malaysia In a decision originally almost completely suppressed and released only on appeal in February 1997, Mega First Industries Sdn Bhd, a subsidiary of Mega First Corporation Berhad of Malaysia has approval to acquire a further 10% of Gourmet Direct Investments Ltd for $650,000. It already owns 20%. Gourmet Direct is the controlling shareholder in major baker and food distributor, Ernest Adams Ltd, owning 46.58% of its shares. According to the Press (5/2/97, “E Adams Stake”, p.29), Mega First had increased its effective shareholding in Ernest Adams to 18.67% from 11.4%. Its shareholding in Gourmet Direct gave it 16.4% (indicating a 35.2% share in Gourmet Direct, exceeding the OIC approval), and a direct shareholding in Ernest Adams of 2.27%. Mega First also has a mortgage security over other Gourmet Direct shares. Gourmet Direct is therefore legally an overseas company now, since Mega First owns 25% or more of it. And since Gourmet Direct owns 25% or more of Ernest Adams, that now too is an overseas company. Gourmet Direct was originally owned by the New Zealand Dairy Board. In another example of the shakedown in the international pharmaceutical industry, two large drug transnationals, Ciba-Geigy Ltd and Sandoz Ltd, both of Switzerland, are merging to form Novartis Ltd. It is said to be the “largest merger ever”. The new company will have a market value in excess of US$60 billion. The merger creates the second-largest pharmaceuticals company in the world, with a market share of 4.4% (behind Glaxo Wellcome on 4.7%), and sales of 14 billion Swiss francs, and in its own words, “number one worldwide position in life sciences”. As part of the merger, Novartis is buying Ciba-Geigy (New Zealand) Ltd from Ciba-Geigy. The price is “yet to be determined”. Total sales of the two companies in 1995 were 36 billion Swiss francs. The new company had a combined market capitalisation of 75 billion Swiss francs at 1/3/96. The merger will result in worldwide job losses. Both Ciba and Sandoz currently employ a total of 130,000 workers worldwide. The new company intends to shed around 10% of its workers, with a third of the job losses in Switzerland. Ciba, with 1995 sales of 20.7 billion Swiss francs, is a biological and chemicals group, involved in healthcare, agriculture and industry. Sandoz is involved in pharmaceuticals, food, biotechnology, crop protection, seeds and construction technologies. It has more than 200 affiliated companies and employs over 50,000 people in 60 countries. In 1995, its sales exceeded 15.2 billion Swiss francs. The merged company will be a major agribusiness as well as drug manufacturer. It will be the largest worldwide marketer of agricultural chemicals, and will become the second-largest company in seeds and animal health. Total consolidated agribusiness sales of the two companies in 1995 were nearly seven billion Swiss francs. “In crop protection, Novartis will have a leadership position in four key areas: weed control, especially in corn, soybeans and cereals; disease control in cereals, vegetables, vineyards and orchards; insect control in a variety of crops, and seed treatment. Novartis will have the world’s largest research and development investment in the crop protection business. In seeds, Novartis will produce varieties for growers of corn, oilseeds, sugarbeets, vegetables and flowers. The company will have one of the largest biotechnology research programs in the industry, focusing on enhancing disease and insect resistance while improving yields.” Some parts of the merged company will be sold. The Specialty Chemicals division of Ciba, comprising Textile Dyes, Chemicals, Additives, Pigments and Polymers will be “demerged” and listed on the Swiss stock exchange. Construction Chemicals (MBT, Master Builders Technologies) of Sandoz will be demerged or sold. The “healthcare” sector will then represent 59% of Novartis’ business mix, agribusiness 27% and nutrition 14%. (Refs: http://orchard.uvm.edu/glfgn/cibasandoz.html, http://www.sandoz.com/SANDOZ/News/DetailsMarch7.html, http://www.sandoz.com/SANDOZ/AboutSandoz/AboutSandoz.html, http://www.swissnews.com/BASELCHEMICAL.) Warner-Lambert buys assets from Glaxo Wellcome in global agreement Glaxo Wellcome New Zealand Ltd is selling some of its assets to Warner-Lambert Company of the U.S.A. for US$16 million and its 49% share in Parke-Davies Wellcome Consumer Healthcare Pty Ltd (PD-W Healthcare) for US$2 million. The assets are
PD-W Healthcare had been 49% owned by Glaxo Wellcome and 51% owned by Warner Lambert New Zealand Ltd, a subsidiary of Warner-Lambert U.S.A. Glaxo Wellcome put its Palmerston North drug manufacturing complex up for sale in April 1996, having announced in 1995 its cessation of manufacturing in Aotearoa by the end of 1996 (Press, 16/4/96, “Glaxo complex on market”, p.30). Glaxo had taken over Wellcome in 1995 to make the world’s biggest drug manufacturer. In July, Glaxo Wellcome agreed to sell Warner-Lambert its businesses in Aotearoa, Australia, Canada, and Mexico, and their joint venture Warner Wellcome, for over $US1 billion (Press, 6/7/96, “Glaxo Wellcome purchase”, p.24). In 1993, Time (9/8/96, “Pill Power”, p.44) had reported that
TransAlta merges Capital Power and EnergyDirect In two approvals given in principle on 27/12/95 and confirmed on 13/8/96, TransAlta Energy Corporation of Canada is setting up a 62.7% owned local subsidiary, TransAlta New Zealand Ltd in order to merge Wellington electricity and gas companies Capital Power Ltd and EnergyDirect Corporation Ltd, valued at $553,874,419. The pressure tactics used in the actual purchase of these companies by the Canadian transnational from the local authorities and community trusts was described in our commentaries on the June 1996 and September 1995 decisions. The completion of their privatisation is the merger approved here. TransAlta New Zealand Ltd is 24.7% owned by the public and 12.6% owned by the EnergyDirect Community Trust. Capital Power Ltd is 100% owned by TransAlta Energy Corporation. EnergyDirect Corporation Ltd is “approximately 40.9%” owned by TransAlta Energy Corporation. Kiwi Income Property Trust buys half share of “The Palms” mall, Christchurch In a decision originally almost completely suppressed and released only in February 1997 on appeal, Kiwi Income Property Trust has approval to buy 50% of “The Palms” shopping mall, which covers 5.5 hectares of land in Shirley, Christchurch. The price (“yet to be determined”) has not been released. The half share is via a 50% shareholding in Woodvale Ltd. The vendors are G.T., D.J.M. and J.E. Percasky. Kiwi Income Property Trust is a unit trust which at that time was approximately 15% owned by “various overseas persons”, and is managed by Kiwi Income Properties Ltd which is 50% owned by FCMI, a public company of Canada, and 50% by residents of Aotearoa. According to the OIC:
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