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Sonic Healthcare of Australia buys out SGS from SGS Medlab
Sonic Healthcare Ltd of Australia, has approval to acquire SGS Medlab New Zealand Ltd from Société Générale de Surveillance Holding SA of Switzerland for an amount “to be advised”. SGS Medlab did not 100% own all its subsidiaries, and Sonic is also buying out their minority shareholders (all of whom are doctors and managers involved in the companies, and from Aotearoa). The subsidiaries are:
SGS owns laboratories in Auckland, Hawkes Bay, Wanganui, Palmerston North, Wellington, Christchurch, Dunedin, Invercargill according to its web site (http://www.sgs.co.nz/medical.htm). Many of these laboratories were independent, doctor-owned and run laboratories before being taken over. According to the Health Funding Authority, Sonic now owns “70% of community laboratories in New Zealand. There is little price competition in the sector.” The HFA is looking at tendering its annual $180 million in contracts to community laboratories in order to reduce its costs. It says “The market for laboratory services has remained relatively static for several decades, and there is little evidence that current spending on laboratory services fairly represents the costs of service delivery. There has been little price competition between providers, despite vigorous competition in some parts of the country for market share. The HFA believes that there are significant opportunities to recover some of the $180 million that is presently spent on community referred laboratory testing each year, and to use those funds to improve health services in other areas.” It predicts that if it “decides to tender for laboratory services, the community laboratories intend to proceed with a media campaign and litigation” (Briefing Papers for the Minister of Health 1999, Health Funding Authority, p.66). The Association of Community Laboratories publicly threatened legal action after the HFA released its briefing papers (Press, 24/01/00, “Laboratories may sue HFA over tender plan”, p.9). They fear this will lead to falling profitability. On the other hand, given Sonic’s highly profit-driven approach (see below), its entry into the market may be because it sees tendering as an opportunity to push out more of the competition. While the HFA’s concerns indicate that SGS was able to exploit a dominant position, SGS does not appear to be getting out because it is afraid of tendering. Sonic is acquiring the entire Australasian medical laboratory group owned by SGS, which is selling its “healthcare and biosciences services” worldwide (SGS company statement, “The SGS Group sells its Healthcare and Biosciences Services”, Geneva, 10/9/99: see its web site http://www.sgsgroup.com). According to Sonic, “the SGS Medical Group comprises eight pathology businesses in Australia and New Zealand and one radiology business in New Zealand” (Australian Stock Exchange Announcement, 10/9/99, “Sonic Healthcare Limited Announces Its Intention to Acquire the SGS Medical Group”, http://www.sonichealthcare.com.au/asxreleases/ann10999.html, and Managing Director’s report, http://www.sonichealthcare.com.au/annualreport/mdreport.htm). After the acquisition, Sonic’s businesses will be as follows, with former SGS subsidiaries indicated:
Australian Capital Territory
Victoria
Sonic, though on an aggressive expansion path (it said the acquisition “provides a solid base for further expansion into the growing healthcare industry in the Asia-Pacific region”), is actually smaller than the company it is acquiring: “In the fiscal year ending 30 June 1999, the SGS Medical Group generated earnings before interest, tax and goodwill amortisation (EBITA) of approximately A$43 million on revenues of A$302 million. Over the same period, Sonic Healthcare generated EBITA of A$36 million on revenues of A$174 million.” The SGS companies are less profitable than Sonic, so “the challenge over the next 3-5 years will be to expand the group margins, using the same strategies which have proven so successful for Sonic over the past years”, according to Sonic’s Managing Director, Dr Colin Goldschmidt. It increases its profits (“expands its margins”), by centralisation, standardisation, and elimination of duplicated services: “Over the past years, the Company has delivered consistent margin expansion through a number of strategies. A primary focus has been to identify synergistic acquisitions and to capture benefits through the elimination of overlapping services. Other strategies aimed at improving efficiency include centralisation of the less frequently performed tests and the standardisation of systems throughout the group.” According to Sonic, “the combined group will be the largest medical diagnostics company in Australia and in New Zealand, with a total of more than 6,000 staff, including 200 specialist medical practitioners … giving Sonic a major presence in New Zealand for the first time”. Under the initial terms of the purchase, Sonic was to pay A$514 million, made up of A$383 million in cash plus approximately 32 million Sonic shares. “These shares will be issued only to SGS Medical Group minority partners, who are the medical practitioners and managers of the individual SGS practices”. A$45 million of the cash component and 22 million of the 32 million share component was to be deferred for up to three years. However, that was later renegotiated: Sonic paid only A$33.44 million for the delayed component by paying it immediately. This reduced the purchase price to A$502.68 million. Sonic is listed on the Australia Stock Exchange and has a relatively diverse ownership. It plans to pay for the acquisition through debt and a share float. Ironically for Aotearoa, Sonic’s Managing Director, Dr Goldschmidt, commented on the acquisition by saying “the creation of an Australian-owned healthcare company of this stature is a milestone event in Sonic’s history. We have the unique opportunity to build a truly world-class medical company in the Australasian region… “. Tough luck, Aotearoa. Mind you, losing SGS is a decided advantage. The Swiss-based transnational specialises in acting as a quasi-governmental authority in many countries. For one that should therefore be guarding its integrity, its most recent claim to fame is particularly embarrassing. In April 1999, former Pakistani Prime Minister, Benazir Bhutto, became the first person in Pakistan’s history to be disqualified from politics for graft. She and her husband were found guilty by a Pakistani court of accepting bribes worth US$9 million from none other than SGS. The company had been hired by Bhutto when she was Prime Minister to collect customs revenue. The head of an SGS subsidiary, Cotecna Inspection SA, promised her a 6% commission through a shell company owned by her husband if it won the contract, which was awarded without open bidding. While Bhutto claims the charges were “political victimisation”, the evidence against SGS was particularly strong (Time, 1/6/98, “Bhutto’s billions”, by Tim McGirk, pp.34-37; 14/9/98, “In my own defense”, by Benazir Bhutto, pp. 32-33; 26/4/99, “Bhutto brought to book”, by Nisid Hajari, p.45). In May 1998, Alliance MP, now Minister of Consumer Affairs, Phillida Bunkle, tabled documents in Parliament including a letter from the Medical Council, that said that Medlab was using inducements such as paying a $5,000 advertising account for a Hawkes Bay doctors’ group. Both the doctors and Medlab denied offering financial inducements, “but we do offer things such as educational sessions”. However the Medical Council said payments were sometimes concealed as grants for computers or as help in marketing services. Such inducements are illegal in Australia and the U.S.A., but not in Aotearoa. The then Minister of Health, Bill English, refused to act, saying it was too hard to distinguish between legitimate promotion of products and inducements (Press, 8/5/98, “Doctors deny Medlab claim”, p.9). SGS acts as customs authorisation authority for a number of third world countries including Guinea and Indonesia. It also does logging certification in a number of countries, and has come under criticism in Gabon and in Cambodia. In Gabon it certified a French/German company in spite of the tropical forest in question being a reserve (Environmental News Network feature, April 1997, “Saving the world’s forests”, by Jean-Pierre Kiekens, http://www.enn.com/enn-news-archive/1997/04/041797/feature.asp). In Cambodia it was hired to perform pre-shipment inspections but refused to help enforce Cambodia’s log export ban saying it was not a law enforcement agency and not a paramilitary force. The IMF had previously cancelled a $20 million loan to Cambodia citing a lack of transparency in Cambodia’s forestry policy and accounting for logging revenues (Globewatch quoting Reuters, “Swiss Firm Declines To Enforce Cambodian Log Ban” http://www.mcs.net/~rogers/globe/cambo.html). In December 1993, Multinational Monitor reported SGS allowing radioactive milk powder into Sri Lanka (“Nestle’s Toxic Milk Returned”): Nestle Lanka, a subsidiary of the multinational food firm, has returned a 15-ton consignment of radioactive milk powder imported from Poland, a company spokesperson said on December 7, 1993. In November 1993, Sri Lankan customs authorities ordered the company to return the milk powder after local tests showed it contained more than the permissible amount of radioactive particles. The spokesperson said the entire consignment was re-shipped on December 6, 1993 to the port of origin for further checks. Customs officials said the discovery was made by the Radio Isotope Centre of the University of Colombo. Sri Lanka has resumed checks on imported milk foods after Bangladesh recently rejected a consignment of milk because it was contaminated by radioactivity. Checks were introduced following the 1984 disaster at the Chernobyl nuclear power plant in the then-Soviet Union, which raised fears that neighbouring milk-producing countries could have been affected. The company spokesperson said the consignment had been certified by the Geneva-based Société Générale de Surveillance (SGS) as having the permissible amount of radioactive material before arriving in Colombo. “The SGS is a world famous organisation that issues certificates of conformity and standards on milk and other products. They are standing by their original certificate,” he said. SGS is also one of the Swiss companies accused of holding onto money left by Jews killed by the Nazis during the Second World War. However, SGS still has a significant presence in Aotearoa. Its web site, http://www.sgs.co.nz/about.htm, shows:
Before the sale of its medical subsidiary, SGS said it had “had a presence in New Zealand since 1976 and now operates from over 28 locations through the North and South Islands. SGS New Zealand employs over 800 people from all scientific disciplines including analytical chemists, metallurgists, agriculturalists, radiographers, physicists, biologists, quality assurance specialists, pathologists and technicians involved in the medical field.”
Victoria University sells its Internet Service Provider, Netlink, to Telstra
Telstra New Zealand Ltd, a subsidiary of Telstra Corporation Ltd of Australia, has approval to acquire Netlink Ltd from Victoria Link Ltd, owned by Victoria University of Wellington, for a suppressed amount. Netlink is the corporatised Internet Service Provider arm of Victoria University. Victoria was one of the first institutions of any kind to offer Internet services in Aotearoa, including to many government departments and local bodies in Wellington. It later developed that service into the commercial Netlink, which focused on the “bulk” corporate market. Indeed without the universities, the Internet would have come to Aotearoa much later than it did. They developed a national network (despite Telecom’s reluctance to provide suitable technology) and – initially with the help of the U.S. National Science Foundation – an international link to the U.S.A. They were later joined by the government scientific establishment (the DSIR, MAF etc, which became the Crown Research Institutes) in the Tuia consortium. An international link, through the University of Waikato in Hamilton, provided the only such link from Aotearoa for a number of years, used by many commercial Internet Service Providers and corporate users. It still provides that service to some. Like the Internet itself, which was developed based on government military and research funding in the U.S.A., government funding and public institutions working on a non-profit basis developed the Internet in Aotearoa. That is not apparent from the hype generated by the commercial entities that now dominate it and would have us believe they invented it.
GSL Capital of the U.K. may acquire Tasman Forests from Fletchers…
GSL Capital Ltd which is 98% owned in the U.K., has approval to acquire Tasman Forest Industries Ltd from Fletcher Challenge Ltd for a suppressed amount. We have seen no reports of this in the news media, nor on Fletcher Challenge’s web pages, so assume that it has not gone ahead. The approval includes 16,784 hectares of forest right, and 8,648 hectares of freehold land, in the Central North Island. “GSL Capital Ltd has identified New Zealand as an ideal place for forestry investment. This is based on the existing forestry industry infrastructure, the climate and soils, and the political and economic climate. GSL Capital Ltd intends to acquire the shares in Tasman to acquire their eucalyptus forest estate. The land will continue to be used for eucalyptus forestry, with most of the forests being harvested in the next ten years. The day to day management of the forests will be undertaken by Tasman pursuant to a management agreement. Approximately half of the currently planted trees will be processed at Tasman’s Kawerau mill. The balance of the wood produced will be marketed by GSL Capital Ltd, in both the domestic and export markets.” GSL Capital is owned by
According to FCL’s 1999 annual report, Tasman Forestry’s “principal activity” is “Eucalypt Plantation Forestry”. It should not be confused with Tasman Pulp and Paper Company Ltd, which is a separate Fletcher Challenge subsidiary. According to the OIC, Fletcher Challenge is owned 39% in the U.S.A., 37% in Aotearoa, 10% in Australia, 9% in the U.K., and 5% in Singapore.
… Fletcher Canada has approval to acquire Fletcher Paper …
In another deal that failed, Fletcher Challenge Canada, which is 50.8% owned by Fletcher Challenge Ltd (according to its 1999 Annual Report), has approval to acquire Fletcher Challenge Paper, a division of FCL for a sum “to be advised”. Fletcher Paper owns 16,784 hectares of forestry rights in the central North Island, and 8,669 hectares of freehold land, 201 of which are at Kawerau and the remainder “at various locations in the central North Island”. The approval was the heart of a proposal the FCL concocted to sell off its paper division to its half-owned Canadian operation. The only problem it encountered was that the minority shareholders in Fletcher Canada weren’t interested. FCL is now looking at selling its Paper division outright. The problem lies in the high debt level of Fletcher Paper – 60% of FCL’s total debt, or about $2.9 billion. This has been compounded by lower pulp and paper prices, over the previous two years, although prices are now rising. In addition, there have been widespread mergers and takeovers in the industry, threatening FCL’s market power. FCL is trying to rid itself of the debt (and aid the process of reducing competition) by selling the Paper operation (Press, 18/1/00, “Paper sale the key to FCL future”, p.13). Fletcher Paper is “one of the world’s largest producers of newsprint and is also a major manufacturer of other paper products”. The proposed sale to Fletcher Canada would have created “a world-scale manufacturer of communication papers and market pulp, operating nine mills located in six countries”. It would “be better able to succeed in a competitive environment based on its increased size and efficiencies of scale”.
… and Fletcher Challenge buys more land for subdivision in Manukau City
Fletcher Challenge Ltd subsidiaries have approval to acquire two more blocks of land for residential subdivision in Manukau City, Auckland. In one, Fletcher Homes Ltd has approval to acquire 7.8 hectares of land off Wattle Farm Road for $11,677,000 from Kirkdale Investments Ltd. Fletcher Homes “intends to develop 141 residential lots and construct residential dwellings on the land”. In the other, Fletcher Residential Ltd has approval to acquire 11.8 hectares at Point View Drive, East Tamaki for $25,010,000 from Howick Parklands Ltd, owned by the Jamieson family of Australia. It “intends to develop 192 residential lots and construct residential dwellings on the land”.
MYOB of Australia buys CA-Systems accounting software for $22m
In the latest in a continuing series of successful local computer companies being bought out from overseas, MYOB Ltd has approval to acquire the “business and assets” of CA Systems Ltd from CA-Systems Ltd “Group” of companies for $22,000,000. The assets are accounting software products. “MYOB Ltd, an Australian public company, is a leading publisher of small business accounting and tax lodgement software. MYOB state the proposed acquisition of CA-Systems Ltd ‘Group’ of companies will allow MYOB to extend and improve its existing range of accounting software products. The acquisition forms part of MYOB’s strategy to provide further products and services to its accountant clients in Australia and expand into the New Zealand market.” MYOB is owned 63.747% by C. Winkler and B. Shofer of Australia, another 29.17% in Australia, and 7.083% by C. Lee of the U.S.A. Neill Birss of the Christchurch Press reports (28/9/99, “$22m for local software firm”, p.31) that CA-Systems will stay in Christchurch where it employs 35 people, with a further 15 elsewhere in Aotearoa. Mike Chisholm, its managing director and major shareholder, who will head the firm as a division of MYOB’s Teletax subsidiary, said that the sale would help it expand into the Australian and wider world markets. It had planned to grow to 75 staff next year, and now thought it would grow more than that. CA-Systems’ software includes programs for calculating tax, managing accounting practices and client accounting. It is used in more than 1,000 accounting practices in Australia and Aotearoa, costing about $20,000 per three-partner practice. It also has cashbook and payroll programs used by 2,500 customers. MYOB was originally developed in America, but the Australian company now owns subsidiaries in the U.S.A., U.K., Canada and Aotearoa, with about 150,000 customers in Australia and 13,000 in Aotearoa. It is paying $18 million in cash and $4 million in its own shares.
521 ha. Dannevirke farm to U.S. owner for conversion to forestry
Cranco Forst, owned by Mr T.H. Lichtenfels of the U.S.A., has approval to acquire 521 hectares of land at Speedy Road, 30km south east of Dannevirke, Southern Hawkes Bay, for $506,250. It “is currently a cattle and sheep farm providing a marginal economic return” and it is intended to plant the property with pinus radiata.
Marlborough’s 9094 ha. Glazebrook Station in Waihopai Valley to U.S. buyers
Marshlands Inc, owned by the Stephens Family of the U.S.A., has approval to acquire the 9,094 hectare Glazebrook Station at Waihopai Valley, Marlborough from Glazebrook Station Ltd for $950,000. It “consists primarily of pasture, scrub and native bush”. They will maintain and upgrade the property and look at converting part into forestry. They state that it is “well suited for recreational tourism activities, including tramping, horse trekking and hunting”. The Marlborough Express (10/12/99, “US buyer plans tours for farm”, by Daniel Hutchinson) reports that the new owner is Walter Stephens of Atlanta, who when he visited Aotearoa in May thought Australia and Aotearoa were one country. He planned only a one week stay, but was “so delighted with your fine country and the people, we stayed two weeks”. He saw Glazebrook advertised in Dunedin and in August returned to look at other properties and then buy it. “He said Marlborough was similar to Montana, Wyoming and Colorado. Mr Stephens said, scenery-wise, the area was beautiful and if red deer hunting and fishing could be established then ‘the hunting experience could be absolutely fantastic’.” He intended to return in April 2000 to “research his plans”.
Tegel buys Drury land to “lessen bio-security hazards” and expand hatchery
Tegel Foods Ltd, a subsidiary of H.J. Heinz Company of the U.S.A. has approval to acquire 1.4 hectares of land at 85 Tegel Road, Drury, Auckland for $450,000. Tegel “operates an integrated chicken processing business” including a hatchery at Drury. The land in this approval adjoins the hatchery, and Tegel wishes “to develop a subterranean water discharge system and to provide for future expansion of its hatchery. Furthermore Tegel advises the property will provide a ‘buffer zone’ between the hatchery and surrounding farms thus lessening any bio-security hazards.”
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