G.T. and K.M. Dyer of the U.S.A. were refused approval to acquire land in the Auckland region. They wished to acquire it as a lifestyle property and holiday home. However they “would like to seek New Zealand permanent residency” but “appear to be unlikely to qualify due to various reasons including their age”. They intended to reside to in New Zealand on the property for approximately six months a year, because they were unlikely to meet the residency requirements. The price, size of the property and details of its location have been suppressed.

Shell bids for Fletcher Energy

Shell Exploration Company B.V. has approval to purchase Fletcher Challenge Energy (FCE), a division of Fletcher Challenge Ltd for a sum “to be advised”. This is a further step in the dismantling of one of New Zealand’s most significant companies, both in size and in historical terms, which began with the sale of Fletcher Paper to Norske Skogindustrier of Norway (see the May 2000 decisions). Shell, the second largest oil company in the world, is owned 60% by Royal Dutch Petroleum Company (N.V. Koninklijke Nederlansche Petroleum Maatschappij) of the Netherlands, and 40% by Shell Transport and Trading Company of the U.K. Fletcher Challenge is owned 39% in the U.S.A., 10% in Australia, 9% in the U.K., 5% in Singapore and only 37% in Aotearoa.

The sale includes a total of 155 hectares of freehold land at 1334 Otaraoa Road, Waitara, 90-160 Beach Road, New Plymouth, and 567 Bird Road, Stratford, Taranaki. It also includes a total of 19 hectares of leasehold land at Mangahewa Road, Foreman Road, Mangaone Road, Otaroroa Road, and 867 Bristol Road, New Plymouth; and 562-548 East Road and 133 Cross Road, Stratford.

The sale was a long and tedious process that was settled only in March 2001, five months after the OIC’s approval.

It began with the smell of blood in the air, following the sale of Fletcher Paper at a price that surprised the sharemarket. Another of the giants of world oil, Chevron (Socal, owner with Texaco of Caltex) was rumoured to be another bidder. The prospect was sweetened by the rising price of crude oil, and Fletcher’s leading shareholding in Capstone Turbine Corporation, an innovative manufacturer of gas and liquid fuel-fired micro-turbine power generators with a high-technology-like share price despite having never made a profit (Press, 5/8/00, “F Energy scores investors’ favour”, p.21). However things moved slowly towards Fletcher Challenge putting its division on the block.

In August, Shell applied for Commerce Commission approval for the purchase, but ran into trouble. The Commission repeatedly extended the time it needed to make a decision, and then in October (decision no. 408) rejected the proposal. The rejection came despite Shell’s offer to divest itself of all of FCE’s interest in the Kupe field, in Kapuni Gas Contracts Limited, in Fletcher Challenge Gas Investments Limited, in Challenge Petroleum Limited (the “Challenge!” petrol retailer, including its New Plymouth terminal), and FCE’s 14.2% interest in the New Zealand Refining Company Limited. Under the deal, Challenge! and the interest in New Zealand Refining Company would be sold to Rubicon, a new, supposedly technology-focussed, company to be set up by Fletcher Challenge to hold a number of the assets it did not wish, or think appropriate, to sell with its divisions.

The Commerce Commission described the two companies’ international activities as follows:

Shell

… Shell Group companies are involved in activities relating to oil and natural gas, chemicals, electricity generation, and renewable resources in more than 135 countries.

[Shell’s] application spells out the following activities the Shell Group is engaged in internationally:

Exploration and Production (or “E&P”): searching for oil and gas fields by means of seismic surveys and exploration wells, developing economically viable fields by drilling wells and building the infrastructure of pipelines and treatment facilities necessary for delivering hydrocarbons to market;

Oil Products: refining and processing crude oil and other feedstocks into transportation fuels, lubricants, heating and fuel oils, LPG and bitumen, and distributing and marketing these products to customers;

Chemicals: processing hydrocarbon feedstocks into base chemical products, petrochemical building blocks and polyolefins, and marketing them globally;

Downstream Gas and Power: marketing and trading natural gas, wholesaling and retailing of natural gas and electricity to industrial and domestic customers, developing and operating independent electric power plants;

Renewables: manufacturing and marketing solar energy systems, implementing rural electrification projects in developing countries, sustainably growing and marketing wood, converting wood fuel into marketable energy, developing wind energy projects.

Within New Zealand, Shell is currently active in all the above areas. The primary activities of Shell NZ include:

· the exploration for, and production of, oil and gas, including holding significant shareholdings in the Maui and Kapuni fields;

· the operation of Shell brand petrol stations, with more than 350 retail locations nation-wide;

· investments in renewable resources, most notably a joint venture with Carter Holt Harvey in Mangakahia Forest in Northland;

· the production and distribution of chemicals, including petrochemicals and detergents;

· the production and distribution of commercial products, including marine and aviation fuels, and lubricants; and

· equity investments in NZRC (17.1%), Fulton Hogan Limited (37.6%), Loyalty New Zealand Limited (25%) and the New Zealand Burger King franchise (50%).

Shell NZ owns 50% of the shares in Shell Todd Oil Services Limited (STOS). The remaining 50% of the shares are owned by Todd Energy Limited (Todd).

Shell and Todd are parties to an agreement made in 1955 (the 1955 JV) under which they agreed to carry out, as a joint venture, prospecting and mining for petroleum in an area including Taranaki, the surrounding areas and offshore from those areas, and production of any petroleum that may be discovered. Part of this agreement proposed the setting up of a servicing company “to do the prospecting and mining on behalf of the joint venture”. The agreement provides that Shell is responsible for the staffing of the servicing company and for providing technical advice to the company. This servicing company is now known as STOS and is the operator of the Maui field, and its onshore production facilities, and of the Kapuni field and production facilities.

FCE

… The application lists the activities of FCE in New Zealand as:

· exploration for, and the production and marketing of, oil, LPG and natural gas;

· operatorship of the McKee, TAWN, Kaimiro, Pohokura and Mangahewa fields;

· a 14.2% interest in NZRC, which operates the refinery at Marsden Point;

· wholesale, retail and marketing of petroleum products, motor spirits and convenience products through the Challenge! service stations, which comprise 93 service stations throughout Aotearoa and 17 fuel stops in the North Island.

FCE’s activities overseas include:

· exploration for, and production, transmission and marketing of, oil and gas in Canada and Brunei;

· exploratory drilling ventures in Argentina;

· petroleum storage and wholesaling in Brisbane;

· a 50% interest in the 120 MW gas fired Cogeneration Project, located at the Worsley Alumina plant in South Western Australia;

· an 11% interest in the Capstone Turbine Corporation, a Los Angeles based “Micro-Turbine” manufacturer which has recently listed on NASDAQ; and

· a 15% interest in Petroz NL, an Australian oil and gas exploration and production company with interests in Australia, the Timor Gap Zone of Co-operation, Indonesia and Italy.

However, the Commerce Commission decided that only three markets were relevant to its decision: the national markets for

· gas production currently;

· post-2009 gas production; and

· LPG production.

In the others, it decided, there was sufficient competition, or Shell had agreed to divest itself of offending operations.

Its concerns in gas production are highlighted in the following table, which shows that FCE and Shell between them had effective control of 100% of the production of gas in Aotearoa in 1999, using data from the Ministry of Economic Development’s Energy Data File, July 2000:

Field	Field Owners		1999 Gas Production
			PJ	%
Maui	FCE	68.75%	175	80
	Shell	25%
	Todd	6.25%
Kapuni	Shell	50%	24	11
	Todd	50%
TAWN	FCE	96.73%	9	4
	Bligh	3.27%
McKee	FCE	100%	8	4
Kaimiro	FCE	100%	1	1
Total			217	100

(PJ = Petajoules; TAWN = the Tariki, Ahuroa, Waihapa and Ngaere fields in Taranaki.)

Many of these assets were the result of privatisations and subject to various “take or pay” provisions whereby the government, or its present or former corporations such as parts of the former Electricity Corporation, had contracted to pay for gas even if it didn’t use it. It had sold some of these contracts to the Natural Gas Corporation (NGC – the Australian-owned owner of TransAlta/On Energy), Contact Energy, Genesis Power and Methanex. The Commerce Commission considered whether those corporations, or the Todd Corporation would provide competition by reselling the gas, but decided that was unlikely. It concluded: “the Commission considers that the constraint from competitors is not sufficient to preclude Shell from exercising significant market power post-acquisition”.

It then looked at whether new competition would arise after 2009, when the Maui and other fields are expected to be close to depletion, and new fields are expected to be in production. It estimated likely 2010 production from known developed and undeveloped fields. Its conclusion was that 63% of the likely or possible new production (including 75% of the likely new production) would be owned by Shell/FCE and only 37% by other owners. Commenting on the commercial discoveries since 1959,

The Commission notes that the largest discoveries – Maui, Kapuni, Pohokura, TAWN – have all been discovered by Shell, FCE or their predecessors or associates, Shell/BP/Todd and Petrocorp. While this in part may be a reflection of the more limited interest in gas exploration in the past, more restrictive licensing regimes, and the Government involvement in Petrocorp, it is likely that Shell and Todds’ past successes will have given them information and expertise not available to more recent entrants.

It concluded that with regard to new entrants to gas production post 2009, “the Commission cannot be confident of the extent of new entry and that it will be sufficient to ensure that the merged entity will not be in a dominant position in the market.”

In sum,

The Commission considers that the likely competitive constraints from current fields and from new fields together would not be sufficient to prevent the merged entity from being able to exercise a high degree of market power. Accordingly the Commission concludes that it is not satisfied that the proposed acquisition would not, or would not be likely to result in an acquisition or strengthening of dominance in the post-2009 gas production market.

In LPG production, the Commerce Commission stated,

the principal acquirers of LPG from the producers are Liquigas, Rockgas, NGC, Shell and Todd. Liquigas was established in 1981 as a New Zealand LPG distribution venture. The parties which established Liquigas and were its initial shareholders were BP Oil New Zealand Ltd, Rockgas Ltd, Natural Gas Trading Ltd, Shell New Zealand Holding Co Ltd, and Todd Petrogas Ltd.

Since that time BP has sold its interest to NGC. Shell is a 18.75% shareholder in Liquigas. The other shareholders are also participants in LPG wholesale markets. They are: NGC which has a 60.25% shareholding, Todd which has a 12.5% share and Rockgas which has a 8.5% share.

Rockgas is an LPG wholesaler and retailer. Its ownership is 50% Origin Energy Ltd and 50% Caltex Gas New Zealand Ltd.

NGC is a listed company which undertakes the business of the acquisition, transmission and marketing of gas throughout the North Island, as well as electricity retailing. It owns the gas treatment plant at Kapuni which produces LPG and is a wholesaler and retailer of LPG, supplying LPG to BP service stations.

It concludes that “the only current producer other than FCE and Shell and their associated companies, NGC, is constrained in its ability to compete with Shell post acquisition.” It considered it was unlikely that new entrants would change this position.

The Commission therefore rejected Shell’s application on the basis of the dominant position it would acquire in all three markets.

Naturally, Shell did not take no for an answer. It applied again on 20 October (eight days after the OIC gave its approval to the purchase!), this time offering to divest the following assets in addition to those offered the first time (see Commerce Commission decision 411):

· 10% of its interest in the Maui field (leaving it with 83.75%), but also agreeing to require the agreement of another party (Todd or the purchaser of the 10%) in making decisions by the Maui joint venture;

· 3.6667% of its interest in the Pohokura field (leaving it with 48%);

· FCE’s interests in

the TAWN gas fields, including the pipeline from the fields to Contact Energy’s New Plymouth power station;
the Ngatoro field “except all potential reservoirs deeper than the currently producing Miocene age Mt Messenger sands” including the pipeline from the Kaimiro field and the Ngatoro field;
the McKee field including the pipeline to Methanex;
the Kaimiro field “except all potential reservoirs deeper than the currently producing Miocene age Mt Messenger sands”
the Mangahewa field “except all potential reservoirs deeper than the reserves contained in the MA-72 Kapuni Group reservoir”

Note that this still leaves Shell with control over 91% of gas production in Aotearoa, through the Maui and Kapuni fields. The additional divestment was minimal.

However the Commerce Commission decided that the remaining 9% of gas production not owned by Shell would provide sufficient competition noting that “it represents around 48% of the total amount of gas used last year by other than the electricity and petrochemical sectors” because the rest was to a large extent tied up in bulk supply contracts. It suppressed the data that show Shell’s estimated share post-2009, but convinced itself that the divestments would mean Shell would not have a dominant position post-2009. On LPG, the Commission considered that the TAWN divestment plus competition from NGC at Kapuni, the change in the Maui ownership and voting rights, plus new information on the nature of contracts between the various companies in the LPG market, would prevent Shell from having a dominant position.

Just what we have come to expect of the Commerce Commission.

The actual deal involved U.S. exploration company, Apache, buying the Canadian and Argentine assets of FCE. According to Fletcher Challenge, Apache is a “leading oil and gas exploration and development company with operations in the United States, Canada, Australia, Egypt, Poland and China. As at 30 September 2000, Apache has US$6.75 billion in assets”.

The original deal offered FCE shareholders in October 2000

· US$3.34 a share in cash (approximately NZ$8.30 at that time)

· One Capstone Turbines share for every 70 FCE shares (valued at $1.72 per FCE share)

· One Rubicon share for each FCE share (valued at $1.20)

(Press, 11/10/00, “Winners and losers on FCL”, p.34)

This total offer, of $11.22 was a 43% premium on the sharemarket price of $7.85 in mid October 2000, but subject to the whims of the exchange rate and the value of Capstone shares between October 2000 and settlement in late March 2001. Indeed, by the time the formal offer documents were published in 2001, the value of the offer had fallen to $9.65 per share. At that value, the 353.2 million shares were valued at $3.4 billion, and Shell was paying $2.6 billion for FCE itself.

Other Fletcher Challenge shareholders were affected by the sale, Fletcher Forests shareholders faring particular badly, and venting their anger at the annual meeting in November 2000 (Press, 3/11/00, “Deane, Andrews bear brunt of shareholder frustration”, p.18).

Though other bids were not apparent in 2000 (other than the suggestion of Chevron’s interest), a late bidder in February 2001 forced Shell to increase the cash part of its offer to US$3.55 a share. The new bidder, Greymouth Petroleum, played up the “little guy” and “kiwi” image, but in fact was a consortium of Ron Brierley’s Guinness Peat Group, FR Partners (Faye Richwhite), and Canadian oil company, Penn West, plus New Zealand and overseas institutions. It offered US$3.70 in cash, later raised to US$3.85, leaving the rest of the offer unchanged. A subsidiary, Peak Petroleum, would be set up to run FCE’s New Zealand and Brunei assets if the bid succeeded, while Penn West would take FCE’s Canada oil and gas interests. In Greymouth Petroleum’s favour was sharebroker Forsyth Barr which was arguing that Shell’s valuation was too low. Against it was the lateness of its bid, which Fletcher Challenge claimed came too late to allow it to back out of the Shell offer.

Nevertheless, Shell raised the cash part of its offer to US$3.55 in response. That was the only achievement that Greymouth spokespeople could claim when their bid was rejected overwhelmingly at a drawn-out Fletcher Challenge shareholders meeting in March 2001, which approved the sale by 96%. Perhaps the most cutting irony was Shell’s answer to their “patriotic” call: Shell had been in New Zealand for 90 years, but Greymouth Petroleum only for weeks.

A telling commentary on the sale of one of our largest energy companies comes from Australia. At the same time as Shell was bidding with great confidence for FCE, it was battling in Australia for full ownership of Woodside Petroleum, manager (and owner of a large share) of the huge North West shelf liquefied gas project off Western Australia. The decision was left to the Australian government (rather than a statutory authority like the OIC) which procrastinated over the decision for some time. Bruce Baskett described the dilemma in the Press (12/3/01, “‘Smile doctors’ no longer required”, p.15):

Offshore investors are battering [the Australian] dollar and one of the most crucial decisions the Government has on its plate could see it plummeting even further. The rating of Australia as a place to invest depends largely on whether the Howard Government will allow Shell to take over Woodside Petroleum. The Government is spooked as it weighs up the pros and cons. In short, they are damned if they do, and will be internationally crucified if they don’t.

John Howard says he is concerned that Australia is becoming a “branch office economy”. He says that his heart is with Australian ownership but the country cannot afford to put up the shutters against foreign investment.

In the end the Australian government vetoed the takeover, Treasurer Peter Costello saying it was “not in the national interest”. The financial markets were “stunned”, and conveyed a warning through international ratings agency, Fitch Inc, that the act shouldn’t be repeated or it would be seen as “a generalised resistance to foreign direct investment in Australia” which would “likely hurt the country’s sovereign [credit] rating”. Fitch’s director of international public finance in London “stressed that Australia remained heavily dependent on international finance with its large current account deficits and heavy external debt burden. That makes it important that international investors remain confident they face a level playing field” (Press, 25/04/01, “Politics big player in gas decision – experts”, p.32). Australia has been warned!

Australian governments are different only in that they occasionally worry before selling out. Perhaps Howard should be advised not to concern himself any more about the country becoming a branch office economy. Our governments can teach him how to stop worrying and love servility.

Fletcher Residential purchases Waitakere land for subdivision

Fletcher Residential Ltd, a subsidiary of Fletcher Challenge Ltd, has approval to acquire 2.3 hectares of land at Rushcreek Drive, Waitakere, Auckland for $4,176,000 from Rushcreek Estates Ltd. It “intends to develop 48 residential lots and construct residential dwellings on the land”. The ownership of Fletcher Challenge is detailed in the previous decision.

AMP acquires Manukau Supa Centa

AMP Property Fund, 89% owned in Australia, has approval to acquire the Manukau Supa Centa (sic) on 13 hectares at the corner of Cavendish Drive and Lambie Drive, Manukau City, for $38,721,491 from Howgate Holdings Ltd and Lady Ruby Investments Ltd of Aotearoa. AMP intends further develop the land, which includes vacant land, as a “commercial/industrial/retail estate”.

SPHC buys Park Royal Hotel, Wellington

SPHC NZ Holdings Ltd, owned by Bass PLC of the U.K. has approval to acquire the Park Royal Hotel in Wellington from AMP NZ Office Featherston Street Ltd, which is 89% owned in Australia and 11% in Aotearoa, for $62,550,000. “The acquisition of the Park Royal Hotel will add a major hotel to the Applicant’s group of hotels in the Asia-Pacific area. The company currently holds the management contract for the hotel and … has 11 hotels in New Zealand under the Centra, Parkroyal and Hermitage brands.”

SPHC (presumably Southern Pacific Hotel Corporation) used to be owned by the Pritzker family of the U.S.A., through a Hong Kong subsidiary, Hale Internaitonal (see our commentary on the October 1997 decisions). Though as far as we know, the OIC never approved it, SPHC has now been taken over by Bass. Tthe two companies announced the acquisition in Singapore on 20/9/00 (http://www.sphc.com.au/aboutus/prchooser.asp?type=1, “Bass finalises acquisition of SPHC Group” with a dateline confusingly 4/4/00):

“Bass Hotels & Resorts today became the largest hotel management company in Asia Pacific and reinforced its dominant position as the global leader in distribution strength following formal completion of the Southern Pacific Hotels Corporation (SPHC) acquisition, which adds 59 hotels to its regional portfolio. Bass announced on January 18 that it had entered into an agreement to purchase the share capital of Hale International Limited, which owned, leased, managed or franchised the 59 hotels through various operating companies, including SPHC.

The acquisition covers 24 hotels in Australia (including six owned or leased), 13 in New Zealand, eight in the South Pacific Islands (New Caledonia, French Polynesia, Fiji, Vanuatu, Suva), three in Papua New Guinea and 11 in Asia. The consideration, as previously announced, is £128 million. BHR is now the second-largest hotel operator in Australia.

Mr Richard Hartman, Managing Director of Bass Hotels & Resorts-Asia Pacific, said today that the acquisition of SPHC “significantly strengthens our number one position in Asia Pacific – where BHR now manages a total of 160 hotels offering more than 40,000 rooms”. Mr Hartman said the SPHC acquisition was also “part of a five-year strategy to achieve market leadership in Australia/New Zealand”.

The report notes that

Bass Hotels & Resorts, the hotel business of Bass PLC of the United Kingdom, operates or franchises more than 2,800 hotels and 450,000 guest rooms in more than 90 countries and territories. The following are some of the service marks owned by Bass Hotels & Resorts, Inc., its subsidiaries or affiliates:

Holiday Inn, Crowne Plaza, Express by Holiday Inns, Holiday Inn Select, Holiday Inn Garden Courts, Holiday Inn SunSpreer Resorts, Staybridge Suites, Holidex, Priority Club Worldwide, Inter-Continental, Forum, and Six Continents Club.

Hudson buys Savoy out from Hyatt Regency Auckland Hotel site for “a song”

Hudson Investment Group Ltd of Australia has approval to acquire the shares of Savoy Capital Assets Ltd in their joint venture, Hudson Savoy Holdings Ltd, for $5,189,957. Savoy had 52.5% of the joint venture with Hudson, which was set up in July 1999 to develop the 1.0862 hectare Hyatt Regency Hotel site on the corner of Princes Street and Eden Crescent, Auckland. The joint venture intended to develop the surrounding land, which includes the Princes Court and Eden Hall buildings, into serviced apartments.

What the OIC does not state is that the man behind Savoy and the failed Britomart scheme, Jihong Lu, was going bankrupt. In November 2000, he was judged bankrupt in the Auckland High Court over a $2.5 million debt as the result of an application by Kuala Lumpur-based engineering firm MESB Berhad. The New Zealand Herald reported that MESB “had secured a judgment against Mr Lu in June for $2.3 million plus costs and interest. It took him to court when a deal to buy his shares in New Zealand telecommunications company SmarTel fell through after MESB had paid Mr Lu a $2 million deposit” (New Zealand Herald, 9/11/00, “Britomart backer bankrupt over $2.5m Malaysian debt”, by Simon Hendery).

Savoy, according to the OIC, “is no longer in a financial position to contribute the necessary development capital to enable the refurbishment and further development of the Hyatt Regency Auckland hotel and the adjacent land”. According to the same Herald story,

Aside from the Britomart fiasco, many of Mr Lu’s other business ventures have proved turbulent. A company he was linked with, Roadsigns, was ordered to pay $500,000 to two employees judged to be unfairly dismissed. SmarTel, which sells pre-paid calling cards and toll services, was itself in hot water last year after a sales promotion it was involved in ran foul of the Lotteries Commission.

The price Hudson paid for the shares is “a song”, as the Herald headlined in another story (15/11/00, “Hyatt stake goes for $2.4m song”, by Anne Gibson), but a song that the OIC claims is twice as long as the Herald thought. When the OIC approved the July 1999 purchase of the property, we reported that it bought the businesses, buildings and land from Otaka International Hotel Ltd of Japan at a price suppressed by the OIC, but reported by NZPA at $40 million (Press, 9/8/99, “Hyatt deal completed by Savoy”, p.30). In addition, says the Herald, the 111 apartment serviced complex is projected to be worth $58 million when finished. The prices of the apartments range from $178,000 to $860,000 and 66% have been sold. A 17-level apartment development on Princes St beside the Hyatt Regency Hotel is in preparation.

According to the Herald,

“The transfer of Savoy Equities’ 47.5 per cent shareholding in the joint venture to Hudson Pacific Group was by way of 9,831,000 fully paid ordinary shares, which are currently trading on the Australian Stock Exchange at approximately 25c per share,” said John Dalzell, of Hudson.

This does not square with the OIC’s approvals in July 1999 and this one, which show that Savoy Capital had 52.5% of the joint venture, and a value of this transaction more than double what the Herald reports – but still far below value. Perhaps the OIC’s value – undoubtedly one given it by the applicant – is inflated by an over-valuation of Hudson’s shares. That would be consistent with the record of some of the principals in these schemes.

Jihong Lu was involved in much bigger stakes in the Philippines, where one of his companies was implicated in the downfall of President Estrada early in 2001 and the collapse of the Philippine share market in 1999. As the Philippine Daily Inquirer, reported in its front page lead story on 12/1/01 (“Erap owns BW, says Espiritu”, by Juliet L. Javellana),

The prosecution yesterday exploded its biggest bombshell at the impeachment trial of President Estrada when former Finance Secretary Edgardo Espiritu testified that President Estrada jointly owned BW Resources Corp. with Dante Tan.

Under the Philippine Constitution, the President is barred from engaging directly or indirectly in any business in the country.

The share price of BW (“Best World”) Resources rose “phenomenally” in 1999 and this was a topic of his discussions with the President during a one-on-one meeting in Malacañang, said Espiritu. “Regulators have said BW shares’ yo-yo-like ride in late 1999 led to the near collapse of the Philippine Stock Exchange in the biggest insider trading scandal in the country’s history.” As the Inquirer reported in another front page lead (20/12/00, “BW Stocks Scandal: Estrada pal Dante Tan charged; P120,000 bail set”, by Michael Lim Ubac), “many small investors were ruined, setting off a government investigation. The scandal hurt the stock market so seriously that lawmakers hastened the passage of a new Securities Regulation Code that the government hoped would restore investor confidence.”

According to Brian Gaynor in the Herald (18/11/00, “Britomart wheeler-dealer runs out of gas”), in an article sketching many of Lu’s other transgressions, the Savoy Group invested $US10 million in BW Resources and he was also chairman of the company.

BW’s share price soared from 2 pesos (10c) at the beginning of 1999 to a peak of 107 pesos on October 11 last year when Macau casino czar Stanley Ho replaced Mr Lu as chairman. Mr Lu remained as deputy chairman and indicated that Savoy would invest a further $US40 million in BW.

We also noted in 1999 that, though the OIC identified (and still identifies) the Hudson Investment Group as being Australian, in fact Savoy Equities was a “cornerstone shareholder” of the company, which is listed in Australia (Press, 15/5/99, “Savoy expands in Auckland CBD”, p.22).

The current shareholding of Savoy Capital Assets, according to the OIC, is

· Savoy Trust (New Zealand), 66.45%

· Idris Hydraulic (Malaysia) Berhad (Malaysia) 14.79%

· Jat Meng Taang (Singapore), a director of Savoy Equities, 5.95%

· Albert Cheock (Malaysia), 3.34%

· Donna Sophonponich (Malaysia), 3.34%

· Matthew Ng (Malaysia), 0.74%

· “New Zealand public”, 5.37%

Brierley Investments buys Greyloch Holdings from ANZ Bank

In a transaction that has all the clarity of a slick lawyer’s explanation, Scilla Investments Ltd, a subsidiary of Brierley Investments Ltd, has approval to acquire Greyloch Holdings Ltd from the ANZ Banking Group (New Zealand) Ltd of Australia, for $119,250,000. Greyloch Holdings’ sole asset is an “investment vehicle”, Greyloch Investments Ltd. ANZ and Brierley Investments “have contractual arrangements with respect to certain investments in relation to Greyloch Holdings Ltd” and they “have agreed to rearrange the basis of certain investments including the acquisition of Greyloch”.

Brierley Investments is 83% owned outside Aotearoa, as follows:

· 24.4% by the Camerlin Group Berhad of Malaysia (but which also has ownership in Singapore and Indonesia)

· 6.59% by the Singapore Government

· 4.13% by Franklin Resources Ltd of the U.S.A.

· 47.88% by “persons who may be overseas persons”

· 17% by small shareholders in Aotearoa

Nelson Pine Industries acquires more Nelson land as buffer to fibreboard plant

Nelson Pine Industries Ltd, a subsidiary of Sumitomo Forestry Company Ltd of Japan, has approval to acquire nine hectares of land at Lower Queens Street, Richmond, Nelson for $337,500 from A E Field and Sons Ltd. Of more interest than this purchase itself are the details of Nelson Pine Industries’ operations in Nelson. The OIC states that

The Applicant owns and operates one of the single largest medium density fibreboard production plants in the world. The Applicant recently announced plans to establish a laminated veneer lumber plant on one of its industrial areas adjoining the main plant site.

The Applicant processes approximately 40% of the Nelson region’s Radiata pine resource into medium density fibreboard and other related products. On an annual basis this represents around 750,000 cubic metres. The subsequent export volume equates to 12% of the region’s export volumes through Port Nelson.

Nelson Pine Industries bought seven hectares of land from A E Field and Sons in 1995 to establish a buffer zone around the fibreboard plant, and A E Field and Sons now want to sell the rest of their land, which is being purchased to increase the size of the buffer. It will be leased to a local orchardist.

The approval for the purchase of the original seven hectares was in July 1995 when we reported that Nelson Pine Industries

is buying out a neighbour who has complained about the noise and dust pollution from Nelson Pine’s factory. Nelson Pine is buying seven hectares of land at Nelson for $375,000 and leasing it back to the vendor, A E Field and Sons Ltd. “While Nelson Pine complies with its planning and statutory requirements in these matters nevertheless it wishes to remove the source of complaint.”

Land for forestry

· The Mar Chang Family Trust of Taiwan has approval to acquire 15 hectares of land at Whangaehu Valley Road, near Wanganui for $97,231 from the New Zealand Forestry Group Ltd, which is owned 76% by Wesley Garratt of Aotearoa and 24% by J. Hong of Taiwan. The Trust is a member of the Mangamahu Forest Owners Association, which has “entered into an arrangement with New Zealand Forestry Group to develop approximately 301 hectares of land near Wanganui”. The last sales related to Mangamahu were in May 2000 when two blocks of land, of 12 and 17 hectares, were sold to residents of Taiwan for $73,225 and $122,146 respectively.

· Green Crow Corporation Inc of the U.S.A. has approval to acquire 169 hectares of land at Tinui, Masterton Castlepoint Road, Wairarapa for $300,000 to develop a commercial forestry operation. Green Crow was last heard of in April 1994 when MRGC Company, 50% owned by Merill and Ring Inc of the U.S.A. and 50% owned by Green Crow Corporation, was given approval to acquire the standing timber and a Forestry Right over a piece of afforested land in the Wairarapa. The term of the right was “approximately 85 years”, over 37 hectares, for “approximately $675,000”. It also has forest cutting rights in Marlborough.

More land for Martha Mine, Waihi

Waihi Gold Company Nominees Ltd has approval to acquire two more blocks of land in Waihi, Coromandel as a buffer to the extension of its gold mine. They are 0.0889 hectares at 16 Newman Street, Waihi, for $160,000, and 1.26 hectares at 12A Slevin Street, Waihi, for $618,750.

Waihi Gold is owned 67.06% by Normandy Mining Ltd, listed in Australia, and 32.94% by AUAG Resources Limited. The OIC shows the AUAG ownership as exactly half each Australian and New Zealand public. The last such acquisition was in July 2000.

“The company is proceeding with an extension to the Martha Mine that will have the effect of extending the life of the mine for about an additional seven years. This extension involves enabling access to be obtained to ore below the level of the currently licensed pit. To reach this ore it is necessary to bench back (or extend) the perimeter of the existing pit, and the additional land is required for this, and to provide a sufficient buffer between the extended mine and surrounding residential uses. Previous consents have been granted by the Commission for the acquisition of such land. The land the subject of this application is directly adjacent to the extended Martha Hill mine licence area, and will be required as a buffer for the extended project.”

U.S. sheep farmer with fetish for new breeds acquires further 867 ha.

Willow Bay Company Ltd owned by David Dean Smith of the U.S.A. has approval to acquire 867 hectares at Taumatatotara West Road, Te Anga, near Waitomo, King Country for $1,406,249. In March 1999, the same company gained approval to acquire a 315 hectare farm at Kaweka Road, Taihape, King Country for $400,000. Smith obtained consent to buy his first farm, of 86 hectares, in Aotearoa in April 1998 for $375,000, and a nearby 11 hectare property including a house in July 1998, for $128,000. In reference to the 86 hectare property the OIC said that “Mr Smith has extensive knowledge and expertise of the Simmental pedigree, Arubrc Stud and Brahman Cross cattle breeds” which he intended to develop. He would employ a farm manager for the day-to-day management and operation of the property.

On acquiring the 315 hectare sheep farm, we were told that while “recognising that sheep farming is probably at its lowest economic return ever, but having a fetish for introducing new strains and breeds of animal, the applicant is enthusiastic to become fully involved in the breeding of existing breeds and also exotic sheep”. He wants to “introduce East Friesian Rams with the Romney ewes on the property”. He

“also wishes to introduce an exotic breed known as Romanov ram, which emanates from Russia and will come out to New Zealand via the U.S.A. The breed is of super high production, but on account of New Zealand’s quarantine requirements, will take at least five years to be able to be properly introduced to New Zealand. The proposed acquisition will enable the applicant to develop his expertise in sheep farming during the intervening period.”

However we are now told that that acquisition was to establish a sheep and beef operation which would involve development of sheep farming and breeding by introducing new exotic breeds; the introduction of Simmental semen from Smith’s farm in America; and the introduction of East Friesian rams with Romney rams to promote better milk, meat and lamb production. He is acquiring the new farm to “make the existing farming venture more viable”. The purchase of the new property, which is “capable of carrying up to 7,730 stock units, will mean that the total number of stock units able to be farmed by the Applicant will be approximately 10,330 stock units”.

Montana buys five blocks of land in Marlborough, Hawkes Bay and Gisborne

Montana Group (NZ) Ltd (formerly Corporate Investments Ltd) has approval to acquire five separate blocks of land for grape growing and wine production. They are

· 80 hectares at Seaview Road, Seddon, Marlborough, for $843,750

· 228 hectares at Seaview Road, Seddon, Marlborough, for $4,207,434

· 18 hectares at State Highway 36, Gisborne, for $720,000

· 38 hectares at Brookfields Road, Clive, Hawke’s Bay for $1,491,251

· 10 hectares at State Highway 50, Hawke’s Bay, for $298,125.

Two different sets of figures are given by the OIC for the ownership of Montana. Though it was currently in the midst of a battle for its control, we don’t believe control was changing so rapidly as to differ between applications made on the same day (27/10/00)! It seems probable the ownership was the same as we reported in the September 2000 decisions where the beginning of the battle was recorded:

· 28.2% by Lion Nathan controlled in Japan;

· 20.69% by P. H. Masfen (chairman, Peter Masfen) of Aotearoa;

· 13.04% by Australian Mutual Provident Society (AMP) of Australia;

· 7.08% by The Capital Group Companies Inc of the U.S.A.;

· and 30.99% in minority shareholdings in Aotearoa;

Craggy Range vineyards expand in Hawkes Bay

David Arden Peabody of Australia has approval to acquire 12 hectares of land at Waimarama Road, RD 12, Havelock North, Hawkes Bay for $450,000. He is “a member of the Peabody family, which has established the Craggy Range vineyard operations in Hawke’s Bay and the Wairarapa, which comprise approximately 357 hectares”.

David Peabody has “been appointed to have immediate oversight and control of the New Zealand winery activities of the enterprise as director of the company”. He intends to “conduct specialised wine-growing activities” on the new property, in particular “clones of the Chardonnay variety of grape”. They will also experiment with olive and truffle production.

In December 1998, Craggy Range Vineyards Ltd, owned by Mr Terry Peabody of Australia, gained approval to acquire three blocks of land for developing vineyards “capable of producing top quality premium wines available for domestic and international markets”. Mr Peabody was involved in developing a chain of restaurants in British Columbia “through which he intends offering New Zealand wines”.

That land was ten hectares at Waimarama Road, Hawkes Bay, for $350,000, on which he proposed planting five hectares of grapes and developing a restaurant and retail outlet; 42 hectares at Kereru Road, Hawkes Bay for $530,000; and 167 hectares at Te Muna Road, Martinborough, Wairarapa, for $2,850,000. All of which doesn’t add up to 357 hectares.

Southland land purchased “to promote and safeguard the earth’s biodiversity”

In a decision whose essentials are suppressed, an investor from the U.S.A. whose name is suppressed, has approval to acquire land of a suppressed size in Southland that adjoins land held for conservation purposes. The land, the use of which is “native bush”, may be on Stewart Island. The OIC states that

the Applicant’s stated mission is to promote and safeguard the earth’s biodiversity. Essential to the Applicant meeting its goal, and the overall intention of this proposal, is the promotion and protection of a healthy environment with specific emphasis on the preservation of fragile and unique ecosystems of Stewart Island. The Applicant intends to achieve this goal by:

(a) focussing on education, specifically to promote understanding awareness of the earth’s biodiversity;

(b) identifying environmental as well as human activities which threatens such biodiversity; and

The remainder of the rationale for the decision has been suppressed.

If the objectives are so laudable, why is it necessary to suppress so many details?

Other rural land sales

· The Trustees of 1996 Plough Farm Trust of the U.K. have approval to acquire five hectares at 1 Uretiti Road, Waipu, Whangarei, Northland, for a “lifestyle property”, for $337,500. The beneficiaries of the trust are “Mr N. Lewis, Mrs C. Lewis and Mr Lewis’s sister, Mrs Orchard”. Mrs Orchard intends to reside on the property to live near her daughter and grandchildren, and has applied for permanent residence.

· Karl-Heinz Reipen of Germany has approval to acquire the 1,105 hectare Pioi Station, Fraser Smith Road, Waitomo District, Waikato, for $1,462,499 from Turipoto Tree Farm of Aotearoa. He intends to establish “sheep cross breeding and cattle breeding programmes” on the farm. He also proposes to establish an “eco-tourism venture” which “will utilise the remote and isolated aspects of the property – with its unspoilt coastal shoreline, native bush and natural topography. The venture will include the development of accommodation facilities, horse trekking, quad biking, tramping expeditions and trophy photography and hunting of deer, pigs and goats.”

· Dr Rudiger Naumann-Etienne of the U.S.A., has approval to acquire 581 hectares at State Highway 6, Wairau Valley, Blenheim, Marlborough for mixed farming, for $1,011,062. It adjoins a farm owned by his wife, a New Zealander. Approximately 430 hectares “which is marginal for agricultural purposes” will be developed as a commercial forestry block. A local company, Property and Land Management Services Ltd will be contracted to manage the forestry development.

· Cabal Properties Ltd, owned by Lord Thomas Clifford of the U.K., has approval to acquire 12 hectares of land from Waipara Hill Wine Estate Ltd, at Omihi Road, Waipara, North Canterbury for $416,531. In August 2000, Cabal Properties Ltd gained approval to acquire 12 hectares of land from Greystone Vineyard Ltd, at McKenzies Road, Waipara, North Canterbury for $202,500 on which he intended to develop a vineyard. That land is five kilometres from this property, which will be developed into a further vineyard. Both will sell on contract to Langdale Wines “who will then produce vintages specifically targeted at the European market (United Kingdom)”. Clifford has “contacts in the United Kingdom and Europe” who will “enable him to identify and secure potential export markets”. It is interesting that land prices appear to have doubled in two months.

· Chiola Lodge Ltd owned by Antonio Giovanni Assetta of Australia has approval to acquire 20 hectares of land at Acton Road, Rakaia, Canterbury for $130,000. Assetta owns “one of New Zealand’s leading trotting stallions, Chiola Hanover” which will form the basis of a horse breeding operation for the Australian market. He “has carried out extensive research to conclude that the quality and depth of New Zealand standardbreds has a greater investment potential than in Australia based on yearling sales figures and performance evidence” and has decided “to relocate his breeding activities based around Chiola Hanover to New Zealand”. The move was “also influenced by New Zealand’s climatic conditions, lower production costs, exchange rates and enhanced breeding opportunities”. He will employ a local consultant to “oversee the stallion work and river protection work”.

· Nigel Douglas Greening Family Trust of the U.K. has approval to acquire 46 hectares of land at Felton Road, Bannockburn, Cromwell, Otago from C S Elms Ltd of Aotearoa for $7,875,000. It will be developed as “a boutique Pinot Noir vineyard” producing wine for export and adds to a further ten hectares purchased via Cornish Point Wines Ltd, approved by the OIC in June 1999. The 1999 purchase was in Cornish Point Road, Bannockburn, cost $365,625, adjoined a lake, and was to be converted from an apple and apricot orchard. “The Applicant also intends to promote and develop the local tourism industry through an operational company, Felton Road Holdings Ltd”, which will produce and market wine and be establish as a “brand”. The applicant has “extensive experience in marketing global ‘brands’ through forming ParkAvenue Productions” in the U.K.

· J.R. and S.L. Lochner of the U.S.A. have approval to acquire 43 hectares of land at Bobby Head Road, Palmerston, Otago for $382,900 for conversion from “a predominantly pastoral and beef breeding farm to a vineyard”. They will trial four grape varieties that have been successful in cooler climates. They also intend to “develop the tourism potential incorporating the neighbouring attraction of the rare Yellow-Eyed Penguin species. They indicate that discussions have been entered into with the Yellow-Eyed Penguin Trust regarding funding of their website”.

· The Clinton Family Trust of Ireland has approval to acquire another farm in Southland. This is time it is 41 hectares at Ryal Bush, No 6 RD Invercargill, for $534,375, and is being acquired through their company Premier Dairies Ltd from McDougall’s Contracting Ltd and Mr A.B. Weller. A sheep farm that will be converted to dairying, it adjoins a property the Clintons gained approval to acquire in June 2000, which was described as a 387 hectare farm at Brown Road, North Makarewa, Southland, purchased for $8,321,625. In that case, the new owners intended to increase the production of the farm and construct a rotary cowshed, new milking machinery and re-fencing.

October 2000 decisions

Field

Field Owners

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