Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – November 2017 Decisions

Tegel Leases Yet More New Plymouth Land

Tegel Foods LtdLtd (NZ Public 31%, US Public 23.3%, various overseas 37.3%, Singapore Public 8.4%) has consent to acquire a leasehold interest in 40.4505 hectares at Tikorangi Road East, Tikorangi, from Paul Gerard Bourke, Bernadette May Bourke and Clonlara 2004 Ltd as trustees of the Bourke Otararoa Trust (NZ 100%) for $46,030,500.

The OIO states that Tegel wishes to increase its chicken production and intends to build and operate a new breeder farm on the land. The transaction satisfied the s.16 criteria of the Overseas Investment Act 2005 (overseas investment in sensitive land), with “substantial and identifiable benefit to New Zealand” under s.17(2)(a)(i) – Jobs, s.17(2)(a)(iii) – increased export receipts, s.17(2)(a)(iv) – greater efficiency/productivity, s.17(2)(a)(vi) – increased processing of primary products, and Regulations 28(e) – previous investments and 28(j) – oversight and participation by New Zealanders.

For Tegel’s ownership history, see also commentaries of February 2011, April 2010, December 2008 and October 1996; for land purchases and leases, see October 2017, November 2016, July 2016, August 2014, May 2013, September 2008, February 2008, March 2006, November 2000, September 2000.October 1999, April 1997 and June 1994.

In brief, it was bought out of Watties’ ownership in 2006 by Australian investment company Pacific Equity Partners Pty Ltd for around $390 million, with various share-shuffling arrangements in 2008 to fund expansion. In 2011 it was taken over by Claris Investments Pte Ltd, a Singapore company ultimately owned by Affinity Equity Partners for $605 million. Affinity is one of Asian’s largest private equity firms, focusing on leveraged buyouts and growth capital transactions.

In December 2017, Tegel Group shares fell 10% following a drop in six-month profits despite sales up 2% to $302 million. Tegel highlights its growing share of the free range market, which is now 12% of all poultry sales (Jonathan Underhill, NBR, 6/12/17 www.nbr.co.nz/article/tegel-shares-drop-10-first-half-result-misses-estimates-b-210831). Tegel describes itself as an “iconic New Zealand heritage brand” – well, I guess the hens are still real Kiwis.

Inghams Leases Land Near Te Awamutu

Inghams Enterprises (NZ) Pty Ltd Ais owned by: various overseas 26.6%; TPG Asia SF V PTE. Ltd, Singapore 20.8%; TPG Asia VI SF Pte. Ltd, Singapore 17.5%; AustralianSuper Investments Pty Ltd as trustee for AustralianSuper Private Equity Trust, Australia 12.1%); TPG Adam Co-Invest LP, USA 8.8%; Mondrian Investment Partners, UK 5.8%; Janus Henderson Investors, UK 4.35%; Macquarie Asset Management, Australia 4.1%.

It has consent to acquire of a leasehold interest in approx. seven hectares at 569 Te Mawhai Road, Tokanui, from Whakatipu Poultry Ltd (James William Kirkham, NZ 50%; Debra Lee Kirkham, NZ 50%) for an annual rental of 8.5% of the total budgeted capital costs of the project. Inghams will pay an annual rental of 8.5% of the total budgeted capital costs of the project.

The OIO states that the land is currently part of a larger property used for dairy grazing. Inghams will, with the landowner, construct a poultry breeder farm and enter into a long-term lease arrangement. The benefits to New Zealand include:

the owner undertaking a substantial investment in the construction of a new poultry breeder farm on the land;
introducing into New Zealand additional investment for the purchase of poultry farm equipment;
increasing the productivity of the land by converting from dairy support to poultry breeder farming;
increasing by a small extent the amount of chicken product that is processed in New Zealand;
creating up to 15 short term job opportunities during the construction phase.

See also commentaries of July 2014, June 2013 (of Inghams), March 1999, September 1998, July 1997, December 1995 and March 1900. Inghams Australia moved into NZ when failed Equiticorp sold them Harvey Farms, after the 1987 crash, and in 2013 Inghams got taken over by Adams Bidco Pty Ltd/TPG Capital.

Fletchers Buy More Cromwell Land To Quarry

Cromwell Certified Concrete Ltd (NZ Public 61.2%; Australian Public 12.1%; North American Public 9.7%; various overseas 8.6%; UK Public 3.4%; European Public 2.9%; Asian Public 2.2%) has consent to acquire approx. 9.8655 hectares at Luggate-Cromwell Road, Cromwell, from Jeremy Patrick Mackie and Jennenne Louise Mackie (NZ 100%) for $862,500.

The OIO states that Cromwell Certified Concrete is a joint venture company 50% owned by Fletcher Concrete and Infrastructure Ltd (“Firth”) and 50% owned by a NZ company McNulty’s Investment Ltd. The land is currently bare land, on which Cromwell Certified Concrete intends to develop a quarry, adjoining its existing quarry. This will enable them to increase extraction of aggregate to meet market demand and extend supply by approx. 15 years. The benefits to New Zealand include:

A high degree of NZ ownership and control of Cromwell Certified Concrete and the investment;
Previous investments by Cromwell Certified Concrete and Firth that have been or are of benefit to New Zealand. Firth has around 650 employees at 70 sites;
Increased processing of aggregate, as the level of extraction will increase, much of it to be processed through Cromwell Certified Concrete’s ready-mix business or elsewhere;
Retention of jobs at the existing quarry and likely creation of further roles in cartage; and
increased efficiency or productivity through cost efficiencies from using existing plant, equipment and infrastructure. The investment will also allow greater exploitation of the existing quarry’s resource.

Cromwell Certified Concrete, McNultys Transport and Amisfield Quarry jointly supply concrete and aggregate in Central Otago and share a Website. Amisfield Quarry is also on the Luggate-Cromwell Rd. The land being acquired is classified as sensitive because it is more than five hectares, non-urban and adjourns a reserve. See OIO Decisions for June 2016, May and August 2014, April and November 2011, June, September and October 2009, March and June 2008, March and July 2007 for other Fletchers Concrete acquisitions.

Singaporeans Lease Queen St Towers To Rent Out

Roxy-CES (NZ) Ltd (Singapore Public 66.7%, Hong Lim Teo, Singapore 13.8%, Tiam Seng Lim, Singapore 4.9%, Hong Wee Teo, Singapore 3.8%, Hong Yeow Teo, Singapore 3.6%, Hong Hee Teo, Singapore 3.6%, Tiang Chuan Lim, Singapore 3.5%) have consent to acquire a leasehold interest in 205 Queen Street, Auckland from Auckland City Holdings Ltd (Kyong HT Yi, Singapore 50%, Edy Hardijana Tjugito, Indonesia 50%), for $277,779,070.

The OIO states that Roxy-CES (NZ) is a company established for the purpose of undertaking this investment, representing a joint venture between Roxy-Pacific Holdings Ltd and Chip Eng Seng Corporation Ltd, both listed on the Singapore Stock Exchange. Both companies undertake residential and commercial investments in construction and development, predominantly in Asia. The OIO has been satisfied that the individuals who will control the investment have the relevant business experience and acumen and are of good character and have demonstrated financial commitment to the investment.

This commercial property is at the SW corner of Queen St and Victoria St, the one with ANZ Bank at street level and two towers, of 17 and 22 stories. Built in 1990, it has two retail levels, an atrium and basement parking for 125 cars on a 3764m2 site with 25,381 m2 of lettable space. Auckland City Holdings bought the lease from Kiwi Property Holdings.

See commentary of January 2014. Roxy-CES Holdings announced that the lease was until June 2081, with a right of renewal for a further term of 98 years until 2179, but named a considerably lower cost: NZ$173,980,000 excluding taxes. http://roxypacific.listedcompany.com/newsroom/20170803_194038_E8Z_DIQDCM146BBCKOE8.1.pdf.

Roxy-Pacific Holdings Ltd is an Asia-Pacific property group, begun in May 1967 and listed on the SGX Mainboard in March 2008. Its flagship hotel property is the Grand Mercure Singapore Roxy, managed by Accor. It owns a self-managed boutique hotel in Japan, a resort in the Maldives and has land parcels for hotel development in Phuket, Thailand.

Between 2004 and 2016, it developed 43 small-to-medium sized residential and commercial blocks in Singapore, Malaysia and Australia, and has just purchased land for another in Singapore, where it also has 52 retail shops, The Roxy Square Shopping Centre. In Sydney, it owns a 28-storey commercial building in Goulbourn St and 50% of a 14-storey building in Clarence Street. SG Investors describes Roxy as a “small-to-mid cap gem” that “continues to landbank as it prepares to launch all its existing landbank in 2018”.

Chip Eng Seng Corporation Ltd is a construction and property group, of which CEL Development Pte Ltd. is the property investment and development arm. Chip Eng Seng Group began as building subcontractors in the 1960s and grew through Singapore Housing & Development Board construction contracts. In the 1990s, it diversified into property investment and development.

Canadian Engineers Take Over Malaysians Engineers

WSP NZ Acquisition Ltd (Canada Public 99.97%; other Canada 0.03%) has consent to acquire 100% of the ordinary shares in Opus International Consultants Ltd by way of a full takeover offer under the Takeovers Code, from Opus International Consultants (UEM Edgenta Berhad, Malaysia 61.2%; NZ Public and various, NZ 35.6%; Australian Public 1.5%; Philippines Public 1.3%; other shareholders 0.36%), for $263,235,184.

The OIO states that WSP NZ and Opus International Consultants are both wholly-owned subsidiaries of separate overseas publicly listed companies that provide engineering consulting services. This aims to combine the two companies’ resources and expertise. WSP NZ has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and has demonstrated financial commitment to the investment.

WSP NZ’s owner, Montreal-based property consultancy WSP Global Inc., offered $1.78/share for the whole of Opus International Consultants Ltd, then trading at 99c/share market, after it had secured agreement to buy out the Malaysian majority shareholder, UEM Edgenta Bhd. Opus trading was suspended on 11 December 2017 and, on 10 January 2018, Opus delisted from the NZX, leaving WSP NZ as the dominant owner.

Opus is a large, multi-disciplinary engineering firm with 3,000 staff across NZ, Australia, Canada, the US and Britain. Its NZ business goes back 20 years ago to Works Consultancy Services Ltd, which the NZ government sold to Malaysian government-controlled Kinta Kellas Ltd. See commentaries of August 2008 and August 1996.

It has 40 offices and 1800 staff in New Zealand, and has been involved in Christchurch reconstruction, restoring transport links to Kaikoura community, NZ Transport Agency’s Northern Corridor improvements in Auckland, and water infrastructure in Christchurch, Auckland and Wellington. Despite doing well in the NZ construction sector, the company overall was trading low after poor financial performances and disappointing offshore acquisitions.

WSP NZ Investment was registered on 10 August 2010, apparently for the purposes of the merger. WSP provides engineering designs and services mostly in the property, civil engineering, energy and environmental sectors, and has an Australian/NZ arm with offices in Auckland. This Canadian company bought the Parsons Brinckerhoff businesses in 2014 off UK construction and infrastructure group Balfour Beatty plc, who had bought it in 2009. The company was involved in London’s Shard and New York’s Freedom Tower.

Parsons Brinckerhoff NZ Ltd registered in NZ in 1998 and has been trading as WSP Parsons Brinckerhoff. The newly merged company, to be known here as WSP NZ, will focus on transport, water and buildings (Catherine Harris, Stuff, 14/8/17, https://www.stuff.co.nz/business/industries/95748644/canadian-firm-makes-takeover-bid-for-nzs-opus-international ; The Bob Dey Property Report, 15/8/17, www.propbd.co.nz/wsp-secures-malaysian-stake-way-full-opus-takeover).

Vital Healthcare Buys Bowen, Wakefield And Royston Hospitals

Vital Healthcare Property Ltd (NZ Public and various NZ 68.1%; Canadian Public 18.4%; Paul Louis Dalla Lana, Canada 6.3%; North American Public 2.9%; Australian Public 1.7%; Asian Public 1.3%; European Public 0.7%; UK Public 0.6%) has consent to acquire significant business assets being the Bowen, Wakefield and Royston Hospitals, Wellington, including a freehold interest in approx. 2.2 hectares of land at Bowen Hospital, from Acurity Health Group Ltd (Australian Public 60.1%; North American Public 39.5%; NZ Public 0.4%) for $121,189,529.

The OIO states that Vital Healthcare Property is a NZ-based investor that specialises in private medical facilities. Acurity will continue to run the medical facilities on a day to day basis and has entered into a lease with Vital Healthcare to do so. Vital Healthcare intends to further develop the properties, in particular Wakefield and Royston hospitals. The benefits to New Zealand include that:

New Zealand oversight and participation in the overseas investment and the Applicant;
Vital Healthcare has undertaken previous investments that have been or are of benefit to New Zealand in the medical sector;
Vital Healthcare has committed to undertake increased landscaping across all three medical facilities.

See also commentary of June 2016 for Vital Healthcare’s acquisition of Boulcott Hospital property, Lower Hutt. Vital Healthcare Property Trust is a major Australasian owner of healthcare property, listed on the NZX. It has healthcare property asset valued at approx. $1.07 billion as at 31 December 2016, 80% of it a large Australian portfolio it acquired in December 2010. As well as those above, the NZ properties are Boulcott Hospital (Lower Hutt; OIO Decisions, June 2016), Kensington Hospital (Whangarei), Ascot Hospital and medical office building (Remuera, Auckland), Apollo Health Centre (Albany, Auckland), Ormiston Hospital (South Auckland) and Napier Health Centre.

The Property Trust is managed by Vital Healthcare Management Ltd, a subsidiary of NorthWest Healthcare Properties Real Estate Investment Trust, Canada’s largest non-government owner and manager of medical office buildings and healthcare facilities, which is also the Trust’s largest shareholder. In December 2017 Vital Healthcare also bought Eden Rehabilitation Hospital in Cooroy, Queensland, for $A23.8 million (Rebecca Howard, NBR, 11/12/17, https://www.nbr.co.nz/article/vital-healthcare-property-trust-buys-queensland-rehab-hospital-b-211007</a).

Canadian Govt Dairy Intensification Before New OIO Directive

Ramsay Dairy Farm Ltd (Canadian Government 100%) has consent to acquire approx. 335.1987 hectares at 803 Ardlui Road, Hororata, Canterbury; and approx. 72.225 hectares at Morgans Road, Hororata, Canterbury, from Haglea Farm Ltd (Gail and Harry Schat, NZ 100%) and Ddot Holdings Ltd (Jennifer Ann Todd, NZ 38.5%; Neal Peter Todd, NZ 38.25%; Mervyn George Todd, NZ 23.25%) for $17,700,000.

The OIO states that Ramsay Dairy Farm is ultimately, indirectly, owned by Canada’s Public Sector Pension Investment Board. This is the acquisition of a medium sized dairy farm and a neighbouring dairy support block, to be amalgamated to create a larger dairy farm. Ramsay Dairy Farm proposes to convert some of the dairy support land to create a larger milking platform, and to support increasing the total number of cows by approx. 400 cows.

The benefits to New Zealand include:

the creation of additional jobs on the amalgamated dairy farm;
an increased volume of milk being processed in New Zealand;
increased export receipts; and
capital investment to convert dairy support land to dairying.

Ramsay Dairy Farm has previously undertaken investments that have been of benefit to New Zealand, including the creation of jobs and the introduction of additional investment for development purposes.

The Public Sector Pension Investment Board is one of Canada’s biggest fund managers, handling the investments of public servants, the Mounties and the military, managing $C139.2 billion of assets (2016). The “ultimate, indirect” ownership path i Ramsay Farm (NZ reg. 2015)→ Green Meadows Farm (NZ reg. 2016)→ Global Herd NZ Ltd (NZ holding company, reg. 2014)→ Sooke Investments Inc. (Montreal, reg. 2011, which owns shares in Kaingaroa), which is a Government of Canada Federal Corporation , formerly known as 782175-Canada Inc.

In 2014 Canadians were reported by KPMG to be NZ’s biggest source of foreign investment, with 22% of the total. That year the OIO approved PSP buying 18 commercial properties for about $1b and increasing its holding in Kaingaroa Timberlands (Tim Cronshaw, NZ Farmer, 16/1/18, https://www.stuff.co.nz/business/farming/agribusiness/100543602/canterbury-farm-sold-for-17m-to-canadian-government-approved-by-overseas-investment-office).

See November 2014 and September 2015 commentaries for other Ramsay Dairy Farm purchases, and April 2013 for details of this pension fund’s original investment in the Kaingaroa Forest, increased in October 2014, and November 2014 for the Investment Fund’s purchase of AMP’s $1b property portfolio. Ddot is of course the Todd family backwards, each with heaps of other directorships and properties. NBR notes that this application got its consent just before Associate Finance Minister David Parker issued a new Directive (https://www.linz.govt.nz/sites/default/files/media/doc/oio_directive-letter_20171128.pdf) with a tighter interpretation of Overseas Investment Act criteria.

He said the previous Directive was “too loose”, applying only to farms “more than ten times the average farm size”, i.e. dairy farms over 1,987 ha and deer farms over 7,146 ha. (Rebecca Howard, NBR, 15/1/18, www.nbr.co.nz/article/canadas-public-sector-pension-board-gets-oio-approval-buy-177m-dairy-farm-and-block-b-211692). Yet Schedule 1 of the Act, as at May 2014, defines sensitive rural land as over five hectares, or close to seashore or lakes (together with adjoining land), and any island.

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