April 2008 decisionsSale of 40% of Auckland International Airport to Canada Pension Fund refused Retrospective approval: Tourism Holdings buys leasehold from Hamilton City … .. and another leasehold for same Hamilton development EnviroWaste buying remainder of Manawatu Waste, to “increase market power” Valad buys Carters depot, Tauranga, from Carter Holt Harvey for lease back … … and 55 ha. in Northland from CHH for industrial park development Trustpower buys Stillwater, Westland leasehold for Arnold Valley Hydro Scheme
Sale of 40% of Auckland International Airport to Canada Pension Fund refusedIn one of the highest profile decisions made under the Overseas Investment Act for some time, and the first time that a multi-billion-dollar investment has been refused, the sale of a controlling shareholding in Auckland International Airport to an overseas shareholder was refused. The government had introduced a new regulation under the Act, which allowed greater control over the sale of strategic assets on sensitive land, but in the end, the decision of the Ministers did not depend on the new regulation (see http://www.oio.linz.govt.nz/news/20080411.htm).
There are two decisions, both refused approval, which relate to the Auckland International Airport partial purchase bid.
· The Canada Pension Plan Investment Board, owned in Canada, has been refused approval to acquire rights and interest in up to 40% of the shares of Auckland International Airport Limited, including 1,548 hectares at Auckland International Airport, Manukau City, Auckland for $1,724,826,507 from existing shareholders in Auckland International Airport Limited, owned 18% in Australia, 10.7% by “various overseas persons”, 0.8% in Canada, 12.75% by the Auckland City Council, 10.05% by the Manukau City Council, and 47.7% in Aotearoa by minority shareholders. [Decision number 200810034.]
· NZ Airport HC Limited, owned 40% in Canada, 8.82% in Australia, 5% by “various overseas persons” 12.75% by Auckland City Council, 10.05% by Manukau City Council, and 23.38% in Aotearoa by minority shareholders, has been refused approval to acquire 100% of the assets of Auckland International Airport Limited “by way of an amalgamation prescribed in Part Xlll of the Companies Act 1993” for $2,906,941,000 “(Total Assets)” from Auckland International Airport Limited, owned 40% in Canada, 8.82% in Australia, 5% by “various overseas persons”, 12.75% by the Auckland City Council, 10.05% by the Manukau City Council, and 23.38% in Aotearoa by minority shareholders. These assets include 1,548 hectares of freehold land at Auckland International Airport, Manukau City, Auckland. The land is or includes o a historic place, historic area, wahi tapu, or wahi tapu area that is registered or for which there is an application or proposal for registration under the Historic Places Act 1993; o land on islands; o non-urban land; o the foreshore or seabed; o land which adjoins the foreshore; o land which adjoins a historic place, historic area, wahi tapu, or wahi tapu area that is registered or for which there is an application or proposal for registration under the Historic Places Act 1993; and o land which adjoins land that is listed, or in a class listed, as a reserve, a public park, or other sensitive area by the OIO. [Decision number 200810035.]
The OIO states in both cases:
The application for consent has been declined as the relevant Ministers were not satisfied that all of the criteria in section 16 of the Overseas Investment Act 2005 had been met. The relevant Ministers provided written reasons for their decision in a document, “Reasons for Decision by relevant Ministers”, which was made public on 11 April 2008.
Canada Pension Plan Investment Board (CPPIB) proposes to acquire a 40% shareholding in Auckland International Airport Limited (AIAL). CPPIB currently holds approximately 0.8% of the shares in AIAL.
AIAL owns and operates Auckland International Airport. Its objective is to provide for the commercial aviation needs of the Auckland region for the next 50 years and beyond. AIAL is a diversified business with investments in property, retail and car parking. Its investment property portfolio supports and provides services for the airport community including the airport’s commercial park, and shopping centre.
The proposed Transaction comprises two steps: (a) An all-cash partial takeover offer, made by NZ Airport NC Limited (NoteCo), a wholly-owned subsidiary of CPPIB, to all AIAL shareholders of $3.6555 per share to take CPPIB’s holding in AIAL to 40%. NoteCo lodged a takeover notice in accordance with Rule 41 of the Takeovers Code on 16 November 2007 (Takeover); and (b) As soon as possible after the successful completion of the takeover, it is CPPIB’s intention that a proposal would be put to all AIAL shareholders under which AIAL would amalgamate with NZ Airport HC Limited (HoldCo), a wholly-owned subsidiary of CPPIB, under the process prescribed in Part XIII of the Companies Act 1993 (Amalgamation).
Under the proposed Amalgamation, HoldCo would be the surviving entity and would succeed to all of the property, rights and obligations of AIAL. CPPIB and other AIAL shareholders would hold shares in HoldCo’s ultimate holding company, NZ Airport HCP Limited (HoldCo Parent). On the effective date of amalgamation, HoldCo Parent and HoldCo would change their names to Auckland Airport Limited and Auckland International Airport Limited, respectively.
The consideration AIAL shareholders would receive in relation to the Amalgamation would be a combination of cash (paid by HoldCo Parent) and stapled securities (consisting of a loan note (issued by NoteCo) stapled to an ordinary share (issued by HoldCo Parent)). The Amalgamation will be conditional upon the necessary resolutions of AIAL shareholders and a favourable ruling from the Inland Revenue Department.
At the conclusion of the Transaction, CPPB would enter into a Co-operation Agreement with HoldCo, under which CPPIB would agree among other things, that: (a) It supports the vision and strategy for AIAL’s business recorded in the five year corporate plan for the financial years from 2008 to 2012 inclusive adopted by the board of AIAL and entitled “Our Strategy for New Zealand’s Airport”; (b) It would share with NZ Airport HC Limited (which will be the surviving entity following the amalgamation) the experience and know-how of best practice, strategy and performance optimisation it has gained from other investments; (c) It would work with NZ Airport HC Limited on growth opportunities for its business; and (d) It would work together with NZ Airport HC Limited to pursue opportunities for investment in, or the development and management of, airports to the extent that HoldCo wishes to pursue such opportunities.
CPPIB and NoteCo have entered into or will enter into a revised Deed relating to voting on resolutions under which they will undertake in favour of AIAL and AIAL shareholders that they will not exercise the votes attaching to more than 24.9% of all the issued voting shares in AIAL on all AIAL shareholder resolutions (or any other company in which they hold securities as a result of the Amalgamation), other than resolutions which affect the rights attaching to CPPIB’s shares.
CPPIB advised that an investment in AIAL’s business and assets is consistent with CPPIB’s long-term investment principles because AIAL’s business and assets are expected to provide stable long-term returns, AIAL operates in a strong regulatory environment, AIAL has a relatively low technology replacement risk and possesses minimal substitution risks being New Zealand’s premier gateway airport. Infrastructure investments, such as AIAL, play a key role in CPPIB’s strategy because their underlying value tends to rise along with inflation. This characteristic makes infrastructure investments a good match for the long-term nature of the Canada Pension Plan’s (CPP) net liabilities given that CPP benefits are linked to inflation. Retrospective approval: Tourism Holdings buys leasehold from Hamilton City …Tourism Holdings Limited, owned 22.2% in the U.S.A., 14.7% in Australia, 3.4% in Hong Kong, 1.8% by “various overseas persons”, and 57.9% in Aotearoa, has approval to acquire 1.5 hectares of leasehold at 32 Kaimiro Street, Pukete, Hamilton, Waikato for $765,000 from the Hamilton City Council. The land “adjoins land that is listed, or in a class listed, as a reserve, a public park, or other sensitive area” by the OIO.
The retrospective approval was required because Tourism Holdings became an overseas company – its overseas owned shareholding exceeded 25% – during 2007. It is 42.1% overseas owned.
According to the OIO,
Between 1995 and 1997 Tourism Holdings Limited (Applicant) acquired 100% of the shares in Caravans International Munro Limited (now struck from the Companies Register). The Applicant operates a caravan and motor home production venture from a facility in Otorohanga under the trading name CI Munro. At some point during 2007 after the leasehold interest was acquired the Applicant became an overseas person for the purposes of the Overseas Investment Act 2005 (Act).
Pursuant to a lease dated 16 March 2007 the Applicant acquired a leasehold interest in the Land for a term to be confirmed but greater than three years from the Hamilton City Council. The Land adjoins land classed as a recreation environment on the Hamilton City Council District Plan rendering it sensitive land under Schedule 1, Part 1 of the Act.
As the Applicant was not an overseas person at the time the leasehold interest was acquired, consent was not sought at the time of the acquisition. The Applicant now seeks consent for the acquisition of the Lease.
The Applicant was seeking to expand its current operations when it acquired the leasehold interest. It currently operates a caravan and motor home production venture from a facility in Otorohanga and intends to use the leasehold interest to expand its operations and increase efficiency and productivity. The expansion includes a significant increase in the size of the existing factory on the Land from 2,180m² to 6,580 m².
[Decision number 200810030.] .. and another leasehold for same Hamilton developmentTourism Holdings Limited also has approval to acquire 0.9 hectares of leasehold at 37 Kaimiro Street, Pukete, Hamilton, Waikato for $247,500 from Star Design Furniture Limited, owned 100% in Aotearoa. The land adjoins land that is listed, or in a class listed, as a reserve, a public park, or other sensitive area, by the OIO.
The OIO states:
The Applicant seeks consent to accept an assignment of a leasehold interest in the Land from Star Design Furniture Limited. The current term of the Lease expires on 30 September 2011 however there is a right of renewal in favour of the Applicant for a further 6 year term. The Land adjoins land classed as a recreation environment on the Hamilton City Council District Plan rendering it sensitive land under Schedule 1, Part 1 of the Overseas Investment Act 2005 (Act).
The Applicant seeks to expand its current operations through acquiring the Lease.
[Decision number 200810031.] EnviroWaste buying remainder of Manawatu Waste, to “increase market power”Two decisions relate to EnviroWaste, owned by private equity corporation, Ironbridge, buying the 50% of Manawatu Waste it does not already own. Although the price paid has been suppressed by the OIO, we can deduce from the statistics that the prices of the two decisions combined total $37,590,000.
In the first decision, EnviroWaste Services Limited, owned 26.1432% in the U.S.A., 25.6292% in Singapore, 12.4539% in Switzerland, 11.3496% in Australia, 7.1783% in Japan, 6.52% in the Netherlands, 3.9138% in the U.K., 2.6062% in Hong Kong, 2.3447% in Germany, and 1.8612% in Aotearoa, has approval to acquire 100% of Manawatu Waste Limited (it already owned 50%), for a suppressed amount from Colmar Holdings Limited. Colmar Holdings is owned 77.89% by Colin Reece Cashmore, 11.22% by Richard Austin, 10.89% by Marion Cashmore, all of Aotearoa. The purchase includes 123 hectares at Bonny Glen Landfill, 818 Wanganui Road and 28 Bruce Road, Makirikiri, Rangitikei, Manawatu
As mentioned, Envirowaste is in fact owned by Ironbridge – see our commentary for April 2007 for further details.
According to the OIO,
The Applicant already owns half the securities in Manawatu Waste Limited and therefore a 50% interest in Midwest Disposal Limited’s assets.
Acquiring the remaining securities in Manawatu Waste Limited will allow the Applicant to increase its market share which will lead to more market power, greater business synergies, and ultimately to increased profit.
This admission that the purchase will in fact lessen competition is contrary to the criteria for approving applications.
[Decision number 200810037.]
In a related decision Ironbridge Capital Pty Limited as manager of the Ironbridge Capital Fund II A, Ironbridge Capital Fund II B and the Ironbridge Capital International Fund II have approval to acquire up to 100% of the shares of Barra Topco II Limited for a suppressed amount from “existing shareholders in Barra Topco II Limited other than Ironbridge shareholders”. The shares to be acquired are owned 56.34% in Australia, and 43.66% in Aotearoa. The purchase includes the same 123 hectares as above.
The OIO states: “This Application to acquire up to 100% of the remaining shares in Barra Topco II Limited is to partially fund the acquisition of up to 100% of the shares in Manawatu Waste Limited.”
According to the OIO, Ironbridge is owned 27.2194% in the U.S.A., 26.675% in Singapore, 12.9621% in Switzerland, 9.5847% in Australia, 7.4713% in Japan, 6.7861% in the Netherlands, 4.0735% in the U.K., 2.7126% in Hong Kong, 2.4404% in Germany, and 0.0751% in Aotearoa.
[Decision number 200810038.] Valad buys Carters depot, Tauranga, from Carter Holt Harvey for lease back …Valad Commercial Management Limited “as responsible entity” of the Valad Property Trust of Australia, has approval to acquire 1.2 hectares at 40 Waihi Road and 14 Birch Avenue, Tauranga, Bay of Plenty for $7,394,625 from Carter Holt Harvey Limited, owned in Aotearoa by Graeme Richard Hart. The property adjoins land that is listed, or in a class listed, as a reserve, a public park, or other sensitive area by the OIO.
The OIO states:
The Overseas Investment Office granted consent to the Applicant on 8 August 2007 to acquire 23 properties in New Zealand from Carter Holt Harvey Limited (CHH) and Carter Holt Harvey Properties Limited (CHH Properties), comprising 14 Carters depot properties, 5 packaging plants, 2 office buildings and 2 vacant lots used for car parking. It is proposed that CHH or CHH Properties will lease back the properties from the Applicant.
The Applicant proposes to acquire the Carters hardware and timber depot located at 40 Waihi Road and 14 Birch Avenue, Tauranga under a separate agreement for sale and purchase. It is also proposed that CHH or CHH Properties will lease back the property from the Applicant.
The acquisition of the land will provide further diversification to Valad Property Group’s property portfolio.
See our commentary for August 2007 for further details of the earlier approval.
[Decision number 200810032.] … and 55 ha. in Northland from CHH for industrial park developmentValad Funds Management (NZ) Pty Limited of Australia has approval to acquire 55 hectares of freehold at 60 McEwan Road, Ruakaka, Northland for $21,982,500 from Carter Holt Harvey Limited, owned 100% by Graeme Richard Hart. The land “is or includes non-urban land”, and “adjoins land that is listed, or in a class listed, as a reserve, a public park, or other sensitive area” by the OIO.
According to the OIO,
The land currently comprises bare land in pasture which the vendor has granted a lease to Northland Port Corporation (NZ) Limited (North Port). The land is currently farmed by a sharemilker pursuant to an arrangement with North Port.
The Applicant intends to subdivide and develop the land, which is currently zoned Business 4 and Marsden Point Zone under the Whangarei District Operative Plan as an industrial park. The Marsden Point Zone is an area which includes land owned by North Port at Marsden Point and is generally used to accommodate the mainly industrial activities
[Decision number 200810033.] Trustpower buys Stillwater, Westland leasehold for Arnold Valley Hydro SchemeTrustPower Limited has approval to 42 hectares of leasehold situated at Arnold Valley Road and Main Road, Stillwater, Westland for $90,000 from Trevor James Teasdale of Aotearoa.
Trustpower is reported by the OIO to be owned 9.7799% in the U.K., 7.1903% by “various overseas persons”, and 83.0298% in Aotearoa. In fact it is controlled by Infratil Limited which holds 50.5326% of the shares of Trustpower, and which is “an overseas person but is New Zealand controlled” according to the OIO. For details of how this works, see “Trustpower acquires land for canal for Wairau Valley hydro scheme” in our commentary on the OIO’s March 2008 decisions.
The OIO states:
TrustPower Limited’s (TrustPower) core business is to generate and sell electricity. TrustPower currently has a gap between the electricity it generates and the electricity it sells to consumers meaning it is required to purchase electricity to sell to consumers leaving it vulnerable to price movements when hedges are not available, particularly during periods of electricity shortages. The acquisition and/or development of generation assets will reduce TrustPower’s potential exposure to electricity price rises.
TrustPower proposes to acquire the subject land as part of the development of the Arnold Valley Hydro-electric Power Scheme (Arnold Valley Scheme), which will comprise a new intake dam, canal, flumes, head pond, regulation pond, and a power station, situated at the Arnold River on the West Coast of the South Island. TrustPower currently owns and operates an existing hydro-electric power station on the Arnold River, which will be decommissioned and demolished following construction of the Arnold Valley Scheme.
The relevant land will be used to provide a practical access road into the lower portion of the Arnold Valley Scheme including the discharge pond and discharge gates.
[Decision number 200810036.] Summary statisticsAll investments The value of investment approved in the year to April 2008 remains is considerably lower than for the previous April year, both in net value (i.e. disregarding sales from one overseas investor to another, and discounting part New Zealand ownership of the assets) and gross value. April 2007 was a big month, including the $2.2 billion sale of Yellow Pages, and a managed buyout of APN News and Media for $3.5 billion which was approved by the OIO but failed, but April 2008 is small even by normal standards.
A notable feature this month was the two applications that were refused, both regarding the proposed sale of a significant interest in Auckland International Airport Ltd to a Canadian pension fund. Refusals are usually small items, often well under $1 million, but these at $4.6 billion dwarf the approvals. The decisions were made by the Ministers rather than OIO, were high profile, and caused much controversy. Note that area and value are inflated because there were two related applications, leading to double counting.
Investment involving land Gross and net sales of land approved by the OIO during the year to April are considerably behind 2007, and are very small by the standards of recent years.
Fishing Quota As usual, there was no fishing quota approved for sale this month.
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Compiled by: Campaign Against Foreign Control of Aotearoa, P. O. Box 2258 Christchurch. |
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