Foreign investment in Aotearoa/New Zealand
Overseas Investment Office – November 2008 Decisions
U.K. Government gets approval to acquire assets of Royal Bank of Scotland
In a piece of fallout from the international financial crisis Her Majesty’s Treasury of the UK Government has approval for the “possible acquisition” of up to 58.1% of the Royal Bank of Scotland Group plc’s (RBS’s) ordinary share capital and its acquisition of 5 billion GBP worth of non-voting non cumulative preference shares of RBS. RBS “indirectly owns or controls business assets of a New Zealand company and sensitive land”. The sensitive land is not detailed; the company is ABN AMRO Group New Zealand Limited. The asset value is given as $1,243,581,000. This amount represents the total assets of ABN AMRO Group New Zealand. The Royal Bank of Scotland Group plc is (or was) owned in the U.K. (56.0%), the U.S.A. (27.0%), and various other countries (17.0%).
RBS is in the centre of the intense financial crisis in the U.K. It is one of the banks which have made irresponsible acquisitions and lending decisions which have led to the U.K. government bailing it out and nationalising it for fear of it bringing down the whole U.K. banking system. One of those decisions was RBS’s purchase of the huge ABN AMRO Group, based in the Netherlands, for €71 billion in 2007: see our commentary for October 2007 for further details.
The OIO states blandly:
The Applicant is responsible for financial and economic policy in the United Kingdom and has recently undertaken to assist financial stability in the United Kingdom economy by engaging in a recapitalisation scheme for United Kingdom incorporated banks. The Applicant is taking shareholdings through recapitalisation of eligible banks and the Vendor is part of the Applicant’s recapitalisation scheme.
[Case number 200821581.]News Corporation renews approval to acquire 100% of Sky Network Television
News Corporation, owned in the U.S.A. (76.3%) and Australia (23.7%), has approval to acquire up to 100.0% of Sky Network Television Limited for $1,902,893,549 (“NZ$ market capitalisation value”) from existing shareholders in Sky Network Television Limited in the U.S.A. (19.09%), Australia (4.7%), U.K. (3.19%), Hong Kong (2.31%), various other countries (1.08%), and Aotearoa (69.63%).
This does not apparently indicate an immediate intention to take over, but provides an option for any time in the next three years.
According to the OIO,
The Applicant, through a wholly owned subsidiary, is the owner of approximately 43.7% of the ordinary shares of Sky Network Television Limited (Sky). The Applicant was granted consent, and a subsequent variation to this consent in 2005 to acquire up to 100% of the shares in Sky, by 9 May 2008.
The three year period for which the Applicant was granted consent to acquire the shares in Sky has since expired. Should consent be granted to the Investment, the effect of the Applicant’s initial consents, granted by the Overseas Investment Office in 2005, will be carried forward.
The Applicant wishes to apply for consent to maintain the ability to continue to acquire up to 100% of the shares in Sky by 31 August 2011. The Applicant believes that the further acquisition of the shares in Sky would strategically enhance the position of the Sky business, and strengthen the Applicant’s position in New Zealand.
The 2005 consents referred to (combined into decision number 200510062) were used to achieve the merger of Independent Newspapers Ltd (INL) and Sky TV. INL had been the owner of one of the two major newspaper and magazine empires in New Zealand, which was sold to Fairfax of Australia in 2003, so by 2005 INL was just a holding company with a bundle of cash and a 78.4% shareholding in Sky TV. The consents gave News Corporation more than it needed: the approval to take over all of Sky TV. See our commentary for May 2005 for further details.
[Case number 200821538.]Red Earth Holdings gets approval to acquire all of PBL Media for $122 million
Red Earth Holdings B.V., owned in the U.S.A. (53.82%), U.K. (13.06%), Singapore (5.89%), Netherlands (5.34%), United Arab Emirates (5.37%), Canada (4.26%), and various other countries (12.26%), has approval to acquire up to 100.0% of PBL Media Holdings Pty Limited and up to 100.0% of PBL Media Holdings Trust, for $121,632,224 (“NZ$ book value of NZ assets”). No vendor is stated, but it appears to be Consolidated Media Holdings (CMH) of Australia.
According to the OIO,
Red Earth Holdings B.V. (Red Earth) was granted consent on 6 June 2007 to acquire 50% of the issued securities in each of PBL Media Holdings Pty Limited (PBL Media) and PBL Media Holdings Trust (Media Trust). On 16 July 2007, Red Earth was granted consent to acquire 75% of the issued securities in each of PBL Media and Media Trust.
PBL is Australia’s leading diversified media company with interests in media, gaming and entertainment. PBL’s businesses include ACP Media Limited, New Zealand’s largest magazine publisher. As part of a restructuring and recapitalisation of CMH’s businesses, PBL Media and Media Trust were established to hold media interests, including ACP Magazines, Nine Network, Ticketek, its 50% interest in ninemsn and its 50.6% shareholding in carsales.com.au.
Red Earth seeks consent to acquire up to 100% of issued securities of PBL Media and Media Trust. Red Earth may either acquire new securities to be issued by PBL Media and Media Trust or it may acquire securities held by CMH.
PBL Media is seeking raise further capital of up to A$300 million to assist in deleveraging the business and resetting the financial covenants that apply to the PBL Media Group. CMH has announced its intention not to contribute additional capital to PBL Media.
The 2007 decisions referred to by the OIO explain what Red Earth is: a “special purpose vehicle” specially created for the purchase of shareholdings in Publishing and Broadcasting Ltd (PBL), by the giant private equity corporation CVC Capital Partners Group. PBL was formerly at the heart of the Packer empire in Australia. James Packer, who took it over when his father Kerry died, is more interested in casinos that the news media and is selling off the media assets. See our commentaries for June and July 2007 for further details. For details of PBL and its magazines in New Zealand, and more about the Packer empire, see the paper “News media ownership in New Zealand“, by Bill Rosenberg.
[Case number 200821578.]Ryton Station owner buys 10,655 ha. Glenthorne Station, Lake Coleridge
Ryton Station Limited, owned in the U.K., has approval to acquire the 10,655 hectare Glenthorne Station, Harper River Road, Lake Coleridge, Canterbury for $16,000,000 from Glenthorne Holdings Limited owned in Aotearoa. The station consists of a crown pastoral lease of 10,396 hectares, a freehold interest in 251 hectares, and a leasehold interest in 7 hectares.
According to the OIO,
The Applicant wishes to make a long-term investment in an operating farm property in New Zealand. The Applicant received Overseas Investment Act consent in July 2008 to acquire an adjoining property, Ryton Station. The Applicant’s shareholder wishes ultimately to spend more time in New Zealand, with a view to possibly living permanently in New Zealand.
The Applicant proposes to enhance Glenthorne Station’s farm operation through investment of capital. The targeted application of fertilizer, new stock water facilities and fencing will increase stock carrying capacity. The Applicant also proposes to protect large areas of the natural outstanding landscape on the property by restricting livestock grazing in those areas. The Applicant will also protect, by way of covenant, significant wetland areas on the property and provide access easements to ensure continued public walking access is available to the Wilberforce Valley, Harper and Avoca Valleys, including Lake Lilian.
The Applicant considers the ability to combine the operations of Ryton and Glenthorne Stations presents an exciting opportunity. Ryton is a difficult property to operate, given modest rainfalls. Glenthorne receives more rainfall and has more flat land for grazing livestock. The two properties may therefore complement each other to some extent, and give the ability to operate a farm in the 20,000 to 25,000 stock unit range.
The July 2008 decision by the OIO gave Ryton Station Limited, owned by John Shrimpton of the U.K., approval to acquire 449 hectares of freehold and 14,146 hectares of leasehold at Harper Road, Lake Coleridge, Canterbury for $23,500,000 from Ryton Holdings Limited, owned by Phillip Roger Burmester of Aotearoa. Shrimpton is an English merchant banker based in Ho Chi Minh City and a director of merchant bank Dragon Capital. See our commentary for that month for further details. In that case, the OIO stated that
Ryton Station’s current farming operation is relatively small, with the Station carrying only 6,000 merino sheep. Large parts of the property are either unable or incapable of being farmed, due to restrictions under a Land Improvement Agreement registered against titles to the property, or the extreme nature of the terrain. In its current state, the farm is barely an economic unit and farming revenues are poorly diversified and mostly reliant on the sale of wool. The farm supplements its revenues with a small tourist operation.
There are high conservation values and public access concerns with both properties.
[Case number 200810075.]Contact Energy buys Pukekawa land for transmission line for new wind farm
Contact Energy Limited, owned in Australia (42.9243%), U.S.A. (6.404%), the U.K. (3.8772%), various other countries (5.4244%), and Aotearoa (41.37%), has approval to acquire 88 hectares at Sharpe Road, Pukekawa, South Auckland for an amount original suppressed but revealed on appeal to be $2,812,500, from Donald George Cameron of Aotearoa.
According to the OIO,
The Applicant is a New Zealand company incorporated in 1995 and listed on the New Zealand Stock Exchange. It currently generates approximately 28% of New Zealand’s total electricity generation from a ranger of hydro, geothermal, and thermal plants and is also one of New Zealand’s major electricity and gas retailers with approximately 630,000 customers nationwide.
Origin Energy Limited (Origin), a major Australian energy company, is the Applicant’s majority shareholder holding 51.4% of the Applicant’s voting shares…
Contact proposes to purchase the land (known as the Cameron Land) in order to progress the Hauauru ma raki wind farm project (Project). The Project was announced in October 2007 and has the potential to generate up to 540 MW of clean, renewable and climate-friendly electricity to power up to 200,000 average homes. On 27 August 2008 the Minister of Energy announced his intention to call in Contact’s resource consent application for Hauauru ma raki, recognising the national significance of the Project.
As stated above, Contact proposes to purchase the land in order to progress the Project. The wind farm itself is located on properties close to the West Coast of the North Island. This is an advantageous site because of its relative proximity to Auckland but also its remote location. However, the Project is very large and requires a 28-kilometre-long duplex 220kV circuit to transmit electricity from the wind far to the national grid.
If possible Contact will negotiate purchase of easements across properties that lie along the transmission route. Only if absolutely necessary, Contact will rely on its powers under the Public Works Act to compulsorily acquire the property rights that it needs. However to avoid the need to use such powers, Contact is exploring alternatives with those owners who do not wish to grant an easement.
The Cameron Land is one of the key properties along the route of Contact’s electricity transmission line for the Project. The property provides scope to explore alternative routes in a section of the line that may pass through a number of smaller lifestyle farms, and therefore minimise the number of people who may be directly affected by the visual and landscape effects of the proposed transmission line. However, the effect of implementing such options would seriously impact on the visual and landscape effects on the Vendor’s farm, making outright purchase of the farm by Contact a more practical solution. Contact proposes to purchase the land, establish easement rights to protect its operations and optimise the alternative route selection. Contact then plans to sell the residual land when the Project is completed.
The Vendor has agreed to sell his land subject to reserving the right to retain 16 of the 87.9 hectares (including his cottage) depending upon the final transmission route.
If Contact acquires the Cameron Land, it will help to progress the Project. The Project is one of a number of renewable energy initiatives being pursued by Contact, and will increase Contact’s renewable generation capacity. As mentioned, Contact requires the land in order to register an easement for the transmission line that will link the wind farm to the national grid.
Contact’s view is that purchasing the Cameron Land is the best solution for this land in relation to the Project. Contact could have sought to acquire an easement over the Cameron Land either by negotiation or compulsory acquisition. However, as described above, the effects of the transmission line on the Cameron Land are likely to be significant, making outright purchase the most practical solution. Contact also considers that it is preferable for the Project and the landowners concerned, if is able to negotiated land rights including buying (and subsequently reselling) land where necessary rather than relying on compulsory acquisition powers.
[Case number 200821544.]Other rural land sales
Matai Pacific Limited, owned in the U.K., has approval to acquire 0.4 hectares at 97 Kennedy Road, Pyes Pa, Tauranga for $825,000 from Grasshopper Farms Limited owned in Aotearoa. The OIO states: “Over the last few years the Applicant has been a participant in the kiwifruit industry in New Zealand. The Applicant already owns 20.9994 hectares of land to the west, south and east of the land that is the subject of the Investment (the Adjoining Land). The Applicant entered a sale and purchase agreement with Grasshopper Farms Limited (Vendor) on 19 June 2008 to acquire the freehold interest in the relevant land, together with the dwelling house and three bay garage/shed on the land. The settlement is conditional only on Overseas Investment Office consent. The Applicant wishes to enhance its development programme with this proposed investment which will promote the Applicant’s position to become a substantial participant in the broader horticultural industry in the Western Bay of Plenty region. The Investment will consolidate the Applicant’s existing land ownership and will allow the Applicant to form one larger kiwifruit orchard and citrus orchard.” The previous acquisition by Matai Pacific was approved in March 2007. See our commentary for that month for further details. That decision showed that Matai Pacific Limited is owned 75% by Walter Lennox Hannay, Christopher Michael Fleming and Mary Fern Taylor as trustees of the Lennox Hannay 1992 Trust, and 25% by Walter Lennox Hannay, all of the U.K. The company has acquired other land holdings over several years.
[Case number 200820024.]Summary Statistics
All investments
This was a very quiet month by number of decisions, but it included some that were very significant both by value and in terms of what they represent for New Zealand and the world economy. The total value of investment approved in the year to November 2008 has been suppressed, though all individual values have apparently been made public. From those we can calculate gross sales of $3,287,744,273 and net $1,343,458,747 but these figures need to be treated with considerable caution because some large amounts represent possible intentions or options rather than actual sales.
Value of investments approved
| November 2008 | 2008 YTD | 2007 Year to November | |
|---|---|---|---|
| Number of approvals | 6 | 122 | 135 |
| Net Investment $ | Confidential | Confidential | 4,406,586,495 |
| Gross value of consideration | Confidential | Confidential | 18,674,524,848 |
Investments refused
| November 2008 | 2008 YTD | 2007 Year to November | |
|---|---|---|---|
| Number of refusals | 0 | 3 | 4 |
| Gross value of consideration ($) | 0 | 4,632,723,767 | 2,032,512 |
| Gross land area (ha) | 0 | 3,158 | 33 |
Investment involving land
Gross and net sales of land approved by the OIO during the years to November have fallen. Refusals (above) have also fallen in number since last year, but are considerably larger in area and value because of the Auckland Airport decision, but are still a tiny proportion of the total.
Freehold Land Approved for Sale
| November 2008 | 2008 YTD | 2007 Year to November | |
|---|---|---|---|
| Number of approvals | 4 | 88 | 80 |
| Net land area (ha) | 303 | 9,554 | 14,678 |
| Gross land area (ha) | 564 | 31,063 | 85,094 |
Other Interests in Land Approved for Sale (For Example, Leases & Crown Pastoral Leases)
| November 2008 | 2008 YTD | 2007 Year to November | |
|---|---|---|---|
| Number of approvals | 1 | 25 | 33 |
| Net land area (ha) | 10,403 | 24,772 | 640 |
| Gross land area (ha) | 10,403 | 37,931 | 3,606 |
Fishing Quota
There was no fishing quota approved for sale this month.
Fishing Quota Approved for Sale
| November 2008 | 2008 YTD | 2007 Year to November | |
|---|---|---|---|
| Number of approvals | 0 | 0 | 0 |
| Net tonnes of Annual Catch Entitlement | 0 | 0 | 0 |
| Gross tonnes of Annual Catch Entitlement | 0 | 0 | 0 |
| Net quota shares | 0 | 0 | 0 |
| Gross quota shares | 0 | 0 | 0 |
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