Foreign investment in Aotearoa/New Zealand
Overseas Investment Office – December 2008 Decisions
Hong Kong application to take over New Zealand Steel Mining Limited refused
Cheung Kong Infrastructure Holdings Limited and Ironsands Investments Limited (CKI), owned in Hong Kong (84.4785%) and various other countries (15.5215%), has been refused approval to acquire New Zealand Steel Mining Limited for $250,000,000 from BlueScope Steel Limited owned in Australia (100%). New Zealand Steel Mining owns or controls a leasehold interest in 1392 hectares at Taharoa Road, and 1.2 hectares of freehold land at Tahuri Street and Te Waitere Road, Kawhia, South Auckland.
This is a most unusual case. It was declined, apparently on the basis that CKI was not making a financial commitment, which is unique. The Minister of Finance in the newly elected National-led government, Bill English, made the final decision to reject (see “Purchase of NZ Steel business assets declined“, Bill English, 17 December 2008. In his statement, the reason was described as:
CKI did not meet the Overseas Investment Act 2005 criteria of substantial and identifiable benefit which was relevant to the acquisition of business assets which included sensitive land.
So the involvement of sensitive land was an important factor.
Yet it appears to come down to CKI deciding the deal was not worth it and so deciding not to spend its money. Why it did not simply withdraw its application, rather than having it refused, is a mystery.
The OIO states:
CKI has three core businesses – materials, energy and transportation. The acquisition of the securities of NZSM provides CKI with a presence in New Zealand which will enable CKI to extend its material business beyond its current operations in Asia. The plan to invest in the Taharoa mine was a logical expansion.
Blue Scope Steel Limited (Blue Scope) owns New Zealand Steel Mining Limited (NZSM) which operates a titanomagnetite (ironsand) mine on the west coast of the North Island. Ironsand is used as a raw material in iron making. The land currently being mined is leased from local landowners (Lease). The Lease is a long term lease under which the landowner receives a tonnage based royalty.
New Zealand has always represented an attractive investment option for CKI due to its stable regulatory regime and business culture being similar to other common law countries in which CKI already holds significant investments. This proposed Investment signals further the Applicant’s commitment to New Zealand.
Originally CKI intended to carry out an expansion of the Business through its proposed investment in NZSM. However, given the reduced demand for the product produced by the NZSM mine and the deteriorating global economic conditions CKI has come to the decision that plans to expand the Business are no longer viable.
The overseas investment transaction has not satisfied the criteria in sections 16 and 18 of the Overseas Investment Act 2005.
Section 16 of the Overseas Investment Act 2005 lays out the criteria for consent for overseas investments in sensitive land, and section 18 criteria for overseas investments in significant business assets.
[Case number 200820037.] Back to TopLend Lease Corporation takes over Babcock and Brown’s aged care operation
This is yet another case of investment or property companies taking ownership of large groups of aged care facilities in Aotearoa (or exchanging ownership – this time probably because private equity group Babcock and Brown is in deep financial trouble). For other recent examples see our commentaries on the February, March, May and June 2008 OIO decisions.
Lend Lease Corporation Limited, owned in Australia (75.66%), U.S.A. (11.15%), U.K. (8.53%), and various other countries (4.66%) has approval to acquire up to 57.4% of the stapled securities of Babcock & Brown Communities Group for $195,000,000. Babcock & Brown Communities Group is owned in Australia (92.59%), Hong Kong (1.61%), various other countries (1.7%), and Aotearoa (4.1%). Each stapled security is made up of one share in Babcock & Brown Communities Limited and one unit in Babcock & Brown Communities Trust.
The OIO notes that Babcock & Brown Communities owns 14 hectares at Peninsula Club, 441 Whangaparaoa Road, Whangaparaoa, Auckland and 13 hectares at Knightsbridge Village, Graham Collins Drive, Mairangi Bay, Auckland.
The company operates its aged care facilities under the Primelife brand which describes itself as “Australia’s leading developer and manager of retirement communities as well as a wide range of senior living residential and aged care facilities” with “nearly 60 retirement villages, aged care hostels and nursing homes, and a further 14 facilities under construction or planned across Australia”. Facilities include independent living (villas and apartments); serviced Apartments; low care hostels and high care nursing homes for the aged; and in-home care.
It manages Primecare retirement facilities in Aotearoa, which have over 1,300 residents. Its New Zealand facilities are
- Knightsbridge Village 121 Graham Collins Drive, Mairangi Bay, Auckland
- Mayfair Village 14 Oteha Valley Road, Browns Bay, Auckland
- Ocean Shores Village 80 Maranui Street, Mount Maunganui, Tauranga
- Parklane Village 106 Becroft Drive, Forrest Hill, Auckland
- The Peninsula Club Village, 441 Whangaparoa Road, Whangaparoa, Auckland
(www.primelife.com.au, accessed 14 April 2009)
For details of the purchase of Primelife and Primecare by a consortium including Babcock and Brown, see our commentary on the February 2006 OIO decisions.
The OIO states:
The Applicant [Lend Lease] is one of the leading international property groups listed on the Australian Securities Exchange (ASX) and its market capitalisation was A$3 billion as at 16 October 2008. The Applicant has operations across three geographic regions: Asia Pacific, Europe and the Americas, and in 35 countries…
The Vendor [Babcock and Brown Communities Group] is Australia’s second largest listed retirement sector and aged care owner and operator. The Vendor currently operates 56 retirement villages and 29 aged care facilities in Australia and New Zealand.
The Applicant has entered into a conditional Implementation Agreement with the Vendor in relation to a proposed recapitalisation of the Vendor (the Proposed Transaction). The Proposed Transaction will result in the Applicant acquiring an interest in up to 57.4% of BBC’s stapled securities.
The Vendor’s Board has recommended the Proposed Transaction to the Vendor’s Stapled Security holders, who will vote on the Proposed Transaction by 12 December 2008.
The Applicant is focused on becoming a leader in the retirement sector and, by entering into and completing the Proposed Transaction, including the Investment, the Applicant will achieve this strategic goal by becoming the manager of, and major investor in, one of Australia’s leading aged care operators.
[Case number 200821564.]Onesteel may take full ownership of Steel and Tube Holdings (but didn’t)
OneSteel NZ Holdings Limited, owned in Australia, has approval to acquire 100% of the ordinary shares of Steel & Tube Holdings Limited for $354,000,000 from Steel and Tube’s remaining (all New Zealand) shareholders. OneSteel had owned over half of Steel and Tube for some time.
Steel and Tube owns or controls:
- 3.6 hectares of freehold land at 68, 74, 78 and 80 Stonedon Drive, East Tamaki, Auckland;
- 1.6 hectares of freehold land at 26 Hautonga Street, Petone, Wellington;
- 1.5 hectares of leasehold at 14 Kerwyn Avenue, East Tamaki, Auckland;
- 0.5 hectares of leasehold at Tewsley Street, Dunedin;
- 3.4 hectares of leasehold at 39-41 Randwick Road, Lower Hutt, Wellington;
- 0.46 hectares of leasehold at 27 King Edward Terrace, Christchurch.
The OIO states:
OneSteel NZ Holdings Limited (OneSteel NZ) currently holds 50.27% of the entire issued share capital of Steel & Tube Holdings Limited (Steel & Tube). OneSteel NZ has held a majority ownership of Steel & Tube since 1993.
One Steel NZ proposes to acquire up to 100% of the equity securities of Steel & tube by way of a full takeover offer pursuant to the provisions of the Takeovers Code 1993, or in the event that 100% of the equity securities are not acquired through the full takeover offer, by way of a subsequent takeover offer, amalgamation, scheme of arrangement, or on-market purchases and compulsory acquisition over a period of 12 months from the date upon which the full takeover closes.
By acquiring 100% of Steel & Tube, OneSteel NZ expects to be in the position to protect its current investment and strengthen Steel & Tube’s financial position. OneSteel NZ expects that benefits will arise as a result in the efficiency gains generated by synergy opportunities in supply chain, integrated operations, marketing and back office as well as through a reduction in administration costs.
In fact, Onesteel had made its takeover offer almost three months previously, in late September 2008. Within three weeks it had had second thoughts and withdrew the offer due to the “dramatic” changes in the economic situation (“OneSteel decides not to proceed with an offer for Steel & Tube (PDF)”, OneSteel announcement, 17 October 2008, accessed 13 April 2009).
This was despite its chairman, Peter Smedley, telling the news media when making the offer in September, that “the opportunity for Steel & Tube shareholders to receive cash was attractive given the illiquid market for Steel & Tube shares and current economic uncertainty and market volatility. OneSteel said that importantly, the offer was not subject to it raising finance.” Onesteel’s offer valued Steel and Tube at $437.9 million – compared to the $354 million value (presumably the market valuation of the whole company) given by the OIO (New Zealand Herald, “Steel & Tube takeover – 17 pc premium offered by OneSteel“, 29 September 2008, accessed 13 April 2009).
Presumably OneSteel left this application in with the OIO in case times improved and it wanted to reopen the offer.
[Case number 200821539.]New Zealand Dairies of Russia buys a further 4 ha. at Waimate, Canterbury
New Zealand Dairies Limited, owned in Russia (82.36%) and Aotearoa (17.64%) has approval to acquire 4.0 hectares at 2667 Waimate Highway, Studholme, RD10, Waimate, Canterbury for $415,000 from Paul Howard McIntosh and Raylene Margaret McIntosh of Aotearoa.
New Zealand Dairies is controlled by Nutritek of Russia in a takeover that sparked strong controversy among other shareholders. It was approved by the OIO in May 2008: see our commentary for that month for further details. According to the OIO,
New Zealand Dairies Limited (NZDL) was incorporated in 2006 to build a milk processing plant at Studholme, South Canterbury. The plant started processing milk in September 2007.
NZDL became an overseas person when Nutritek Overseas Pte. Ltd, an indirect wholly-owned subsidiary of Nutrinvestholdings, a Russian company acquired shares in NZDL.
Nutrinvestholdings (through its various subsidiaries) is one of the leading producers of baby food and dairy products in Russia and other Commonwealth of Independent State countries by revenue. The core business activities of Nutrinvestholdings comprises the production of baby food, which includes clinical nutrition products and dairy products…
NZDL proposes to acquire the relevant land which adjoins land containing NZDL’s milk processing plant.
The land is being acquired for reverse sensitivity reasons and to create a buffer zone between the milk processing plant operated by NZDL and neighbouring residences. The land is also being acquired for operational reasons to ensure continuity of disposal of wastewater from the plant for irrigation purposes.
What “reverse sensitivity” means is not explained.
[Case number 200820033.]Tenon buys 27 ha. of land at Matatoki, Coromandel for $1
Tenon Industries Limited, owned in the U.S.A. (61.433%), various other countries (4.53%), and Aotearoa (34.037%), has approval to acquire 27 hectares at 9632 State Highway 26, Matatoki, Coromandel for $1 from Ground Works Property Limited of Aotearoa.
All the OIO says to explain is that “The overseas investment transaction has satisfied the criteria in section 16 of the Overseas Investment Act 2005.” It lists among “substantial and identifiable benefits to New Zealand”, an “offer to sell seabed/foreshore to the Crown”.
There is no explanation of the token price that Tenon is paying, and why this is a “substantial benefit” to New Zealand.
[Case number 200820010.]Kodansha of Japan buys 894 ha. Cotton Forest and Drumfern Forest, Southland
Kodansha Limited, owned in Japan, has approval to acquire 894 hectares at Break Neck Road, Dipton and Lillburn Valley Road, Lillburn Valley, Southland for an initially suppressed amount released on appeal as $11,812,500 from Hardwood Forests Limited owned in Japan (26.03%) and Aotearoa (73.97%).
The deal ties the forests to supplying Kodansha. The OIO states:
Kodansha Limited (Kodansha) is a Japanese publishing and printing company. Kodansha’s business relies on the supply of wood chips for the production of paper. In order to secure a supply of wood chips, Kodansha has previously invested in forestry in Japan and Australia.
Kodansha proposes to acquire the forestry and land known as Cotton Forest and Drumfern Forest situated in Southland. The forests have a planted area of 765.4 hectares, comprising predominantly eucalyptus nitens. The forests are currently managed by South Wood Export Limited and it is envisaged that this arrangement will continue. Harvesting of the forest is scheduled over the three years commencing in 2009. Kodansha intends to replant the area harvested each year being undertaken the following year.
The proposed investment will secure a long-term supply of woodchips for export to Kodansha’s business in Japan.
[Case number 200810068.]Channel Islands company acquires Nau Mai on 6 hectares near Queenstown
Emmatty Properties Nau Mai Limited, owned in the Channel Islands, has approval to acquire 6 hectares at Lot 17, Slopehill Road, Queenstown for $1,100,000 from Nadine Amy Norcross of Aotearoa.
According to the OIO,
The Applicant was formed to acquire and then own and operate the property known as Nau Mai at Lower Shotover Road, Queenstown as an exclusive self catering accommodation business (Nau Mai Business). The directors of the Applicant are James David Philippe Crill of the Channel Islands in the United Kingdom and Alastair Duncan McIlwrick and Diana Gay McIlwrick, both of Queenstown in New Zealand…
The Applicant intends to acquire the land to construct a dwelling and operate the land and dwelling as a self catering accommodation business in line with its existing Queenstown business and South West England accommodation business and has provided a business plan setting out how it intends to do this. The Applicant has entered into an agreement for sale and purchase with the Vendor which agreement is conditional upon consent of the Overseas Investment Office.
The Investment is a continuation of the Applicant’s investments including the existing accommodation businesses in both New Zealand and the United Kingdom.
[Case number 200821547.]Approval for 300 ha. purchase at Little River, Banks Peninsula by US investor
Douglas John De Angelis of the U.S.A. has approval to acquire 300 hectares of land at 2655 and 2733A Bossu Road, Little River, Banks Peninsula, Canterbury for a suppressed amount from Margaret Alxiere Elsie Yates, and Karl David Yates & Nancy Barbara Yates of Aotearoa.
According to the OIO,
The Applicant has previously received consent from the Overseas Investment Commission to acquire 243.32 hectares of land known as Oashore, situated near Little River, Banks Peninsula, Canterbury (refer A199920136/D199920131 and A199920139/D199920134). Since acquisition of these properties the Applicant has implemented an Ecological Restoration Plan which has included the restoration and regeneration of native vegetation, the control of animal and plant pests and the protection of historic sites situated on Oashore.
The Applicant proposes to acquire the relevant land, known as Craignish, which adjoins the land he previously acquired in 1999.
The addition of Craignish to the Oashore ecological restoration project will enable substantially greater areas of native forest and shrub-lands to be protected from deterioration and increase the connectivity of habitats over broader and more diverse areas. Protecting and maintaining indigenous habitats on the Craignish land will therefore complement the ecological restoration potential of Oashore.
In November 1999 we reported that
D. De Angelis of the U.S.A. has approval to acquire two blocks of land at Bossu Road, Banks Peninsula, Canterbury. One is 184 hectares at “Poronui”, for $703,125, and the other is 60 hectares at “Oashore” for $315,000. In both cases the new owner “intends to establish large stands of native forest on the land… The properties, described as declining farming ventures will then be developed as an ecotourism destination and as an extension to the Southern Bays Walkways located on Banks Peninsula. In addition to restoration / reintroduction of native flora and fauna the proposed long term investment will include development of walking tracks, mountain biking trails, camping sites and tourist accommodation on the properties.”
[Case number 200720119.]Canterbury decision largely suppressed
An applicant whose identity has been suppressed, has approval to acquire 58 hectares at Detroit Drive and Hoskyns Road for a suppressed amount from the Selwyn District Council. The background to the decision has also been largely suppressed.
[Case number 200821566.]Summary statistics
All investments
This month presents the full year totals. The value of investment approved in 2008 was half that for 2007, by both gross and net value (net disregards sales from one overseas investor to another, and discounts part New Zealand ownership of the assets). By far the greatest part of the value of the approvals is for sale from one overseas investor to another.
Value of investments approved
| December 2008 | 2008 | 2007 | |
|---|---|---|---|
| Number of approvals | 8 | 130 | 146 |
| Net Investment $ | 390,635,751 | 2,966,504,470 | 4,631,213,828 |
| Gross value of consideration | 580,788,751 | 10,270,212,064 | 19,120,248,641 |
Investments refused
| December 2008 | 2008 | 2007 | |
|---|---|---|---|
| Number of refusals | 1 | 4 | 4 |
| Gross value of consideration ($) | 250,000,000 | 4,882,723,767 | 2,032,512 |
| Gross land area (ha) | 1,393 | 4,551 | 33 |
Investment involving land
Gross sales of land approved by the OIO during 2008 are about a third of those approved in 2007 by area, and net sales are about two-thirds 2007. On the other hand, gross sales of leases and other interests in land are 10 times their 2007 values by area, and net sales have increased over 30 times. Refusals (above) are the same by number in 2008 as they were in 2007, but much greater by area and value due largely to the refusal to grant consent to the sale of Auckland International Airport. They are still a tiny proportion of the total.
Freehold Land Approved for Sale
| December 2008 | 2008 | 2007 | |
|---|---|---|---|
| Number of approvals | 8 | 96 | 87 |
| Net land area (ha) | 1,053 | 10,607 | 15,826 |
| Gross land area (ha) | 1,322 | 32,385 | 86,601 |
Other Interests in Land Approved for Sale (For Example, Leases & Crown Pastoral Leases)
| December 2008 | 2008 | 2007 | |
|---|---|---|---|
| Number of approvals | 1 | 26 | 38 |
| Net land area (ha) | 6 | 24,778 | 754 |
| Gross land area (ha) | 6 | 37,937 | 3,754 |
Fishing Quota
There was no fishing quota approved for sale this month.
Fishing Quota Approved for Sale
| December 2008 | 2008 YTD | 2007 Year to December | |
|---|---|---|---|
| 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 |
Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.