Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – December 2010 Decisions

December was an extremely busy month at the OIO. It features many dairy farm sales reflecting growing overseas interest in this sector. We start our analysis of the most publicised decision, the initial attempt by Chinese interests to buy Crafar Farms (in receivership).

Chinese-Owned Natural Dairy Attempt To Buy Crafar Farms Declined

The decline of the Crafar Farm empire (one of the largest privately owned dairy farming entities in New Zealand) has been well documented. Its rapid expansion, fuelled by mountains of debt, inevitably meant it would only end in tears for Allan Crafar and his family. It wasn’t long before the vultures started gathering, the first to arrive being Natural Dairy. This Chinese-controlled company was fronted by May Wang, a New Zealand resident with a chequered business history. More on that later; firstly details of the Decisions that were declined.

A total of six transactions were declined. The OIO states as background to each of these decisions: “Natural Dairy (NZ) Holdings Limited (Natural Dairy) has identified a market in China for milk products which can be guaranteed as being 100% produced and processed in New Zealand. The initial business plan is to acquire the Crafar farms (and possibly additional land thereafter) along with a milk treatment plant to produce long life packaged milk which can be sold by Natural Dairy in Asia”. As you will see below, four transactions relate to the same four farms, ownership of which changes hands through a number of Wang controlled companies, finally ending up in the hands of Natural Dairy. Why the deal was structured this way is unknown.

Transaction One (Retrospective)

UBNZ Funds Management Limited May Wang, New Zealand (100%) was declined approval for an overseas investment in sensitive land being the applicant’s acquisition in February 2010 of a freehold interest in:

“Waitotara” – 161 hectares of land at Ngutuwera Road, Wanganui,
“Norsewood” – 195.1 hectares of land at SH2, Norsewood ,
“Linton” – 222.9 hectares of land at Hewitts Road, Linton, and
“Whakarongo” – 142.8 hectares of land at Napier Road, Manawatu.

The vendor was Nugen Farms Limited (in receivership and liquidation) and Windburn View Limited New Zealand (100%)

Transaction Two (Retrospective)

UBNZ Assets Holdings Limited May Wang, New Zealand (100%) was declined approval for an overseas investment in sensitive land being the applicant’s acquisition in February 2010 of a freehold interest in:

“Waitotara” – 161 hectares of land at Ngutuwera Road, Wanganui,
“Norsewood” – 195.1 hectares of land at SH2, Norsewood ,
“Linton” – 222.9 hectares of land at Hewitts Road, Linton, and
“Whakarongo” – 142.8 hectares of land at Napier Road, Manawatu.

The vendor was UBNZ Funds Management Limited May Wang, New Zealand (100%) (i.e. the proposed purchaser in transaction one above).

Transaction Three (Retrospective)

Natural Dairy (NZ) Holdings Limited Various Overseas Persons (24.4%), UBNZ Trustee Ltd, New Zealand, and Super Worth International Ltd, British Virgin Islands (17.5%), Xiamen Hengxing Group Co Ltd, China (16.1%), Zhan King, Du Lisa and Sky Upright Enterprises Ltd, Hong Kong (14.2%), High Excellent Ltd, British Virgin Islands (9.2%), Liu Zhen Dong, China (5.7%), Hong Kong Sincere Investment Ltd, China (5.4%), Anton Capital, Hong Kong (4.3%), Wu Neng Kun and Ruan Kang Ling, Hong Kong (1.6%), Lin Zhi Hong, China (1.6%) was declined approval for an overseas investment in sensitive land being the applicant’s acquisition in February 2010 of a freehold interest in:

“Waitotara” – 161 hectares of land at Ngutuwera Road, Wanganui,
“Norsewood” – 195.1 hectares of land at SH2, Norsewood ,
“Linton” – 222.9 hectares of land at Hewitts Road, Linton, and
“Whakarongo” – 142.8 hectares of land at Napier Road, Manawatu.

The vendor was UBNZ Trustee Limited May Wang, New Zealand (100%) (i.e. the proposed purchaser in transaction four below)

Transaction Four (Retrospective)

UBNZ Trustee Limited May Wang, New Zealand (100%) was declined approval for an overseas investment in sensitive land being the applicant’s acquisition in February 2010 of a freehold interest in:

“Waitotara” – 161 hectares of land at Ngutuwera Road, Wanganui,
“Norsewood” – 195.1 hectares of land at SH2, Norsewood ,
“Linton” – 222.9 hectares of land at Hewitts Road, Linton, and
“Whakarongo” – 142.8 hectares of land at Napier Road, Manawatu.

The vendor (mortgagor) was UBNZ Assets Holdings Limited (shareholding not stated), (i.e. the proposed purchaser in transaction two above)

Transaction Five

UBNZ Assets Holdings Limited Natural Dairy (NZ) Holdings Limited, Hong Kong (20%) May Wang, New Zealand (80%) was declined approval for an overseas investment in sensitive land being the applicant’s acquisition in February 2010 of a freehold interest in:

“Pine View” and “Cirencester” – 739.5 hectares of land at Short Road, Reporoa,
“Plateau” – 323.5 hectares of land at Plateau Road, Reporoa,
“Rawhiti” – 128.6 hectares of land at Rawhiti Road, Reporoa,
“Broadlands” – 404.5 hectares of land at Broadlands Road, Reporoa,
“Atiamuri” – 205.9 hectares of land at Tia Street, Atiamuri,
“Maxwell” – 647 hectares of land at SH 3, Waverley,
“Forest Road” – 250.3 hectares of land at Forest Road, Bulls,
“Kohi Road” – 206.3 hectares of land at Karahaki Road, Waverley,
“Karangahape Road” – 627.5 hectares of land at Karangahape Road, Taupo,
“Collins Road” – 393.4 hectares of land at Collins Road, Hamilton,
“Benneydale I” and “Benneydale II” – 1,688 hectares of land at SH 30, Benneydale,
“Tiwhaiti” – 148.2 hectares of land at Tiwhaiti Road, Hawera,
“Taharua Station” – 1750.8 hectares of land at Taharua Road, Taupo, and
“Ferry View” – 379 hectares of land at Parewanui Road, Bulls.

The vendor was Plateau Farms Limited (in receivership), Ferry View Farms Limited (in receivership), Taharua Limited (in receivership) and Hillside Limited (in receivership) New Zealand Public (100%).

Transaction Six

Natural Dairy (NZ) Holdings Limited Various Overseas Persons (24.4%), UBNZ Trustee Ltd, New Zealand, and Super Worth International Ltd, British Virgin Islands (17.5%), Xiamen Hengxing Group Co Ltd, China (16.1%), Zhan King, Du Lisa and Sky Upright Enterprises Ltd, Hong Kong (14.2%), High Excellent Ltd, British Virgin Islands (9.2%), Liu Zhen Dong, China (5.7%), Hong Kong Sincere Investment Ltd, China (5.4%), Anton Capital, Hong Kong (4.3%), Wu Neng Kun and Ruan Kang Ling, Hong Kong (1.6%), Lin Zhi Hong, China (1.6%) was declined approval for an overseas investment in sensitive land, being the Applicant’s proposed acquisition of rights or interests in the remaining 80% of the shares of UBNZ Assets Holdings Limited which (following completion of Transaction 5) will own or control a freehold interest in:

“Pine View” and Cirencester” – 739.5 hectares of land at Short Road, Reporoa
“Plateau” – 323.5 hectares of land at Plateau Road, Reporoa,
“Rawhiti” – 128.6 hectares of land at Rawhiti Road, Reporoa,
“Broadlands” – 404.5 hectares of land at Broadlands Road, Reporoa,
“Atiamuri” – 205.9 hectares of land at Tia Street, Atiamuri,
“Maxwell” – 647 hectares of land at SH 3, Waverley,
“Forest Road” – 250.3 hectares of land at Forest Road, Bulls,
“Kohi Road” – 206.3 hectares of land at Karahaki Road, Waverley,
“Karangahape Road” – 627.5 hectares of land at Karangahape Road, Taupo,
“Collins Road” – 393.4 hectares of land at Collins Road, Hamilton,
“Benneydale I” and “Benneydale II” – 1688 hectares of land at SH 30, Benneydale,
“Tiwhaiti” – 148.2 hectares of land at Tiwhaiti Road, Hawera,
“Taharua Station” – 1750.8 hectares of land at Taharua Road, Taupo, and
“Ferry View” – 379 hectares of land at Parewanui Road, Bulls.

As part of this transaction the OIO declined approval for an overseas investment in significant business assets, being the Applicant’s proposed acquisition of rights or interests in 80% of the shares of UBNZ Assets Holdings Limited, the consideration of which exceeds $100m. The vendor was UBNZ Trustee Limited May Wang, New Zealand (100%).

Colourful Business Backgrounds

In declining the six transactions above, the OIO gives the non specific reason as: “The relevant Ministers are not satisfied that all of the criteria in section 16 or section 18 of the Overseas Investment Act 2005 are met”. Essentially the OIO rejected these applications because the persons owning and/or controlling the foreign applicant are not of good character. So who is the applicant Natural Dairy and its front person May Wang? The New Zealand Farmers Weekly (25/3/10), in an article by Richard Rennie, gives good background on both these characters.

“The Chinese businesswoman fronting a large scale investment in New Zealand dairy farms has defended her chequered business history here. May Wang has two liquidated businesses and owes hundreds of thousands to creditors and business partners through a failed property and hotel company, Dynasty Group. She left New Zealand in October 2008, the day after Dynasty Group was liquidated, but returned last year to lead Chinese-backed efforts to buy a large number of dairy farms from the CraFarms group, now in receivership, and more recently, two dairy units owned by NuGen Farms, now in receivership but formerly owned by Allan Crafar’s son Robert.

“Wang is the NZ face of UBNZ Assets Holdings, the company that has bought at least four Crafar dairy properties here, despite still requiring Overseas Investment Office (OIO) approval. ‘We went through a very difficult time with Dynasty Group, and my business partner walked away from the business. I became responsible for dealing with all creditors and payments’, she told the NZ Farmers Weekly from Singapore. Wang claimed to be continuing to repay creditors from her own funds.

“The OIO has stated Wang’s business history suggests she could struggle to personally fund the land purchases which are estimated to amount to $25 million. However, Wang claims her New Zealand citizenship means she is just as entitled to buy property as anyone else in this country. Her company UBNZ Trustee Ltd was the first registered buyer of the NuGen Farms (Robert Crafar) properties bought last month. However, titles were immediately transferred to UBNZ Assets Holdings, of which she owns 80%. The remaining 20% of UBNZ Assets is owned by NZ Natural Dairy Ltd. It is in turn a wholly owned subsidiary of Hong Kong-held Natural Dairy (NZ) Holdings, in Hong Kong. This prompted a ‘please explain’ from the OIO. ‘We were acting on the advice we had at the time that told us if we carried out the original contract we did not break the law’, Wang claimed. She said her company’s solicitors were working now to file an application for retrospective consent from the OIO.

“The colourful business background of Jack Chen, listed as a director of NZ Natural Dairy, also raises questions. Chen was reportedly prevented from running any company in mainland China for three years in 2004 due to breaches in securities law. Company records here register him as residing in Howick, Auckland. Complaints were also filed to the Hong Kong Stock Exchange as late as last year (2009) about Chen’s involvement in Natural Dairy (NZ) Holdings.

“Wang claimed the OIO would be hard pressed to turn down the application to buy the land, claiming no individuals were involved that should not be in the businesses. However, she refused to comment on Chen’s past. Wang and others were reported flying around Bay of Plenty and Waikato as late as last week in a chartered helicopter looking at properties for potential purchase. She claimed the next stage of investment will include an ultra-high temperature (UHT) milk plant to process and export product back to Asia.

“Natural Dairy (NZ) Holdings has already claimed in the Chinese press it had a deal with UBNZ, a company it described as a ‘New Zealand milk processing company’, back in November (2009). This is despite UBNZ having no plant or farms under its full ownership at this point. Wang said the higher than current market prices paid for the properties bought so far were justified on the grounds they were based on prices agreed with the vendors in late 2008 when the market peaked.

“However the NZ Farmers Weekly understands similar high prices have been touted on more recent propositions in Western Southland and Wang confirmed the company was considering land there. She said wealthy individuals were underwriting the bid to buy land in NZ, with $100 million deposited in a NZ bank account on Christmas Eve. Funders include a Chen Fashu, one of China’s 25 richest men with a net recorded wealth of $US1.5 billion. Chen’s empire includes a 7% stake in the massive Tsingtao brewery. He purchased $NZ25 million of shares in Natural Dairy (NZ) on December 22 last year (2009)”.

In September 2010 Natural Dairy and Wang were reported to have parted ways. In December, Wang was declared bankrupt by the High Court which rejected Wang’s offer to pay her creditors (owed $22 million) six cents in the dollar. After indicating she would appeal the bankruptcy order, she withdrew her appeal two weeks later. However Wang’s problems don’t end here. She has an Auckland District Court hearing on three criminal charges brought by the Ministry of Economic Development which is set for later in 2011. The Companies Act charges – failing to keep proper books and records; failing to provide information to the liquidator and leaving the country without advising the liquidator – relate to the collapse of her property company, Dynasty Group.

New Chinese Bidder

In the NZ Herald (27/5/11), under the heading “What price NZ? Land bid test limits” Karyn Scherer provides an excellent in depth look at subsequent interest in the Crafar farms and overseas land sales generally. “It’s been nearly two years since the banks that lent him more than $200 million pulled the plug on Allan Crafar’s agricultural empire. But exactly when Australian-owned Westpac, Dutch-owned Rabobank, and now Chinese-controlled PGG Wrightson Finance will get back their cash is anyone’s guess.

“With winter just around the corner, it’s already fairly frigid in Reporoa, where Crafar and his wife Beth continue to live without a regular income. ‘At least we’ve got the grandkids’, is about the only cheery thing the once indomitable farmer can find to say. While many in the media appear to have lost interest in the family’s plight, the sale of 13 dairy farms and three drystock farms they once owned in the central North Island continues to grind on. The latest bidders are now awaiting the verdict of the Overseas Investment Office (OIO) and the Government, on whether they are allowed to become the new owners. The previous bidder, Hong Kong-based Natural Dairy, had its offer declined just before Christmas (2010) on the grounds that not all those associated with the company met the ‘good character’ test in the overseas investment regulations.

“The new bidder, private Chinese-based conglomerate Shanghai Pengxin, appears to have carefully tailored its application to meet the OIO’s requirements. But it may not be that straightforward. ‘One day someone will make a mini-series out of what has become a saga’, Federated Farmers’ Dairy spokesman Lachlan McKenzie noted last month. ‘There have been so many false dawns with the former CraFarms that I hesitate to say this is the end’. In January 2011, new foreign ownership rules were introduced which allow Ministers to consider whether New Zealand’s economic interests are being adequately promoted and safeguarded. Potential buyers can argue mitigating factors, by demonstrating their commitment to local involvement. And in the case of large land purchases – for dairying, more than 1,720ha or so – these two factors must be given ‘high relative importance’, compared to the other factors that are also taken into account.

“As lawyers specialising in foreign investment have noted, the Government appears to have given itself considerable wiggle room. While the OIO’s role is to make a recommendation to the Government, the Government still has the ultimate say. Sam Nelson, from law firm Lane Neave, says the new rules are widely seen as tougher than they were previously. ‘I think it just gives the power at the end of the day to the Ministers. If they’re presented with something that is politically unpalatable they can veto it. That’s my personal view on it’, he says. Bell Gully partner David Boswell concurs. While the OIO has rarely turned down past applications, there have already been some high profile refusals, he notes, most notably with the Arab bid for Auckland Airport.

“Across the Tasman, the Australian government recently refused to allow the Singapore Stock Exchange to buy the Australian Stock Exchange, on ‘national interest’ grounds. But John Key faces a tricky choice so close to the election: if his Government approves the latest Crafar bid, its opponents will almost certainly leap on his previous comments that Kiwis don’t want to end up as ‘tenants in our own country’. Even more ominously for National, other foreign buyers keen to acquire an even bigger stake in our farms are also anxiously awaiting the latest Crafar decision.

“Last week, bids closed for an 83% stake in Fonterra’s biggest supplier, Dairy Holdings, which oversees 72 South Island farms. The stake is for sale following the receivership of Allan Hubbard’s South Canterbury Finance, which owned a third of Dairy Holdings. Other shareholders in the company, including dairy magnate Alan Pye, Christchurch businessman Humphry Rolleston and three United States investors, are also taking the opportunity to sell their stakes.

“Potential bidders reported to have shown an interest include Chinese dairy giant Bright Dairy, which last year (2010) invested $82 million in struggling South Island milk processor Synlait; a pastoral fund owned by Australian investment bank Macquarie Group; British private equity firm Terra Firma; US private equity firm Carlyle Group; and the Harvard Endowment Fund, which already owns a swag of forests and farmland in this country. With roughly 14,200ha and more than 43,000 cows, Dairy Holdings is about twice as big as the Crafar empire. Together the two operations account for more than 2% of our national milk output.

Doesn’t Know Much About Dairying

“Given the Natural Dairy debacle, Shanghai Pengxin is being understandably cautious. It has hired veteran public relations consultant Cedric Allan as its local spokesman, and is refusing to give interviews until the Government announces its decision. The OIO says it aims to make decisions on ‘high quality, straightforward applications’ within 50 working days, which would mean the end of next month, but there is no statutory deadline. In the meantime, Shanghai Pengxin has revealed it would spend more than $200 million buying and upgrading the Crafar farms in the first two years, and another $100 million on marketing in the first five years. It aims to lift the farms’ production by more than 10% by the end of the third year, although cynics note this would simply restore production to around the same level as before they were placed in receivership.

“It has also signalled it will eventually stop supplying Fonterra, and will instead form a partnership with a local milk processor to make products such as infant formula, ice cream and cheese for the Chinese market. According to Cedric Allan, it has already found two local directors, and would be totally reliant on Kiwi staff in this country. ‘You’ve got a company that knows not much about dairy farming and not much about making dairy products, and frankly will be heavily reliant on New Zealand skills’, he says. What it does have, Allan argues, is the right contacts in China to help boost sales of added value products in a rapidly growing market.

“According to its Website, Shanghai Pengxin was founded in 1997 by brothers Jiang Zhaobai and Jiang Lei. But it is the older brother, Jiang Zhaobai, who appears to be its main driving force. Jiang, who is not yet 50, owns 90% of the company’s shares. A civil engineer who started a construction business with just $250 in 1988, Jiang made his fortune as a property developer and is these days one of China’s wealthiest men. China’s best known rich list, the Hurun Rich List, last year estimated the brothers’ wealth at $US740 million ($928 million), putting them in the top 300 of China’s multimillionaires.

“Shanghai Pengxin has significant investments across China, mostly in commercial and residential real estate, infrastructure, mining, and sheep breeding. It has recently diversified into other markets, including agricultural operations in Bolivia, Argentina and Cambodia, and mining in the Congo. It has also dabbled in technology, with an investment in a US company, MPI Corporation, which is developing a new type of composite material for wind turbine blades.

“In an email to the Business Herald, the company said it began to take an interest in New Zealand’s dairy industry two years ago and ‘naturally we heard about the Crafar opportunity when it came up’. It has already registered a local company, Milk New Zealand, which would be the vehicle for its Crafar investment, although its parent company would be based in Hong Kong. So far, the sole director of the New Zealand company, is Auckland businessman Terry Lee.

“According to Companies Office records, Lee is the director of several New Zealand companies, some of which appear to be related to rural properties in the South Island. One of these is Viewbank Dairy Ltd, which is also partly owned by Allan Hubbard and his wife. From December 2009 to September 2010 Lee also owned a company called Kiwi Dairy, together with a Chinese investor, Xing Hong. The pair appears to have sold the company, since renamed Oravida, to local Chinese investors. Lee has also set up a company called Nature Pure with Jiang Zhaobai, and another called Clean Green New Zealand. The names Milk New Zealand Farming and Milk New Zealand Investment have also been reserved.

Empty Promises In US

“According to Allan, Jiang is definitely eyeing further investments in New Zealand. ‘They are in an expansionist mode’, he says. ‘They have the capital, a willingness to invest and a belief in their expertise and contacts in China, so if they become involved in New Zealand they will look for other things to make money’. Perhaps Shanghai Pengxin will look at infrastructure projects, or other primary industries here. But American businesses who have already had some dealings with the company say it might not pay for hi-tech businesses looking for new capital to get too excited.

“In 2009 and 2010, Jiang was given VIP treatment when he visited the United States on a mission to invest millions of dollars in American technology. The visit got plenty of publicity, partly because Jiang decided to partner with Sierra Asia, a highly regarded US consultancy whose partners include two former chief US trade negotiators, and a top Chinese lawyer who helped write many of China’s intellectual property laws. Seattle Times reporter Kristi Heim says Shanghai Pengxin made a ‘big pitch’ to the city. ‘For us, it was big promises made and big hype, but they didn’t end up taking an investment in any of the companies here’. Heim, who speaks Chinese, interviewed Jiang several times and says she was impressed with his openness and his savvy about politically sensitive issues such as China’s attitude to intellectual property, and American fears about losing jobs to China.

“Jiang told her his company employed more than 5,000 people. The purpose of his visit to Seattle was to find US companies specialising in green technology, clean energy, new media, mobile telecoms and biotech, and to invest up to $US10 million in each. He talked up the possibility of further investments, and heavily plugged a Shanghai technology park he was developing, known as the MOY Global Innovative Enterprise Center. He mentioned that the centre hoped to eventually attract $US2 billion to $US5 billion in capital to help American companies break into the Chinese market, and that its ultimate target was to invest in up to 5,000 companies. Shanghai Pengxin did indeed cast its eye over many Seattle businesses, and entered serious negotiations with two biotech companies. But in the end, no deals were done.

“Heim believes a key reason was because it wanted the US companies to pay huge fees for using the MOY Center. ‘That drove a lot of people away, but not everyone, and there were still at least a dozen companies I talked to who were still very interested in partnering with Jiang’s firm. Why he never took an investment in any of them, I’m not sure’. One of the businesses involved confirmed to the Business Herald that the fees were a major issue. The executive, who does not want to be named because his company has since been bought by a large public company, says he did not doubt that Shanghai Pengxin was serious about its intentions. He also believed it was able to provide valuable advice about breaking into the Chinese market.

“‘But Mr Jiang is not necessarily a technologist or a scientist. He’s really a real estate developer. He’s looking to attract businesses to his technology park … For people with stars in their eyes and their feet never touching the ground, they could easily have their expectations misaligned’. Shanghai Pengxin confirmed to the Herald that it does not yet have any tenants in the MOY Center. It claims the economic recovery in the US means developing businesses are looking for buyers, rather than investors. However, it is still ‘observing’ the US companies it invited to Shanghai. ‘The MOY Center is not yet as successful as we expected three years ago when we planned the business model’, it says. ‘We are changing the MOY business model to assist American companies do business in China’. The company has talked up the benefits of the centre to New Zealanders as well.

Joe Massey was chief US trade negotiator with China and Japan from 1985 to 1992. He is also a former director of the Center for International Business at Dartmouth College, and a partner in Sierra Asia. Massey confirms that Shanghai Pengxin ended its relationship with Sierra Asia in October (2010). Although he is baffled by its decision not to go ahead with any investments in Seattle, he insists there are no hard feelings. ‘The question is I think for New Zealand, at what price does this investment come? Is it a national policy issue or is it a commercial transaction? I don’t know enough of the detail to know that. But from my perspective, if the price is right, and the conditions are right, in a normal transaction it shouldn’t matter who the investor is. If the location of the investment is in New Zealand and the operation of the investment is in New Zealand, then ultimately New Zealand has control of it. And if they’re bringing more money into the economy and paying a higher price, perhaps the entire economy is benefiting’.

“Massey notes that, like New Zealand, many US companies are hungry for capital right now. ‘They need that market – after all, it’s the second largest market in the world now. If you talk to business people here there’s a lot of interest, and positive interest. The fear is more in the newspapers and not in the business community’. His own view of China’s re-emergence as an economic superpower is that the world is returning to normal. ‘For five and a half centuries the West has had a huge breathing space because the biggest guys in the world basically turned inward. Since 1978 they’ve now turned outward again and are overcoming the blunder they made for leaving the international economy to the likes of us, and to your forebears and ours out of Britain. But they are back, and they know how to make money and they intend to do it, and the world will be adapting to them just as it adapted to Britain when it was in its heyday, and to us’.

Unreliable Accounts

“According to a senior Beijing journalist, accounts filed with the Shanghai Administration for Industry and Commerce appear to show Shanghai Pengxin’s registered capital is just 100 million yuan ($19.3 million). The accounts show its total assets are more than 1 billion yuan, but its reported annual sales from 2007 to 2009 are each 115,000 yuan and its annual paid taxes are less than 7,000 yuan for those years. The journalist acknowledges the figures are ‘ridiculous’, and that there may be a rational explanation. She also notes many Chinese companies do not file reliable accounts.

“Shanghai Pengxin says the figures are wrong. ‘Pengxin is a highly reputable company with very sound finances and an AAA credit rating’, it told the Herald. On its Website, the company claims to have assets of more than $US2 billion, and Allan notes it has provided full financial details to the OIO. Massey laughs when asked about the issue. While he makes it clear he is not referring to Shanghai Pengxin specifically, he agrees the Chinese financial system is still very different than it is in the West.

“The fact that many Chinese companies do not pay much tax ‘is a problem for the Chinese government that they frequently make note of’, he says. Massey is also unconcerned about the possible crash of the Chinese property market, where Shanghai Pengxin has so many of its assets. ‘When the Chinese real estate bubble will burst, no one can say. There have been predictions that it will burst every year now for the last half a dozen years and it hasn’t yet happened. But it would make sense for anyone who is a smart businessperson to diversify their investments, and Mr Jiang is certainly a smart businessman’.

“The company itself acknowledges there may be some ‘short term adjustments’ in the Chinese real estate market, but says it is confident in its long term future. It also notes it is mostly in the commercial market, not residential. ‘In the last 15 years we have gone through many economic cycles and crises and we are well prepared, so our plans in NZ and China will not be affected’. While large Chinese corporates are determined to be seen as world class in their governance, most Kiwis dealing with China are well aware of the many horror stories involving entrepreneurs. One of the most high profile examples locally is that of Pacific Hovercraft, a Rotorua company that agreed to a joint venture with Chinese investor Terry Yang in 2008. When the deal fell apart last year (2010), Pacific Hovercraft founder Stephen Preest publicly accused Yang of effectively stealing his company, and his intellectual property. The dispute resulted in the resignation of Cabinet Minister Pansy Wong, whose husband helped broker the deal.

Local Apologists & Collaborators

“Local businesspeople with experience in China point out that it is unfair to assume every Chinese businessperson is a shark. And those with extensive experience, such as former Prime Minister Jenny Shipley, maintain we can’t afford to be xenophobic over the issue. Last month Shipley claimed that growing interest from Asian business giants in spending their newfound wealth was a prime opportunity New Zealand could not afford to ignore. ‘Today our generation has to look to China. And for my generation and my parents’ generation, if we don’t get over this, we should get used to wearing jandals’, she told TV One’s Q+A.

“Some critics have also noted that Kiwis should either put up or shut up when it comes to the sale of farms. At least that was what Natural Dairy’s local PR man, Bill Ralston, seemed to be getting at in his Listener column last month when he wrote: ‘There are concerted public campaigns to stop the sale of productive land and resources to foreign interests, even though we lack the cash to develop them more productively ourselves’. Ralston has a point. It is believed that Landcorp bid around $130 million for the Crafar farms, compared to Shanghai Pengxin’s $170 million or so. Natural Dairy is believed to have offered more than $200 million. Landcorp Chief Executive Officer Chris Kelly says it is unfair to compare overseas and local bids, because overseas bidders can factor in the extra value they can get from processing the milk themselves, or with a partner.

“‘I can tell you that if the reported figures are true, our view is that the farms themselves were overvalued at that level’, he says. ‘My guess is they are looking at that as a complete value chain proposition, from taking milk off the farm right through to selling milk power or infant formula in China. Now an individual farmer can’t do that. They need Fonterra or someone, so it’s comparing apples and pears’. Other commentators have suggested Chinese companies may be less concerned about short term profits. However, it has also been noted that the only reason the Crafar farms and the majority stake in Dairy Holdings are up for sale is that their Kiwi owners overextended themselves in the first place.

“While Federated Farmers’ official stance is similar to Shipley’s, some farmers were dismayed to see the organisation’s chairman, Don Nicolson, virtually begging foreign buyers to take the land off our hands during a Bloomberg TV interview late in 2010. Bruce Wills, who heads the lobby group’s meat and fibre division, agrees the stance is purely pragmatic. But it is also necessary, he insists, if farming is to have a future. A former banker and valuer, he notes that debt has more than doubled in the agricultural sector over the past seven years to around $47 billion.

“Wills agrees the Chinese seem to be taking a long term view of the value of New Zealand farmland, given their concerns about feeding their own population. Although Fonterra is doing its best to capitalise on the same trend, most Kiwi farmers simply can’t afford to take a similar long term view, he says. While a few dairy farmers are indeed creaming it, most are still deeply mired in debt, says Wills. And the only way that debt will be repaid is if the milk payout stays at record levels for another few years yet, or through large injections of fresh capital.

“‘Where’s that fresh capital going to come from? It’s not coming in great speed from existing farmers because we’re still a bit cagey about what we’ve been through, and we’re not sure what’s around the corner. A bit of stuff is coming out of the cities… but the big dollops are from those countries with the cash and the real drive to secure some more food assets’. As we have all learned in the wake of the global financial crisis, the bottom line is that far too many Kiwis – in the country and the cities – have borrowed far too much money and few are in any position to borrow any more.

“‘Sure, we’ve got to be careful of not losing too many of our assets offshore where we do have a competitive advantage, but we also have to recognise that we do need outside capital. We are over-indebted. We’ve seen what’s happened to our forestry assets and our banking assets and we all look back in hindsight and say: ‘What a shame we all let that go’. But basically it’s our own fault. Whether we’re going to learn this time, I just don’t know'”. Given the amount of dairy sales approved this month (see below), unfortunately it appears Kiwis haven’t learnt!

But Germans Having More Success In Buying Up Our Dairy Farms

In 12 separate decisions, four separate German investment funds have received approvals to acquire dairy farms in the South Island. Firstly, Aquila AgrarINVEST Investitions GmbH, D/S Neuseeland Milchfarm Investitions GmbH and Alceda Star SA Germany (100%) received 5 approvals for the following purchases:

an acquisition of rights or interests in up to 80% of the units of Browns Pastoral Limited Partnership which owns or controls a freehold interest in 168.4 hectares of land at 737 Hokonui School Rd, RD2, Winton,Southland (known as Browns Farm), and 197.8 hectares of land at 674 Hokonui School, No 2 RD, Winton, Southland (known as Woodds Farm), for $7,323,750 and $3,849,890 respectively. The vendor Browns Farm was Latheron Wheel Limited Gordon John McKenzie, New Zealand (90%), Timothy Patrick Ward, Kevin James Burns and Lynne Marie Burns, New Zealand (9.8%), Lynne Marie Burns, New Zealand (0.1%), Kevin James Burns, New Zealand (0.1%). The vendor of Woods Farm was Brendon Keith Woodd, Lynley Diane Woodd and Paul Edwin Menzies as trustees of the Brendon and Lynley Woodd Family Trust New Zealand (100%). Aquila Agrar intends to merge the above two farms (which adjoin each other) into a larger dairy operation.
an acquisition of rights or interests in up to 100% of the units of Mead Farm Limited Partnership which owns or controls a freehold interest in 531.5 hectares of land at Rakaia Terrace Road, Rakaia, Mid Canterbury, for $17,336,250. The vendor was Synlait Farms Limited Synlait Limited, New Zealand (100%).
an acquisition of rights or interests in up to 100% of the units of Eastern Bush Limited Partnership which owns or controls a freehold interest in 179.9 hectares of land at 473 Clifden Gorge Road, and 227 hectares of land at Old School Rd, both Eastern Bush, Southland, for $5,625,000 and $3,786,902 respectively. The vendor of the Clifden Gorge Road property was Latitude473 Limited Greg Norman Collins, New Zealand (40%), Paul David Marshall, New Zealand (20%), Juanita Priscilla Marshall, New Zealand (20%), John Joseph Ellis and Valerie Jean Ellis, New Zealand (20%). The vendor of the Old School Road property was Derek John Chamberlain, Bronwyn Jane Chamberlain and Jonathan George Newson as trustees of the DJ and BJ Chamberlain Family Trust New Zealand (100%).

The OIO states in the case of all five decisions: “The Applicant states that it is interested in a genuine return on its investments by adding value through additional capital expenditure, sound farming practices and good management.” See our March 2010 commentary for details of Aquila’s previous land purchases in Southland.

More Dairy Farms Bought By Germans

In another series of five separate decisions, another German investment fund, DAH Beteiligungs GmbH Daniel Wolfgang Hopp, Germany (100%) received approval to acquire the following:

rights or interests in up to 100% of the units of Orauea Pastoral Limited Partnership which owns or controls a freehold interest in 366.3 hectares of land at 286 Feldwick Road, RD2, Eastern Bush, Otautau, Southland, for $12,375,000. The vendor was Quadrant Pastoral Limited Greg Norman Collins, New Zealand (40%), John Joseph Ellis and Valerie Jean Ellis, New Zealand (20%), Juanita Priscilla Marshall, New Zealand (20%), Paul David Marshall, New Zealand (20%),
rights or interests in up to 100% of the units of Kamahi Farms Limited Partnership which owns or controls a freehold interest in 80.8 hectares of land at 89 Swain Road, Edendale, Southland (known as Farview Farm) for $3,239,240. The vendor was Farview Farms Limited Christine Mary Farley and Michael Hunter Farley, New Zealand (100%),
rights or interests in up to 100% of the units of Kamahi Farms Limited Partnership which owns or controls a freehold interest in 429.7 hectares of land at 89 Swain Rd, Edendale, Southland for $17,235,760. The vendor was Michael Hunter Farley, Christine Mary Farley and Diprose Miller Trustees Limited as trustees of the Kamahi Trust New Zealand (100%). The buyer plans to combine this farm with the adjoining Farview Farm above into a single dairy operation.
rights or interests in up to 100% of the units of Avondale Pastoral Limited Partnership which owns or controls a freehold interest in 141.4 hectares of land at 1799 Avondale Rd, Winton, Southland and 450.4 hectares of land at 1799 Avondale Rd, Winton, Southland for $4,050,000 and $17,325,000 respectively. The vendor of the first property was John Joseph Hickman and Tracey Ann Hickman as trustees for the Avondale Trust New Zealand (100%), the second property, Strathyre Farms Limited John Joseph Hickman, New Zealand (50%), Tracey Ann Hickman, New Zealand (50%). The buyer plans to combine the two properties into a single dairy operation.

The OIO states in the case of all five decisions: “The Applicant’s director and advisors have identified New Zealand as a country with a good economic and stable political system, with agriculture playing a significant part of the economy”. The Press 1/2/11) reported some details of these purchases. According to its report, DAH Beteiligungs is owned by the family of Dietmar Hopp. Hopp founded the giant German software company SAP in 1972 with other former IBM executives. His family interests include sports teams and hotels, including the exclusive French resort Domaine de Terre Blanche which he bought from actor Sean Connery. With that connection to “James Bond”, and the cream of our dairy farms going to overseas buyers, it’s a shame the OIO couldn’t live up to the name of the original Bond movie, “Dr No”!

Vermogensverwaltung J Jahr GmbH, Sovereign Fund SIF, Little Rock Business Corporation, Eckhard G Jess, Hof Peeneland GbR and AD Fund Classic SIF John Jahr, Germany (32%), Frank Keske, Germany (27%), Eckhard Gunter Jess, Germany (18%), Gerd Schepers, Germany (18%), Roman Rosslenbroich, Germany (3%), Detlef Uwe Schon, Germany (2%) received approval to acquire rights or interests in up to 100% of the units of Cascade Pastoral Limited Partnership which owns or controls a freehold interest in 327.4 hectares of land at 140 Cascade Road, Culverden, Canterbury for $11,250,000. The vendor was Pineleigh Limited Pineleigh Group Holdings Limited, New Zealand (100%).

The OIO states: “The land known as Cascade Farm is currently used as a dairy farm. The Applicant proposes to increase production as a result of the construction of a new cowshed on the land, increased automation of milking systems and farm development work. The Applicant believes New Zealand is an ideal environment for investing in agriculture, particularly dairy farms. The Applicant states that it is interested in a genuine return on its investments by adding value through additional capital expenditure, sound farming practices and good management”.

And the last part of this German dairy invasion has Kiwimilk AG Philipp Schluter, Germany (50%), Wolfgang Zwingenberger, Switzerland (50%) receiving approval to acquire rights or interests in up to 100% of the units of Hurunui Limited Partnership which owns or controls a freehold interest in 217 hectares of land at Balmoral Station Rd, Culverden, Canterbury for $6,806,250. The vendor was Belwood Farm Limited New Zealand (100%). The OIO states: “The Applicant intends to acquire Hurunui Farm which is currently used as a dairy support and runoff farm. The Applicant proposes to develop the land into a fully productive dairy farm. The Applicant believes New Zealand is an ideal environment for investing in agriculture, particularly dairy farms. The Applicant states that it is interested in a genuine return on its investments by adding value through additional capital expenditure, sound farming practices and good management”.

Porters Heights Skifield In Land Swap With DOC

In two related decisions, the owners of Porters Heights Skifield have sold down their investment and entered into a land swap arrangement with the Department of Conservation. Firstly, Washland Holdings HB Pty Limited as trustee of the Washland Holdings HB Trust Simon Thomas Harvey, Australia (100%) received approval to acquire rights or interests in a further 78.29% of the shares of Blackfish Limited which owns or controls a leasehold interest in 708.1999 hectares of land at Southern end of the Craigieburn Range for just $37. I’d be interested to see the calculations involved in coming up with that price!

The vendors were existing shareholders in Blackfish Limited other than Washland Holdings HB Pty Limited Christopher Peter Rose, Australia (32.5%), Duncan James Bull, New Zealand (32.5%), Michael James Sleigh, New Zealand (20%), Timothy Paul Allan, New Zealand (10%), M&C PH Limited, New Zealand (5%). The OIO states: “Blackfish Limited has a leasehold interest in the Porters Ski Area (Porters) in Canterbury. Blackfish Limited leases the land as nominee of the New Zealand Blackfish Joint Venture (Joint Venture), which is the underlying owner of the Porters’ assets. The Applicant is one of the Joint Venture parties and has provided most of the development funds spent since Porters was acquired by the Joint Venture in 2006. In order to continue operating as a commercial ski area, Porters requires significant capital investment in terms of new ski lifts, expanded snow making and new visitor facilities on the ski area. In order to complete the next stage of redevelopment, significant funds are required to complete the resource consent process and the Applicant will provide these funds”.

In the second OIO decision, Blackfish Limited Simon Thomas Harvey, Australia (21.71%), Duncan James Bull, Australia (21.6%), Michael James Sleigh, New Zealand (20%), Timothy Paul Allan, New Zealand (10%), Christopher Peter Rose, Australia (7.2%), Peter Francis Rose, Australia (7.2%), Joe Nakat, Australia (7.2%), David Carson Murray, New Zealand (1%), Frederick David Justin Murray, New Zealand (1%), Christopher David Milne, New Zealand (1%), Humphrey John Davy Rolleston, New Zealand (1%), Richard George Nelson Rookes, New Zealand (1%) received approval to acquire a freehold interest in 15.2 hectares of land at 498 Kowhai Rd, Springfield; and a freehold interest in 21.2 hectares of land at 21.2ha at SHW 73, Springfield. Consideration was $530,000; the vendors were Michael James Sleigh New Zealand (100%), Department of Conservation The Crown, New Zealand (100%).

The OIO states: “This investment is one of a series of applications to enable further development of Porters Ski Area (Porters) in Canterbury. The development plan for Porters includes the construction of a new alpine village which is believed to be the largest current proposed tourism development in New Zealand. This application is required to enable a land swap agreement between Blackfish Limited and the Department of Conservation (DOC). Under the agreement, DOC will exchange 21 hectares of the land currently used for Porters for 15 hectares of ecologically valuable land adjoining Lords Bush Reserve (which is being acquired by Blackfish Limited from Michael Sleigh). The land swap will enhance the ecological viability of Lords Bush Reserve and allow the continued development of Porters”. See our December 2006 commentary for details of Blackfish’s original purchase of Porter Heights.

The controversy around the land swap primarily relates to the principle and scale of the proposed development. Concerns have been raised by Fish & Game as to the wastewater impact on the Porter River, in which the developers themselves predict a fivefold increase in nitrogen levels. At the time of writing, the 226 hectare, 3,500 bed alpine village development proposal was being heard by Environment Canterbury and the Selwyn District Council. At the hearing, Simon Harvey suggested the ski area would close if the development was not allowed to proceed. I wouldn’t read too much into that threat. The ski area is currently operating at a profit, but in four years of Blackfish ownership, has not met financing or depreciation costs. Blackfish is more likely to sell the operation as a going concern, if can’t get its controversial and fanciful development off the ground.

Shopping Mall Conglomerate Restructures Ahead Of Public Float

Westfield Retail Trust Australian Public (99.5%), various overseas persons (0.5%) received approval to acquire (directly or indirectly) of rights or interests in 50% of the shares of Westfield NZ Holdings Limited (NZ-JVCo) which owns or controls:

a freehold interest in five hectares of land at Westfield Westcity Shopping Centre, 7 Catherine Street, Henderson, Auckland; and
a freehold interest in 3.8 hectares of land at Westfield 277 Shopping Centre, 277 Broadway and Mortimer Pass, Newmarket, Auckland.

Approval was also sought and given for an overseas investment in significant business assets, being the Applicant’s acquisition (directly or indirectly) of rights or interests in 50% of the shares of NZ-JVCo and the assignment of a loan from Westfield Trust/Westfield Management Limited, the asset value for which exceeds $100m. The asset value was stated at $925,000,000; the vendor was Westfield Group Australian Public (99.5%), various overseas persons (0.5%), i.e. no actual change of ownership at this point.

The OIO states: “Westfield. Group owns shopping centres throughout Australia and New Zea land. Westfield Group is proposing a restructure under which 50% of its interests in its Australian and New Zealand shopping centres will be demerged through a public float of a separate listed property trust on the ASX. Westfield Retail Trust will acquire a 50% interest in the Australian and New Zealand shopping centres. Westfield Group will retain ownership of the other 50% of interest in the Australian and New Zealand shopping centres”.

Anne Gibson in the NZ Herald summarised the deal (5/11/10): “Westfield Group is restructuring its retail property empire here and in Australia as it tries to boost returns to security holders by spinning off a separately listed trust with half its Australian and New Zealand assets. Westfield Group is to create Westfield Retail Trust, as part of a $A3.5 billion capital raising, which would become a joint venture partner in 54 of the group’s shopping centres in Australia and New Zealand…

“Westfield owns 12 New Zealand malls: Albany, Hamilton’s Chartwell, Auckland CBD’s Downtown, Glenfield, Manukau, 277 Newmarket, Pakuranga, Queensgate in Lower Hutt, Christchurch’s Riccarton, Takapuna’s Shore City, St Lukes and Henderson’s WestCity. Westfield wants to double in size its St Lukes mall, expanding it to become New Zealand’s largest mall with more than nine ha of indoor shopping space. The new Auckland Council was due this week to discuss this proposal, given the green light by independent planning commissioners but strongly opposed by the St Lukes Community Action Group which objected to the item even being on the agenda in the council’s first week….” For details on how Westfield came to own 12 New Zealand shopping malls, see our commentaries for December 1998, April and August 1999, May 2001, August 2002, and July 2004.

Commonwealth Bank Of Australia Buys LynnMall Shopping Centre

In another shopping mall deal, Kiwi Income Properties Limited as manager for Kiwi Income Property Trust Commonwealth Bank of Australia, Australia (100%) received approval for an overseas investment in significant business assets, being the acquisition of the LynnMall Shopping Centre, New Lynn, Auckland. Consideration was stated as $174,000,000 plus GST (if any). The vendor was AMP Capital Property Portfolio Limited New Zealand Public (65%), Australian Public (35%). The OIO states: “The acquisition of the Property by the Kiwi Income Property Trust is consistent with the Trust’s objectives to provide attractive long term sustainable property-based returns to investors, among other things, the acquisition of retail property assets as part of a high quality diversified property portfolio spread throughout New Zealand.

“Kiwi Income [Property] Trust, the country’s biggest listed property investment vehicle, was established in 1992, and since that time the company has acquired a number of properties throughout New Zealand, being a mix of commercial, industrial, retail and rental properties. The Trust owns, or part owns a number of shopping centres in New Zealand, including North City Plaza, Porirua, Palmerston North Plaza, the Majestic Centre, Wellington, Northland Shopping Centre, Christchurch, and the Palms Shopping Mall, Christchurch”. Previous purchases by this company are too numerous to mention. Type “Kiwi Income Property Trust” into the CAFCA Website search engine for a full list of these.

Singaporeans Buy Australasia’s Largest Sugar Refiner

Wilmar Australia Pty Limited Kuok group of companies (including Kerry Group Limited, Kuok Brothers Sdn Berhad, and Kuok (Singapore) Limited, Singapore (31.8%), Singapore Public (29.6%), Archer Daniels Midland Company, United States of America (16.4%), Kuok Khoon Hong, Singapore (12%), Martua Sitorus, Indonesia (10.2%) received OIO approval to acquire rights or interests in 100% of the ordinary shares of Sucrogen Limited which owns or controls:

a freehold interest in 14.4 hectares of land at 90-100 Colonial Rd, Birkenhead, Auckland; and
a freehold interest in 1.4 hectares of land at 22-36 Huka Rd, Birkenhead, Auckland.

Approval was also given for an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests in 100% of the ordinary shares of Sucrogen Limited, the value of the assets of Sucrogen Limited and its 25% or more subsidiaries being greater than $100m. No actual value was given. The vendors were existing shareholders of Sucrogen Limited Australian Public (49.6%), National Nominees Limited, Australia (15.5%), JP Morgan Nominees Australia Limited, Australia (13.2%), HSBC Custody Nominees (Australia) Limited, Australia (10.4%), ANZ Nominees Limited, Australia (3.8%), Citicorp Nominees Pty Limited, Australia (2.7%), Cogent Nominees Pty Limited, Australia (2%), United Kingdom Public (1.9%), various (0.9%).

The OIO states: “The ultimate holding company of the Applicant is Wilmar International Limited (WIL), a Singapore based agribusiness group. Sucrogen Limited (Sucrogen) is the largest sugar refiner in Australia and New Zealand and the eighth largest producer globally. WIL intends to work with Sucrogen’s existing management to enhance the Australian and New Zealand operations and to pursue growth opportunities in the Asia Pacific region. The Investment will likely result in greater volumes of sugar being processed in New Zealand and greater export receipts being generated”.

It remains to be seen whether greater volumes of sugar will be processed here. Presumably this will only happen if New Zealand’s production costs (i.e. labour, electricity) are significantly cheaper than say Australia’s where the raw material will come from. The increased export receipts will simply reflect those cost savings and increased profits for its overseas owners. Just as worrying is the appearance of Archer Daniels Midland (the infamous global price fixing recidivist) on Sucrogen’s share registry (for considerably more detail on Archer Daniels Midland’s corporate criminality, see Jeremy Agar’s review of the film “The Informant!” and Murray Horton’s review of the book “Rats In the Grain”, both in Watchdog 123, May 2010, Ed.).

According to its Website, Wilmar is Asia’s leading agribusiness group (whatever that means?). Wilmar International Limited, founded in 1991, is amongst the largest listed companies by market capitalisation on the Singapore Exchange. Its business activities include oil palm cultivation, oilseeds crushing, edible oils refining, sugar, specialty fats, oleochemicals and biodiesel manufacturing and grains processing. Headquartered in Singapore, Wilmar has over 300 manufacturing plants and an extensive distribution network covering China, India, Indonesia and some 50 other countries to support a well established processing and merchandising business. Wilmar also manufactures and distributes fertilisers and owns a fleet of vessels. The Group is backed by a transnational staff force of more than 88,000 people.

It claims to be:

the largest global processor and merchandiser of palm and lauric oils;
one of the largest plantation companies in Indonesia/Malaysia;
the largest palm biodiesel manufacturer in the world;
a leading consumer pack edible oils producer, oilseeds crusher, edible oils refiner, specialty fats and oleochemicals manufacturer in China;
one of the largest edible oils refiners and a leading producer of consumer pack edible oils in India;
the largest edible oils refiner in Ukraine; and
the leading importer of edible oils into East Africa and one of the largest importers of edible oils into South-east Africa.

In other words, like Archer Daniels Midland, a real bottleneck in the global food supply chain, simultaneously screwing down prices paid to growers, while inflating food costs to consumers.

In fact its own Website, brags as much: “we have established a resilient integrated agribusiness model that captures the entire value chain of the agricultural commodity processing business, from origination and processing to the branding, merchandising and distribution of a wide range of agricultural products. Wilmar is a leader in the supply of high quality processed agricultural products to the food manufacturing industry, industrial and consumer food catering businesses and has strong leadership positions in consumer-packed products in its targeted markets. Through scale, integration and the logistical advantages of our business model, we are able to extract margins at every step of the value chain, resulting in significant operational synergies and cost efficiencies”. Scary if you are one of the worlds hungry!

Bay Audiology Owners Now “Hear” From The Italians

Amplifon Australia Pty Ltd Amplifin SpA, Italy (57.6%), various overseas persons (20.2%), Italian Public (11.9%), United Kingdom Public (5%), United States Public (3.3%), French Public (2%) received approval to acquire rights or interests in 100% of the shares of NHC Group Pty Limited, the value of the New Zealand assets of NHC Group Pty Limited and its 25% or more subsidiaries being greater than $100m. The asset value was stated at $151,731,861; the vendors were existing Shareholders of NHC Group Pty Limited Australian Public (97.5%), New Zealand Public (2.5%).

The OIO states: “The Applicant is a company ultimately wholly owned by Amplifon SpA (Amplifon), an Italian company involved in the distribution and personalised fitting of hearing aids in 15 different countries. NHC Group Pty Limited (NHC) operates 101 audiology clinics throughout Australia. National Hearing Care (New Zealand) Limited is a wholly owned subsidiary of NHC, which operates 78 audiology clinics throughout New Zealand offering a full range of hearing screening, diagnostic testing and rehabilitation services under the National Hearing and Bay Audiology brands. Amplifon intends to continue NHC’s operations in the same form as presently conducted, and will use NHC as business base for further expansion into Asia”.

NHC subsidiary National Hearing Care (New Zealand) Limited, readers may recall, bought Bay Audiology (operating 64 clinics in NZ) from Abano Healthcare in August 2009 for $158 million. See our August 2009 commentary for details. Amplifon now appears to be paying $152 million for 78 clinics, suggesting a loss to NHC over the 17 months it has owned them. Abano however who retained a small shareholding in NHC was reported by the NZX (26/9/10), to have made a profit of $11m on the sale of NHC to Amplifon.

Bayer Is A Buyer Of Bomac Industries

Bayer AG Various (31.1%), German Public (22.3%), Canadian and United States Public (20.8%), United Kingdom Public (11.3%), European Public (14.5%) received approval to acquire rights or interests in 100% of the shares of Bomac Industries Limited and Bomac Research Limited, the consideration of which exceeds $100m. Consideration was not revealed. The vendors were existing shareholders of Bomac Industries Limited and Bomac Research Limited McLaren family, New Zealand (84%), Leech & Partners Limited, New Zealand (16%). The OIO states: “The Applicant’s purchase will provide Bomac’s animal healthcare business with the essential capital and industry experience for future growth and efficiency”.

Hamish Rutherford at Stuff.co.nz reported on the deal (3/11/10): “New Zealand’s largest privately owned animal healthcare company, Bomac, is being sold to German healthcare giant Bayer. The two companies have signed a purchase agreement and pending regulatory approval, the sale is expected to be completed in early 2011. Financial details of the deal are not being released. Auckland-based Bomac manufactures 290 animal healthcare products designed for farm stock, horses and pets. Founded in 1958 and owned by the McLaren family, it has 200 staff, including 25 in Australia, as well as a shareholding in a subsidiary in Argentina.

“Bomac’s products are sold in more than 60 countries; with its leading products including a treatment for mastitis in dairy cows. Dr Alexander Jahn, who heads Bayer’s animal healthcare business in Australasia, said the deal would boost the group’s operations in fast growing Southern Hemisphere markets. ”With Bomac we found a company, where we can capture local innovation and lever it across the fastest growing markets in the world’. Bomac Managing Director, Connel McLaren, said Bayer had committed to expanding the company’s research and development programme, in particular focusing on mastitis management and parasite control. The company’s research budget exceeds 10% of its annual sales. ”They share our belief that New Zealand is an ideal place to undertake new product development and we also share the same values and commitments towards our customers and employees’, Mr McLaren said. Bomac does not publish its financial accounts. Bayer, which has been operating in New Zealand for 85 years, generated revenues of $122.5 million in New Zealand in 2009, a fall of $5.4m on the previous year. Headquartered in Leverkusen, the company has more than 108,000 staff worldwide, generating revenue of €31.2 billion (NZ$56.8b) in 2009. Its animal healthcare business had revenue of just under €1b last year”.

Americans Take Control Of Clemenger

Omnicom Group Inc United States Public (88.2%), United Kingdom Public (4.2%), Canadian Public (2.2%), Norwegian Public (1.7%), Bermuda Public (1.3%), Singapore Public (1.3%), Japanese Public (1.1%) received approval to acquire rights or interests in 27% of the Class A and Class C shares of Clemenger Group Limited, the consideration of which exceeds $100m. Consideration was stated at $199,001,685. The vendors were existing shareholders of Clemenger Group Limited other than Omnicom Group Inc Australian Public (75.6%), New Zealand Public (24.4%).

The OIO states: “The Applicant currently owns 46.67% of the Australian entity Clemenger Group Limited. Clemenger New Zealand is wholly owned subsidiary of Clemenger Group Limited. The Applicant is looking to increase its shareholding in Clemenger Group Limited to 73.67% by acquiring a 27% shareholding from existing minority shareholders in the company. The Applicant is seeking to take advantage of the growth in the Asia Pacific region. Accordingly, the Applicant would like to utilise Clemenger Group Limited’s strength, expertise and creativity as part of its overall growth strategy in this region”. Both Omnicom and Clemenger group are large advertising agencies, in Omnicom’s case, the largest in the Asia Pacific region. This deal will see the Clemenger Group, which owns 40 companies in Australia and New Zealand including flagship advertising agencies Clemenger BBDO, CHE and Colenso BBDO, become majority overseas owned and controlled after 64 years of proudly trumpeting its local ownership.

French Make A Killing On Sale Of Vineyards To NZ Breweriesr

With $80 million in its back pocket after buying back its Khyber Pass Rd site from AMP, it seems NZ Breweries now wants to buy up a number of tasty Gisborne vineyards. New Zealand Breweries Limited Japanese Public (78.5%), United States Public (9.4%), various overseas persons (5.9%), United Kingdom Public (5.2%), Australian Public (1%) together with their associate Indevin Estates Gisborne Limited New Zealand (100%) received approval to acquire:

a freehold interest in 6.6 hectares of land at Benson Vineyard, Ormond Valley Rd, Ormond, Gisborne; and
a freehold interest in 49 hectares of land at Ormond Vineyard, 89 Snowsill Rd & Matawhai Rd, Ormond, Gisborne; and
a freehold interest in 162.4 hectares of land at Patutahi Vineyard at Wharekopae, Brunton and Tinroto Rds, Patutahi, Gisborne; and
a freehold interest in 49.3 hectares of land at Riverpoint Vineyard, 187-189 Riverpoint Rd, Matawhero, Gisborne; and
a freehold interest in 88.6 hectares of land at Saints Vineyard, 188 Tinoroto Rd and Pipiwhakao Rd, Patutahi, Gisborne; and
a freehold interest in 93.5 hectares of land at Twin Rivers Vineyard, 38 Sisson Rd, Pakowhai, Hawkes Bay; and
a freehold interest in 74.6 hectares of land at Whitmore Vineyard, 115 Whitmore Rd, Ormond, Gisborne.

Consideration was stated at $88,300,000. The vendor was Pernod Ricard New Zealand Limited Pernod Ricard SA, France (100%).

The OIO states: “The Applicant and the Associate’s parent company, Indevin Group Limited (IGL), have agreed to purchase the land containing approximately 524 hectares in the Gisborne area together with the Vendor’s business assets which include vineyards, a winery and the intellectual property rights in certain wine brands. The Applicant will then transfer to the Associate the freehold estate in the sensitive land forming part of the Investment. The Applicant and IGL have entered into a Cooperation Agreement which provides how the business assets forming part of the Investment will be utilised by the Applicant and IGL. The Applicant will retain the intellectual property rights in the wine brands and will use its distribution channels for the marketing and selling of the wine branded products produced by IGL and the Associate using the sensitive land comprising the Investment”.

You may recall from the previous month, Pernod Ricard has just purchased a number of vineyards with the stated purpose of divesting them at a later date. Indeed three of the above properties (Riverpoint, Saints and Twin Rivers) were part of that purchase and therefore were divested rather quickly to NZ Breweries. Perhaps that speed had something to do with extraordinary profit, Pernod appears to have made on the deal. The above purchase of 524 hectares for $88.3 million represents an average price to Pernod of $168,511 per hectare, which seems reasonable. However, last month Pernod paid an average price of just $5,854 per hectare for 231 of those very same hectares! HELLO! The intellectual property rights can not possibly explain this difference. Either the OIO has got its numbers wrong, or Capital Nominees Limited as nominee for the Public Trust as trustee for Capital Commercial Property Trust (the seller to Pernod last month) has been well and truly shafted?

Uncle Sam Pours More $ Into AIG

It seems the poor old US taxpayer continues to bail out one of the key players (no relation to our Prime Minister) of the 2008 global credit crunch. Specifically United States Department of the Treasury United States of America (100%) has received approval to acquire rights or interests in 92.1% of the Common Stock of American International Group Inc, the value of the New Zealand assets of American International Group Inc (AIG) and its 25% or more subsidiaries being greater than $100m. The asset value was stated at $355,683,000. The vendor was AIG Credit Facility Trust various overseas persons (100%). The OIO states: “The Application relates to a recapitalisation required as a result of the global financial credit crisis. Following the recapitalisation the Applicant eventually intends to exit its ownership interest in AIG”. In other words Uncle Sam must create and buy shares in AIG before it can sell them. The $64,000,000 question is whether Uncle Sam will ever get its money back?

AIG, you may recall, was possibly the highest profile casualty of the global financial crisis in 2008. Prior to the crisis, AIG was the world’s largest insurance company. In that role it essentially insured many of the world’s largest banks against losses in the nebulous world of financial derivatives (credit default swaps, collateralised debt obligations, etc). When these derivatives were eventually seen for what they were, aka “the emperor has no clothes”, AIG faced many massive payouts, which would have bankrupted it, if it wasn’t for the good ol’ US taxpayer mortgaging the next generation or three to bail them out. Clearly the US taxpayer bailout is continuing.

AIG was the proverbial “Too Big to Fail” according to the US government, which may have been true, as its demise would almost certainly have brought the whole house of cards down. However it would be interesting to surmise what role the US Federal Reserve (the American Central Bank) played in this saga, as that institution is essentially controlled by the banks with which AIG dealt. Perhaps “dealt” is the wrong word, giving the impression of a high stakes game of poker. A closer analogy would be Russian roulette with the Federal Reserve (read banks) permanently holding the gun (fully loaded), pointed at the US taxpayer! See our commentaries for March 2009 and May 2010 for more background on the AIG debacle.

Americans Eyeing Up Kawerau Geothermal Power Generation

KG Assets LLLP Innovations Development Group, Inc., United States of America (48.8%), Various overseas persons (29.5%), United States Public (20.5%), New Zealand Public (1.2%) received approval to acquire rights or interests in 40% of the Te Ahi O Maui Limited Partnership (TAOM LP) which owns or controls a leasehold interest in 171.5 hectares of land at Kawerau. The vendor was Te Ahi O Maui Limited Partnership Eastland Group Limited, New Zealand (80%), Innovations Development Group, Inc., United States of America (10%), Kawerau A8D Ahuwhenua Trust, New Zealand (10%). The asset value was stated at $300,000.

The OIO states: “The Applicant is a limited liability limited partnership incorporated in Hawaii, USA. Its limited partners are largely Hawaiian entities and individuals, including the Innovations Development Group Inc (IDG). IDG is a Hawaii-based strategic planning and development company specialising in developing indigenous-owned assets in a socially responsible, ‘green’ manner that is respectful of native cultures. The Applicant will acquire an interest in TAOM LP, which is taking a 40 year lease over sensitive land at Kawerau in order to establish a geothermal power station”.

Geothermal Digest reported details of the deal (6/6/11): “Innovations Development Group (IDG), based in Honolulu, has signed with New Zealand’s Eastland Group to develop the Te Ahi O Maui geothermal project. The deal includes the exclusive development right for 420 acres in Kawerau on a trust block belonging to the indigenous Maori people. There is an existing commercially viable geothermal well on the land, but Eastland Group Chief Executive Matt Todd said that the entire area has shown a significant additional resource beneath the surface.

“IDG looks to a world where indigenous leaders and their beneficiaries can shape and influence local, regional, and global policies that are rooted in the values and traditions of their culture through the advancement of economic development. The company’s goal is to emerge as International leaders in the renewable and sustainable low emission energy generation industries through the development of Native-to-Native Joint Venture Partnerships throughout the Pacific.

“‘This is an exciting development for us to be involved in,” says Todd. ‘While Gisborne-based Eastland Group is a large local business, it is not a multinational or huge corporate, and as a result we have similar provincial values with a strong sense of community responsibility, as does the Trust [IDG] we are working with on this project’. The new operation is not far from Eastland Group’s nine megawatt (MW) geothermal power station, bought in early 2010. Eastland wishes to expand further into the power generation sector focusing on renewable energy.

“The project will be done in stages, with stage one to be a ten MW to 15 MW plant with a capital cost of $45 million to $60 million. The power generated will be fed back into the Bay of Plenty community using local electricity lines, where possible. The project’s name, Te Ahi O Maui, which loosely translated means ‘the fire of Maui’, is a curiosity, and links the two islands through volcanic activity. It is said that the ngawha’s (geothermal fluid) journeyed from Hawaii to Aotearoa, with the belief that the Chief Ngatoroirangi summoned the heat from his homeland Hawaii’iki. The demigod Maui sent it from Hawaii through another demigod Pele, the Hawaiian goddess of fire. Aotearoa is the Maori name for New Zealand”.

Michael Hill Simplifies His Investment, So…

Durante Holdings Pty Limited Michael Hill Family, New Zealand (100%) has received approval to acquire rights or interests in 47.6% of the ordinary shares of Michael Hill International Limited, the consideration of which exceeds $100m. The vendor was Box Hill Trust, Michael Hill International Share Trust and Quinten Trust Michael Hill Family, New Zealand (100%) Consideration was $144,122,086. The OIO states: “The rationale for the investment is to consolidate the Hill’s family’s shareholding in Michael Hill International Limited into one single entity”. Is simplification the only reason Michael Hill is consolidating his family shareholding into one entity, or is he streamlining this for some future development?

Other December Decisions

Ohana LP The Giannamore Family, France (100%) received approval to acquire a freehold interest in 377 hectares of land at Kereta Farm, 429 Manaia Rd, SH 25, Coromandel. The vendor was Spatial Enterprises Limited Lesley Anne Bundock, New Zealand (50%), Michael Stephen Bundock, New Zealand (50%). Consideration was $8,353,125. The OIO states: “The Applicant intends to further develop the current sheep and cattle farming operation on the property. Development plans include increasing stock numbers, an enhanced fertiliser programme, new fencing around streams and natural bush, replanting of deteriorating bush, and improvements to facilities including water supply, yards, sheds and fencing. The objective in the medium term is to make the farming operation profitable and it is possible that a small horse breeding operation may commence”.

And in another French purchase, Le Port Blue Limited Charles Lehartel, France (72%), David Charles Porter, New Zealand (9%), Terrence Frederick Porter, New Zealand (9%), Eileen Lehartel, France (5%), Vainui Lehartel, France (5%) received approval to acquire a freehold interest in 4.4 hectares of land at 4 Fraser Street and Port Road, Whangarei. The vendor was Northern Land Holdings Limited (In Receivership) Allen Stuart Jones, New Zealand (100%), consideration $8,437,500.

The OIO states: “Le Port Blue Ltd is acquiring the property in order to redevelop the land as a world class yacht and shipbuilding facility with the capability of building super yachts and commercial vessels in the 80 metre range. The facility will be operated by its associated company (Le Port Marine Ltd – Marine). The proposed investment will rejuvenate an asset that is currently lying moribund as a result of the collapse of the yachting business that was carried out on the land and will help to stimulate the economy in the Whangarei district”.

And finally for December, Bloomsbury Stud (NZ) Limited New Zealand Public (50%), United Kingdom Public (50%) received approval to acquire a freehold interest in 17.8 hectares of land at 44 Jeffery Rd, Crown Terrace, Queenstown. The vendor was Robina Mary Bodle New Zealand (100%); consideration was $2,930,000. The OIO states: “The Applicant will acquire the Land for use as a South Island base from which to manage its bloodstock and other New Zealand investments. A lodge on the Land will be refurbished and a new residence constructed”.

Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.