Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – March 2013 Decisions

New Chinese-Owned Infant Formula Plant For Morven

This month is dominated by some significant Chinese investment. Firstly, Inner Mongolia Yili Industrial Group Co. Ltd China Public (89.8%) and Hohhot Investment Co. Ltd, China Public (10.2%) received approval for the acquisition of rights or interests in up to 100% of the shares of Oceania Dairy Limited which will either result in the Applicant (i) indirectly owning approximately 37.9 hectares of freehold land at Morven (“the Land”), or (ii) indirectly owning the right to exercise an option to purchase the Land; and an overseas investment in significant business assets where the total expenditure expected to be incurred, before commencing the business, in establishing that business, exceeds $100 million. Total cost of the development was stated at approximately $214,000,000. The vendor was Oceania Dairy Ltd New Zealand (100%).

The OIO states: “The Applicant is China’s market leading dairy products manufacturer. The Applicant proposes to construct a milk processing plant on the Land to produce base powder using various local suppliers of raw milk. The base powder will be exported to China and used in the production of infant milk formula”. Inner Mongolia Yili Industrial Group Co. Ltd is China’s second largest dairy company. While this investment on the face of it seems good for the country in creating new local jobs, it does come with potentially massive risks to the country’s reputation given recent and regular controversies around Chinese infant milk formula. Under the heading “Formula for Trouble” Christopher Adams in the New Zealand Herald (15/6/13) reports on the tainted history of Chinese infant milk powder industry.

“The fears and anxieties shared by millions of Chinese parents can be summed up in the story of baby Yi Kaixuan. First came a powdery substance in his urine. Then there was blood. Soon Yi wasn’t producing any urine at all and he died shortly after his parents took him to a hospital in Lanzhou, the capital of China’s north-western Gansu Province. He was only six months old. The culprit: a brand of infant formula made by a company with a now notorious name, Sanlu.

“Yi was one of at least six Chinese babies who died in 2008 after melamine, a toxic industrial chemical, was illegally added to milk products to boost their protein levels. Around 300,000 children fell ill. Five years on from the scandal, many Chinese parents are yet to regain their trust in domestic brands. And despite this country’s close connection to the melamine disaster – local dairy giant Fonterra had a joint venture with Sanlu – the crisis has created a thriving branded infant formula industry in New Zealand that barely existed a few years ago. Hundreds of baby milk brands – many of them with links back to Chinese businesspeople and names like ‘New Bay Bay’, ‘Ioland’ and ‘Orkloland’ – are now being exported from a number of contract manufacturing facilities around the country.

“But progress has stumbled in a rocky year for New Zealand-China business relations, which has so far featured embarrassing advice on China to local businesses from former Fonterra chairman Sir Henry van der Heyden (‘Don’t ever trust them’); a Chinese court ruling that kiwifruit exporter Zespri’s invoicing practices amounted to smuggling; and the meat hold-up fiasco at Chinese ports. In late 2012 Chinese newspapers reported that ‘substandard’ New Zealand-made baby milk had been rejected at the country’s border, including 26 tonnes of Ioland formula that was found to have insufficient iodine levels, a potential health risk for babies. And in May 2013 a series of critical news stories about Kiwi infant formula was broadcast on the State-run CCTV network to a potential audience in the hundreds of millions”.

Tables Have Turned

“After decades of New Zealanders looking down their noses at supposedly shoddy Chinese goods, the tables appeared to have turned. One news item questioned why some brands here used contract manufacturers instead of making the formula themselves, suggesting this made it difficult to ensure the products were safe. Another story exposed the false claims a number of brands have been making in their Chinese marketing. Several have claimed to be well-known in New Zealand, despite being produced solely for export. The People’s Daily newspaper reported that CCTV also sent a can of New Bay Bay for testing by the Government import authority in China, which found the product had selenium levels below Chinese standards.

“One mother from Inner Mongolia summed up Chinese parents’ acute worries over food safety after news of substandard imported infant formula from several countries, including New Zealand, broke in 2012. ‘Now that expensive foreign milk powder products are also flawed I wonder if there is any milk powder that is safe enough to feed my one-year-old daughter’, she reportedly told the State-run news agency, Xinhua. Gregg Wycherley, Managing Director of Fresco Nutrition, which sells an infant milk product in the New Zealand market, says though the CCTV stories were politically motivated by a Chinese government looking to rebuild its domestic formula industry, they also covered genuine problems this country needs to address.

“His views are shared by many who say the rush to supply a seemingly insatiable Chinese demand for imported formula has attracted some questionable operators, who threaten New Zealand’s lucrative reputation for high quality food – the driving force behind more than $2 billion in annual dairy exports to China. ‘You cannot underestimate the absolute paranoia of Chinese parents when it comes to food safety and feeding their children’, says Wycherley, a former journalist who has worked in China for CCTV and Xinhua. ‘If New Zealand infant formula is perceived as unsafe, then that will have a massive flow on effect to all other dairy sectors as well like milk powder and yoghurt – everything you can imagine.

“‘In New Zealand we’re quite relaxed about food safety. We just think that if it’s in the supermarket it’s safe and 99% of the time that’s absolutely correct. We don’t realise how different it is in China, where products being in the supermarket is no guarantee of their safety’. Wycherley believes it would be a good idea for some kind of audit to be conducted by the Ministry for Primary Industries to establish how many formula brands are being exported, who the businesspeople behind them are and how much product they’re selling. ‘The most common customer for many of the contract manufacturers is the small customer who buys one or two containers of formula, fails [to sell it in China] and then that’s the end of them’.

Misleading & Deceptive

“Until now, the Ministry hasn’t been able to say how many brands are being exported to China. However this week it announced that from June 20, contract manufacturers will have to register with the department information about the brands they produce. The opaque nature of some firms involved in New Zealand’s baby milk trade became evident when the Weekend Herald tried to track down a company named in one of the CCTV news stories. The firm is understood to have acted as an agent in this country for New Bay Bay formula and its address was listed on cans of the product. When a CCTV journalist showed up at the address, however, it turned out to be an auto repair shop on (Auckland’s) Great South Road and staff at the business had never heard of the company supposedly involved in formula trade.

“The Weekend Herald spent two afternoons combing the streets of east Auckland trying to track down the directors of the company, using details filed with the New Zealand Companies Office. The Pakuranga address listed for one of the directors turned out to be non-existent. The following day the firm’s accountant changed the details to another house on the same street, saying the previous address had been the result of a ‘typing error’. A woman at the second address said the director – who had an entirely different address listed on the shareholder information page of the Companies Office Website – didn’t live there.

“Another shareholder is registered as living in an apartment block on Karangahape Road, but the manager says no one of that name lives, or has recently lived, in the building. New Bay Bay, which is based in the Chinese coastal province of Fujian, says the agent company had previously been based at the Great South Road location and had stopped representing the formula brand in 2012 when New Bay Bay opted to work directly with its manufacturer, Auckland’s Sutton Group. New Bay Bay says at that time the address was removed from the cans. However the Chinese firm gave a different explanation for the Great South Road incident on its Mandarin Website, saying it had never worked with the agent as it hadn’t been ‘qualified’ to represent the brand. New Bay Bay then blamed its graphic design team for mistakenly putting the address on the cans.

“Westland Milk Products’ Chief Executive Rod Quin, whose firm is New Zealand’s second biggest dairy cooperative after Fonterra, says some serious issues need fixing, not least contract manufactured brands passing themselves off in China as ‘reputable New Zealand dairy processors’. ‘We’ve traded on a safe and secure supply chain and high quality dairy products for many years and these guys chasing short-term opportunity put a lot of that at risk’, says Quin. He says one infant formula brand even falsely claimed to be based across the road from Westland’s dairy processing plant in Hokitika.

Another issue, Quin says, is a formula manufacturing process called ‘dry blending’. This is when all the ingredients are mixed in a dry form, as opposed to a ‘wet blend’, which is mixed in liquid form and then spray dried into a powder. Wet blends are viewed as superior to dry blends as the ingredients are combined more thoroughly through the finished product. Quin, whose firm opened a multimillion-dollar wet blending plant in Hokitika in 2013, says dry blending could have resulted in some of the seizures of New Zealand formula in China.

“‘The composition of every spoon that goes into a baby’s bottle needs to be the same from the start of the can to the finish and in a dry blend you get a lot of particle size differences and they will separate out over time as the can goes from New Zealand through to China’, he says. That means the proportion of nutrients at the top of the can differs from that at the bottom, potentially leading to the failed results in tests conducted by Chinese import authorities.

“Sutton Group, the maker of New Bay Bay formula, declined to comment on the low selenium test results, saying it would prefer the Ministry for Primary Industries to explain why some New Zealand products have not met Chinese standards. The Ministry says products that have been rejected in China have later been found to be in compliance with Chinese and New Zealand standards when re-tested in this country, suggesting there are differences in the two testing regimes.

“Food Safety Minister Nikki Kaye says she’s confident New Zealand’s food safety regime is solid, but a group of Ministers are working on an initiative aimed at strengthening the country’s ‘food assurance systems’. ‘That’s basically to see if there are more things we can do – not at a food safety level but at an assurance level – to ensure that when any threats (such as the CCTV stories) arise we can either counter them and do more to strengthen our brand and reputation in some of these markets’.

“Despite all the challenges, Quin says infant formula offers a huge economic opportunity for New Zealand, as long as the country gets it right. Around 16 million babies are born in China each year and only 28% of them will be breastfed, according to Unicef, the United Nations’ children’s agency. The retail value of Chinese infant formula sales are projected to reach $US12 billion by 2016, double the $US6 billion they were thought to be worth in 2011, although gathering reliable data on the market is notoriously difficult. And there has also been talk of China relaxing its one child policy, which could result in a baby boom of epic proportions.

Dairy Trade Getting Increasingly Political

“But though China offers a lucrative destination for this country’s agricultural exports, the dairy trade is getting increasingly political. A new leadership, which is taking a tough line on food safety, assumed control of the country in March 2013. Premier Li Keqiang revealed in May 2013 that the Chinese government would step up its monitoring of imported formula and ‘nurture’ the development of domestic brands, including through the restructuring of Chinese dairy corporations.

“It’s probably no coincidence that the CCTV stories about New Zealand-made infant formula had been broadcast just a couple of weeks earlier. Some observers believe Beijing is still smarting over New Zealand’s handling of 2013’s dicyandiamide (DCD) scare, when traces of the nitrate inhibitor were found in Kiwi milk products. It’s been suggested the Chinese Government wanted some kind of recall, which New Zealand couldn’t provide, and the meat hold-up and CCTV stories were a kind of payback. One industry source, who doesn’t want to be named, speculates that the CCTV stories were intended to discredit this country’s infant formula exports before large-scale, New Zealand-based formula plants planned by two Chinese corporations come online.

“The Inner Mongolia Yili Industrial Group intends to spend more than $200 million establishing a formula factory in South Canterbury, while Yashili International Holdings plans to spend a similar sum setting up a plant in Pokeno, south of Auckland. Wycherley says rebuilding the domestic formula industry is a matter of pride in China, which is expected to overtake the United States and become the world’s biggest economy by 2016. ‘The Chinese are very nationalistic and they’re very proud – they don’t like to have the embarrassment of their domestic dairy industry being shamed in the world market’. And Yili has had problems with its infant formula in the past. In 2012 it recalled some infant formula products after Chinese government inspectors discovered mercury contamination”.

And A Chinese Milk Powder Plant For Pokeno

In a second Chinese milk plant investment, Yashili New Zealand Dairy Co. Limited Zhang Family, China, People’s Republic of (51.9%), CA Dairy Holdings, Cayman Islands (24.2%), various overseas persons (23.9%) received approval for an overseas investment in significant business assets, being the establishment of a business in New Zealand by the Applicant where the total expenditure required before commencing business exceeds $100m. No vendor was stated so presumably they already own this land. Total cost of the development was stated at $212,000,000.

The OIO states: “The Applicant plans to build a milk processing plant in the Waikato town of Pokeno. The plant will manufacture paediatric milk powder products. The Applicant believes that acquiring and operating its own manufacturing facility in New Zealand will allow it to exercise better control over the source and quality of dairy products, which will create a steady supply chain and prevent over reliance on a single supplier (the Applicant already sources milk powder from New Zealand for use in its products)”.

Yashili was subsequently taken over by anther Chinese behemoth. As reported on stuff.co.nz (23/6/13): “Infant formula producer Yashili International, which sources milk from New Zealand, is being snapped up by China Mengniu Dairy in a deal worth about $HK12.5 billion ($NZ2billion) as part of a plan to expand its milk powder business The deal for Carlyle-backed Yashili International Holdings marks the latest step by China’s milk industry to consolidate the market after several tainted milk scandals tarnished the fragmented sector.

“Yashili, one of China’s top three producers of infant formula for the domestic market, is planning to build a $220 million infant milk formula export plant in Pokeno. Hong Kong-listed Yashili, with a market value of $US1.5b, is 52.19% controlled by a holding company controlled by Chairman Zhang Lidian and 24.39% owned by Washington DC-based Carlyle, one of the largest private equity firms in the world. Mengniu is 19% owned by China’s State-backed agricultural and food industry supplier COFCO.

“This is the second time since May 2013 that a US private equity firm has exited a lucrative investment in a Chinese milk company. For Mengniu, which also recently announced an investment by French dairy group Danone, the purchase will strengthen its foothold in the milk powder segment, which currently contributes less than 2% of its revenues. Mengniu, twice hit by accusations it sold tainted milk, agreed in May 2013 to buy 26.92% of China Modern Dairy Holdings from private equity firms KKR & Co LP and CDH Investments. That deal allowed Mengniu, whose liquid milk products rank first in China by sales volume, to ensure control over its milk supplies and win confidence among consumers in a market that is growing at about 20% a year. KKR nearly tripled its original investment in Mengniu from the sale, a person with direct knowledge of the matter told Reuters at the time”.

Growing Market

“China’s infant formula market is expected to grow to $US25b by 2017, Euromonitor data shows, as more mothers join the workforce. The fatal milk scandal in 2008 involved substituting a chemical into infant formula to increase profits on the product. The melamine-laced milk killed six babies in China and sickened about 300,000. Other tainted milk scandals have emerged since, which has hammered demand for domestic producers. Chinese companies are now espousing foreign safety standards – Bright Dairy and Food Ltd, for example, also sources raw materials from New Zealand…

“Mengniu teamed up with Danish-Swedish dairy group Arla Foods in June 2012 to develop dairy products in China, in another bid to regain consumer confidence. In May 2013, Mengniu struck a deal with France’s Danone, the world’s largest yoghurt maker. The deal involves the creation of a joint venture between Danone and State-owned Chinese food enterprise COFCO, Mengniu’s biggest shareholder. Danone will also set up a joint venture with Mengniu for the production and sale of yoghurt in China. Danone will own 20% of the business”.

Yashili has since announced hat the Mengniu takeover will not change its plans for the Pokeno plant. However, Andrea Fox at stuff.co.nz (28/6/13) reported it wasn’t quite as simple as that. “Plans for a $230 million infant formula plant at Pokeno in north Waikato will take a new twist if Chinese dairy company Mengniu takes over Chinese company Yashili, which has consent for the project. The Overseas Investment Office (OIO) has confirmed that Mengniu, a State-owned enterprise and China’s biggest dairy company, will have to apply for its own consent for the plant if the $NZ2 billion takeover deal is completed. Mengniu said in a statement this week that privately owned Yashili’s controlling shareholders had accepted its offer.

“Yashili, which is one of China’s big three infant formula processors, was cleared in 2013 by the OIO to buy the Pokeno land for the plant, which it said would create about 120 jobs. An OIO spokesman said if the takeover proceeds, Mengniu would need a new consent because the overseas investment legislation applies to acquisitions by overseas parties of significant New Zealand business assets, even if the purchase takes place overseas. The requirement for consent was triggered when an overseas party acquired a stake of 25% or more or a controlling interest in the target company.

“Mengniu’s statement had said the Pokeno plant proposal would not be affected by the takeover. The OIO noted the Mengniu takeover offer is not yet unconditional. Yashili is in the process of applying for land use and emissions consent to local authorities. Construction is due to start in 2013 with commissioning planned for the second half of 2014. The Mengniu-Yashili deal marks the latest step in China’s milk industry to consolidate the market after tainted-milk scandals.

“Meanwhile, expat Kiwi David Mahon, who has been a businessman and consultant in Beijing for more than 20 years, wrote in his newsletter China Watch this week on the ‘drawbacks of State capitalism’ in China. He said China’s State-owned enterprises continued to accrue ‘unprecedented economic power’. ‘Two of the greatest threats to the stability of the Chinese economy remain the increase in State and relative decrease in private ownership, and the reluctance of banks to lend to the private sector’. Noting Mengniu’s takeover bid for Yashili ‘one of the country’s most strategic privately owned infant formula companies’, Mahon said Mengniu was controlled by its largest shareholder COFCO, China’s State-owned agriculture and food giant, and already accounted for about 30% of the wider domestic dairy market.

“The Chinese infant formula market is worth approximately $US12.5b ($NZ126b) annually and is likely to double in value by 2017.The Government claims that it is primarily interested in food safety, and that State ownership in the food sector will give it the means to enforce standards. This is true to a degree but the core motives of most SOEs are to expand their power and increase profits. ‘If it appears that profits might be hurt through compliance with food safety standards, the safety standards will suffer. Ultimately, widespread State ownership in any sector results in multiple conflicts of interest. Food safety and environmental compliance can only be weakened when the State is both commercial leader and regulator of a sector’, Mahon said”.

NZ Super Fund Sells 14,000 Hectares To Chinese Government

China National Forest Products Trading Corporation & China National Forest Products Industry Corporation Chinese Government, China, People’s Republic of (100%) received approval for the acquisition of a freehold interest in approximately:

2,132 hectares (Coroglen Forest – Coromandel District);
326 hectares (Endean Forest – Rotorua District);
434 hectares (Kanuka Forest – Gisborne District);
438 hectares (Taharoa Forest – Waikato District);
966 hectares (Kopu Forest – Coromandel District);
1,195 hectares (Patetonga Forest – Waikato District);
402 hectares (Putawa Forest – Waikato District);
744 hectares (Raglan Forest – Waikato District);
7,243 hectares (Rototuna Forest – Kaipara District); and
245 hectares (Waipuna Forest – Wairarapa District).

The vendor was NZSF Timber Investments (No 3) Limited Guardians of New Zealand Superannuation Fund, New Zealand (100%); consideration was confidential. The OIO states: “The Applicant will own the land as a long term commercial forestry investment, managing the plantation forests in accordance with best international silvicultural practices. It is intended that the forests will be re-planted following harvest to maintain continuity of supply”.

David Hargreaves in Property (24/4/13) comments briefly on this deal: “The New Zealand Superannuation Fund has trimmed its substantial forestry holdings by selling 11 blocks in the North Island to mostly Chinese interests for an undisclosed sum. The Fund’s General Manager Investments, Matt Whineray, said selling the 14,000 hectares of forestry would enable the fund to focus on other domestic and international investment opportunities. ‘In line with our objective to maximise the Fund’s returns over the long term, and factoring in the growth opportunities in other parts of our portfolio, we see more attractive investment opportunities for our purposes elsewhere’.

The China National Forest Products Trading Corporation, a log importer and subsidiary of the State-owned China Forestry Group Corporation, has purchased the majority of the portfolio, subject to Chinese regulatory approval. The remaining assets have been sold to New Zealand investors. The timber portfolio that has been sold comprises forest crop and land in locations throughout the North Island. The bulk of the portfolio was purchased by the Fund in 2005, with some minor additions in 2008. The sale to CNFP has been approved by New Zealand’s Overseas Investment Office”.

Harvard Expands Its Central Otago Dairy Empire

Dairy Farms Partnership President and Fellows of Harvard College, United States of America (100%) received approval for the acquisition of a freehold interest in approximately 1,382.2 hectares of land at Puketoi Runs Road, Maniototo, Otago. The vendors were Dogterom O’Callaghan Limited Nanne Otto Dogterom, New Zealand (67%) and Michael Desmond O’Callaghan, New Zealand (33%); consideration was confidential. The OIO states: “The Applicant owns two nearby dairy farms and intends to purchase the land and to operate it as a dairy farm and a dairy support farm in conjunction with those two other farms. The Applicant also intends to upgrade the farm”.

Simon Hartley in the Otago Daily Times reports (1/5/13): “The multibillion-dollar Harvard University endowment fund has received Overseas Investment Office (OIO) permission to continue expanding its dairy farm holdings in the Maniototo in Central Otago, already among the largest in the country. The OIO decision yesterday granted consent for Dairy Farms Partnership, owned by Harvard University in the US, to buy 1 ,382ha of freehold land on Puketoi Runs Rd, in the Maniototo.

“Before this purchase, Harvard’s total assets in the district were valued at more than $60 million. The full-year report of Harvard subsidiary DF1 Ltd, filed with the Companies Office on Christmas Eve 2012, said DF1 had, subject to OIO approval, acquired the farm assets of Dogterom O’Callaghan Ltd for $2.5 million, including $1 million for stock and $1.23 million in Fonterra shares. Despite booking a more than 50% decline in profit, Harvard is continuing to acquire land. Its herd of 6,641 cows, as at June 2012, is valued at almost $13 million. The Puketoi Runs Road property joins the farms Helenslea, Alnwick, Tercio and Saran in the district.

“In its decision, the OIO said Harvard planned to upgrade the property to operate as a dairy and dairy support farm, which would create jobs in the area. The former controversial Big Sky Farm development was bought out of receivership by the Harvard University endowment fund in late 2010 for $32 million. As at June 2012, the fund’s total asset value had risen 11% to $60.4 million from $54.3 million the previous year. During the previous financial year, DF1 acquired a 20% interest in the Maniototo East Side Irrigation Co Ltd, plus board representation through a related party. The financial report showed DF1’s operating revenue declined 3.4% from $11.3 million the previous year to $10.98 million for the year to June 2012. It appears rising farm expenses and administration costs contributed to a 55% decline in after-tax profit, from $4.33 million in 2011 to $1.94 million. DF1 Ltd was incorporated in the Cayman Islands and registered in New Zealand as a branch of an overseas company. The ”group’ financial results reported represent DF1 and its 99%-owned subsidiary Dairy Farms Partnership”.

The fact a large US university endowment fund uses a subsidiary registered in the Cayman Islands to buy large tracts of Aotearoa does not lead me into believing they have anything other than profits at the core of this investment. For details of other Harvard University purchases here, see our commentaries for October 2003 (Kaingaroa), March 2004, October 2004, October 2008 and September 2010 (Big Sky purchase).

And OceanaGold Expands Its Central Otago Mining Empire

OceanaGold (New Zealand) Limited Australian Public (93.1%), New Zealand Public (5.8%) and various (1.1%) received approval for the acquisition of a freehold interest in 1,624 hectares of land at Matheson Road, Hyde, Otago. The vendors were Coral Joy Peddie, Roger Norman Macassey and Andrew John Anderson as Executors New Zealand (100%); consideration was confidential. The OIO states: “The Applicant is acquiring the land for use in its gold mining operations”.

Oceana’s expansion plans maybe premature however. As reported by Marta Steeman in stuff.co.nz (21/6/13): “Australian goldminer OceanaGold is looking at freezing the wages of several hundred staff at its two South Island mines. The sustained fall in the gold price has triggered the hard look at the operating costs of the Macraes Mine in Otago and the Globe Progress Mine near Reefton on the West Coast. OceanaGold will seek cost savings on other expenditure. It may reduce the mine life of Globe Progress. The company said it had about 800 employees and contractors at the two mines – its main mining operations.

In a Company Insight report to shareholders today, released on the New Zealand stock exchange, OceanaGold said it was reviewing its mine plan at its main New Zealand mine, Macraes, and ‘more particularly Reefton in light of the lower gold price. ‘We’re looking to minimise the amount of capital expenditure, particularly on re-stripping for future production, and we’re also looking at wage freezes and reviewing all discretionary expenditure to reduce unit operating costs’, it said. ‘We will update the market on Reefton within the next six weeks but can expect that the mine schedule will likely reflect a shorter mine life with these new economic realities’. Sure enough, a couple of weeks later, Oceana announced it will mothball its Reefton mine in two years, which is two years earlier than expected, with the loss of over 200 jobs. See our May 2006, April 2009 and April 2011 commentaries for details of other OceanaGold land purchases in the area.

Origin Sells Waihapa Energy Assets To Canadians

Waihapa Production Services Limited Canadian Public (96.4%), United States Public (2.6%) and New Zealand Public (1%) received approval for the acquisition of a freehold interest in approximately 49.8 hectares of land located at Bird Road, Pukengahu, being the site of the Waihapa Production Station. The vendors were Origin Energy Resources NZ (TAWN) Limited Australian Public (98.6%), New Zealand Public (1.1%) and various overseas persons (0.3%); consideration was stated as part of a wider transaction the consideration for which is approximately $C42 million plus royalty arrangements. The OIO states: “The Applicant is acquiring the land in order to own, operate and further develop the Waihapa Energy Production Station and associated energy field assets”. While the OIO may have approved this deal, it appears far from a done deal, with the Canadians struggling to find the $ to complete the overall transaction.

South Pacific Pictures Sold To Overseas Interests

In two separate decisions, a significant stake in South Pacific Pictures has been sold to overseas interests. Firstly All3Media Limited United States Public (38%), Various overseas persons (33%) and United Kingdom Public (29%) received approval for the acquisition of rights or interests in an additional 40.3% of the shares (total 100%) of South Pacific Pictures Investments Limited which owns or controls a leasehold interest in 1.4 hectares of land located at Tolich Place, Henderson, Auckland. The vendor was Endeavour Entertainment Limited New Zealand (100%); consideration was confidential. The OIO states: “The Applicant intends to continue and grow the present activities of the television and film production business located on the land”.

In the second related decision, South Pacific Pictures Investments Limited Endeavour Entertainment Limited, New Zealand (40.3%), United States Public (22.7%), various overseas persons (19.7%) and United Kingdom Public (17.3%) received approval for the acquisition of a leasehold interest in 1.4 hectares of land located at Tolich Place, Henderson, Auckland. The vendor was Studio Property Limited New Zealand (100%) John Drinnan in the New Zealand Herald (10/4/13) reports on this sale.

“South Pacific Pictures, the company that has made classic Kiwi shows such as Shortland Street, Outrageous Fortune and Whale Rider is now 100% foreign owned. SPP joins the Natural History Unit, Eyeworks Touchdown and Screentime as examples of local production companies which are now fully owned by overseas interests. In the past, South Pacific has received big chunks of taxpayer funding for its dramas through New Zealand On Air. Veteran film and TV producer John Barnett has confirmed he is selling out his minority stake in the firm – formerly the TVNZ drama department. Barnett is New Zealand’s best known film and TV producer and has been a well-known face at international film and TV markets for decades. Barnett is selling his stake to majority shareholder All3Media, a big UK production company controlled by private equity firm Permira.

“Kelly Martin will take over as Chief Executive. She joined the company as number two in 2012 after leaving her role as a programmer at TV3. Barnett and Martin were yesterday at screen industry programming markets in France and could not be reached for details on the future of the company or Barnett’s plans. Production industry sources speculated that Barnett would be producing films – his first love. Most recently he was a key producer behind the Sione’s Wedding movies. Barnett issued a statement saying: ‘I’ve been CEO of South Pacific for more than 20 years, and it is now a good time for a new leader to take the company into the next decade’.

“Barnett said All3Media had been a shareholder in South Pacific Pictures since 2003 when it acquired the interest previously held by UK-based media company Chrysalis Holdings. He sought Chrysalis as a shareholder as he wanted to have a UK-based television sales agent inside the tent. A source familiar with the company said All3Media had always been concerned about a succession strategy for South Pacific Pictures, given Barnett’s importance. Kelly Martin was the latest of several executives lined up to be heir over the years. The price All3Media paid for Barnett’s stake was not clear at print time”.

Aussies Get Retrospective Permission To Buy FleetPartners

NZGT (FP) Trustee Limited as trustee of the FP Ignition Trust 2011 – 1 New Zealand The Trust Company Limited, Australia (100%) received retrospective approval for an overseas investment in significant business assets, being the Applicant’s acquisition of property in New Zealand used in carrying on business in New Zealand (in a series of related or linked transactions) for consideration exceeding $100m, that property being vehicle assets and vehicle lease receivables. The asset value (as at February 2013) was stated at $163,000,000. The vendors were Persons who may be “overseas persons” various (100%).

The OIO states: “The Applicant provides trustee services to the FleetPartners group of companies. FleetPartners is a specialist vehicle lease and fleet management business that operates in Australia and New Zealand. The Applicant has sought and been granted retrospective consent in connection with FleetPartners’ vehicle leasing operations”. See our October 2006 and September 2008 commentaries for details of the “Persons who may be “overseas persons” purchase of Fleetpartners.

Other March Decisions

Craigmore Farming NZ LP Craigmore Sustainables (Farming) NV, being various overseas persons (up to 95%, currently 24.7%) and New Zealand Public (currently 75.3%) received approval for the acquisition (either directly or through an 80% – 100% owned subsidiary of the Applicant) of a freehold interest in approximately:

57 hectares of land located at Gilbertson Road, Napier;
37 hectares of land located at 468 and 469 Lawn Road, Clive; and
17 hectares of land located at 91 Tukituki Road, Haumoana.

The vendor was Cooper Horticultural Limited (In Receivership) New Zealand (100%); consideration was $6,000,000. The OIO states: “The Applicant intends to improve the value and productive capacity of the orchards located upon the land”. This deal appears to be related to a much larger transaction approved by the OIO in February 2013.

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