Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – April 2013 Decisions

EnviroWaste Changes Hands

NZ Holdings (2012) Limited Cheung Kong Infrastructure Group received approval for the acquisition of rights or interests in 100% of the share capital of Barra Topco II Ltd which indirectly owns or controls:

a freehold interest in approximately 356 hectares located at various locations around New Zealand being the sites of various refuse transfer stations, landfills and waste management related utilities: and
a leasehold interest in approximately 406 hectares located at various locations around New Zealand being the sites of various refuse transfer stations, landfills and waste management related utilities.

Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests in 100% of the share capital of Barra Topco II Ltd, the consideration of which, and the value of the assets of which, exceeds $100m. Consideration was actually $490,000,000. The vendors were Existing Shareholders of Barra Topco II Limited New Zealand management and funds managed by Ironbridge Capital. The OIO states: “Barra Topco II Limited is the ultimate holding company of EnviroWaste Services Limited, New Zealand’s second largest waste management company. The investment will further extend the Applicant’s geographical presence in New Zealand and is in line with its corporate initiatives to invest in environmental and land-related projects”.

Matt Nippert at Stuff.co.nz reported details of this deal prior to the OIO application (16/1/13): “A company founded by one of Asia’s richest men, Li Ka-shing, is buying EnviroWaste, New Zealand’s second largest waste management company. The Overseas Investment Office will consider whether a Chinese firm can take over the New Zealand company. Australian private equity outfit Ironbridge Capital announced yesterday it had reached agreement to sell EnviroWaste to listed Hong Kong-based Cheung Kong Infrastructure (CKI).

“The deal would see CKI pay $490 million in cash and assume $11m in lease obligations. In a statement to the Hong Kong Stock Exchange, CKI said the agreed net asset valuation of the takeover target was $119m. ‘The acquisition reflects the company’s strategy of investing in infrastructure opportunities around the world, leveraging the company’s strong financial position’, it said. CKI was founded by Hong Kong mogul Li Ka-shing, whose worth is estimated at more than $30 billion. His son Victor Li Tzar-kuoi is chairman of CKI.

“If cleared, the EnviroWaste deal would add another large New Zealand asset to CKI’s 2008 purchase of the Wellington power lines business, which the company bought for $785m from Vector. EnviroWaste employs 400 people and has nearly half a million commercial and residential customers throughout New Zealand. If the OIO approves the deal, it will bring a healthy return to investors in Ironbridge’s fund. The private equity firm acquired EnviroWaste from Fulton Hogan in December 2006, and a subsequent series of acquisitions pushed Ironbridge’s total commitment to $365m.

“The company had been saddled with debt after Ironbridge’s purchase, with accounts to June 2012 posted to the Companies Office showing finance costs turned earnings before interest and tax of $32.2m into a loss of $19m. Bank borrowings of $194m carrying an interest rate of 8.34% were due to mature in the first half of 2013. Ironbridge principals were not made available for interview, but founding partner Julian Knights said in a written statement that the current EnviroWaste management team would be retained. An OIO spokesman said CKI had not yet made an application to take over EnviroWaste. The OIO expected to make a recommendation within 30 days of its submission, the spokesman said”.

See our April 2007 commentary for details of Ironbridge’s purchase of Envirowaste. Cheung Kong is part of the empire of Hong Kong based billionaire Li Ka-shing, who in 2006 attempted to buy a controlling interest in Lyttelton Port Company. In July 2006 it received OIO approval to buy the Vector Wellington Electricity Network, however in December 2008 was refused permission to buy NZ Steel. See “Hold The Front Page – Major TNC Takeover Vetoed” by Quentin Findlay in Watchdog 120, May 2009 for further background on the NZ Steel refusal.

Harvard Restructures Its Kaingaroa Forest Investment

Public Sector Pension Investment Board & Guardians of New Zealand Superannuation Fund & President and Fellows of Harvard College President of the Treasury Board of Canada (50%), President and Fellows of Harvard College, United States of America (47.9%) and Guardians of New Zealand Superannuation (2.1%) received approval for the acquisition of rights or interests in 100% of the shares of KT1 Co and KT2 Co which owns or controls:

a freehold interest in approximately 266.3 hectares of land at Pikowai Road, Matata, Bay of Plenty; and
a freehold interest in approximately 542.4 hectares of land at State Highway 5, Waiotapu, Rotorua District; and
a freehold interest in approximately 37.1 hectares of land at State Highway 38, Murupara, Kaingaroa Plains, Bay of Plenty; and
a freehold interest in approximately 866.2 hectares of land at State Highway 5 Te Haroto, Hawkes Bay; and
a freehold interest in approximately 25.6 hectares of land at Taharua Road, Kaingaroa Plains, Bay of Plenty; and
a leasehold interest in approximately 105.5 hectares of land at Dun Road, Kaingaroa Village, Rotorua District; and
a leasehold interest in approximately 143.4 hectares of land at 1102 Te Ngae Road, State Highway 30, Rotorua District.

Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests in 100% of the shares of KT1 Co and KT2 Co, the consideration of which exceeds $100m, and assumption of debt to KT1 Co and KT2 Co, the consideration of which exceeds $100m. The vendor was Phemus Corporation President and Fellows of Harvard College, United States of America (100%); consideration was confidential.

The OIO states: “The proposed transaction involves the sale of shares in KT1 Co and KT2 Co, together with the assumption of debt, to Public Sector Pension Investment Board, Guardians of New Zealand Superannuation Fund (GNZSF) and the President and Fellow of Harvard College together with a restructure of the ownership of KT1 Co and KT2 Co. KT1 Co and KT2 Co hold a 60% interest in Kaingaroa Timberlands Partnership (KTP), with the remaining 40% being held by GNZSF. The proposed transaction will increase GNZSF’s overall ownership interest in KTP and will provide it with greater governance and control over KTP”. See our comprehensive October 2003 commentary for details of Harvard’s original purchase of Kaingaroa.

Chinese Buy Otuwhero Wines

In March 2013 the Chinese showed a liking for our milk powder and forests. In April it’s wine. O:TU Investments Limited Min Jia, China, People’s Republic of (97%) and Xiumei Lin, China, People’s Republic of (3%) received approval for the acquisition of:

a freehold interest in approximately 256.9 hectares of land at Marlborough (Main Block); and
a freehold interest in approximately 79.6 hectares of land at Marlborough (Donaldson Block).

The vendor was Otuwhero Estate Wines Limited (in receivership); Otuwhero Estates Limited (in receivership); and Otuwhero Estates No 3 Limited (in receivership) New Zealand Public (84.2%) and Indonesian Public (15.8%), Tui Concepts Limited New Zealand (100%); consideration was confidential. The OIO states: “The Applicant intends to convert the Donaldson Block to a vineyard and further develop the existing vineyard on the Main Block. It is intended to produce wine under the “O:TU” label”.

Eli Greenblat (Sydney Morning Herald 6/6/13) reports on this deal and a growing Chinese taste for wine: “A group of Chinese investors have purchased Otuwhero Estate vineyards in New Zealand’s Marlborough region from receivership, securing a foothold in the booming sauvignon blanc wine sector and further tightening Chinese control on local agricultural assets. New Zealand’s Overseas Investment Office has given its stamp of approval for the purchase of more than 300 hectares of Awatere Valley land in Marlborough to a Chinese company. The sale price has not been disclosed.

“A company called O:TU Investments, controlled by Chinese nationals Min Jia and Xiumei Lin, has bought the land from Otuwhero Estates, Otuwhero Estate Wines, Otuwhero Estates No 3 and Tui Concepts. The Otuwhero Marlborough wine group lurched into receivership in 2010, owing $NZ29.93 million. Since its failure it had been managed by accounting and receivership firm Deloitte. Marlborough has exploded onto the world stage of wine in the last few years thanks to the massive demand by drinkers for the region’s sauvignon blanc. Marlborough sauvignon blanc currently dominates the top ten most popular wines sold in Australia, with local liquor shops heavily promoting the style of white wine in their stores and in advertising.

“The purchase of Otuwhero comes as Chinese investors show an insatiable appetite for vineyards across the globe, with one recent report from Europe suggesting Chinese companies were buying one winery a month in France, with investors from the Middle Kingdom also investing in Australian winemakers. In May 2013 a Chinese investment firm made a strategic investment in one of Australia’s oldest wineries, Bleasdale at Langhorne Creek, South Australia, buying a 10% stake in the family-owned business. Chinese firms have been eager buyers of Australian agricultural assets in the last few years, buying up wineries, sugarcane, cattle businesses and farmland. It has been rumoured for some time that China’s Bright Foods was keen to buy Treasury Wine Estates, one of the world’s biggest winemakers and owners of brands such as Penfolds, Wolf Blass and Rosemount”.

Russian Gets Retrospective Consent For Waiwera Water

Mikhail Khimich Russia (100%) and Budfin Nominees Limited New Zealand (100%) received retrospective approval for the acquisition of rights or interests in up to a further 40% of the shares of Waiwera Water New Zealand Limited which owns or controls a freehold interest in approximately ten hectares of land at 7 Upper Waiwera Road, Waiwera, Rodney District. The vendor was Traus Holdings Limited John Donald St Clair Brown, New Zealand (100%); consideration was confidential.

The OIO states: “Mr Khimich owns 60% of the shares of Waiwera Water New Zealand Limited (“Waiwera Water”) and is in the process of acquiring the remaining 40% from the vendor. Mr Khimich has sought and been granted retrospective consent to complete the acquisition of the additional shares on the basis that he intends to develop the relevant land into an organic winery. The winery will focus on producing fortified wine and spirits. Budfin Nominees Limited is a nominee company operated by law firm Buddle Findlay (who represent Mr Khimich)”. Khimich, a Russian billionaire, originally had plans to build a water bottling plant at the site, but ran into considerable local opposition (see our October 2010 commentary). He subsequently received Auckland Council approval to construct a small private organic winery. Khimich made his billions through oil and gas interests after the break up of the former Soviet Union.

Another Ownership Restructure Of Walter Peak Station

Morris Salomon Kahn & Shmuel Meitar Israel (100%) received approval for the acquisition of rights or interests in up to a further 10% of the shares of Walter Peak Station Limited (in addition to the Applicants’ existing shareholding) and the corresponding beneficial interest in Walter Peak Station Trust which owns or controls:

a freehold interest in 335.3 hectares of land at Walter Peak Station; and
a leasehold interest in 25,758 hectares of land at Walter Peak Station.

The vendor was Benjamin Yehoshua Kahn Israel (100%); consideration was $1.6 million. The OIO states: “The Applicants are the principal beneficial owners of Walter Peak Station, a high country farming operation in Queenstown comprising Crown leasehold and freehold land totalling 26,093 hectares. Benjamin Yehoshua Kahn (son of Morris Kahn) holds a minority interest in Walter Peak Station. The Applicants are acquiring Benjamin Kahn’s minority interest in the Walter Peak Station. The proposed investment is an internal restructure which will result in the Applicants increasing their already dominant interest in the farming operation”. Walter Peak Station was originally purchased by Americans Ian and Tonya Koblick and the Kahns in 1998 (see our October 1998 commentary). In January 2009 they sold (with retrospective OIO approval) a 27.5% interest to Meitar for $1 and further ownership restructuring occurred in July 2011 and December 2012.

Germans Grab Another Farm

NMP Farm Investment GmbH and Oceania Agrar Investitions GmbH Oceania Agrar GmbH & Co. KG and Aquila AgrarINVEST III GmbH & Co. KG, Germany (100%) received approval for the acquisition of a freehold interest in approximately 552.6 hectares of land at 901 Waimiha Road, Ongarue. The vendors were Paul Howard Sorensen, Gene Paul Sorensen and Bailey Ingham Trustees Limited as Trustees of the Sorensen Family Trust New Zealand (100%); consideration was $4,500,000.

The OIO states: “The Applicant plans to convert the farm from a mixed dairy heifer grazing, sheep and cattle farm to a farm focused on intensive sheep and beef breeding and finishing and to increase the stock holding capacity through development of the farm”. See our March and December 2010, March, April, May and August 2011 and July 2012 commentaries for details of other dairy farm purchases here by this German investment fund, primarily in Southland.

Swiss Increases The Size Of His Mataka Station

Bernard Jean Sabrier Switzerland (100%) received approval for the acquisition of a freehold interest in approximately:

20 hectares of land being Lot 10 DP 346421 Mataka Station, Purerua Peninsula, Bay of Islands; and
50 hectares of land being Lot 21 DP 323083 Mataka Station; and
53 hectares of land being Lot 35 DP 363154 Mataka Station; and
three hectares of land being Part Lot 6 DP 323083 Mataka Station.

The vendors were Bank of New Zealand (Lots 10 & 21) Australia (100%), Trustees of the Smith Family Trust (Lot 35) New Zealand (100%) and W & M Hunt (Part Lot 6) New Zealand (100%). Consideration was $1,350,000 (Lots 10 & 21), $750,000 (Lot 35) and $1 (Part Lot 6). The OIO states: “The Applicant intends to acquire the land to preserve and enhance the natural environment in the vicinity of the properties he already owns at Mataka Station”. See our December 2002, March 2003 and April 2011 commentaries for details of Sabrier’s previous land purchases here.

Other April Decisions

Matauri Bay Partnership Sylvain Laine and family, French Polynesia (50%) and Roger Lossing and family, French Polynesia (50%) received approval for the acquisition of a freehold interest in 296.2 hectares of land at 1205 Matauri Bay Road, Matauri, Northland. The vendors were Max Beazley & Sons Limited Arthur Walton Beazley, New Zealand (41.8%), Larry Rayner Beazley, New Zealand (41.4%) and Maxwell John Beazley, New Zealand (16.8%); consideration was $2,150,000. The OIO states: “The land is a sheep and beef farm. The Applicant will restock the farm and invest considerable sums in developing the farm and protecting areas of indigenous vegetation on the land”.

Matthew Robert Chapman Australia (100%) received approval for the acquisition of a freehold interest in approximately 232.6 hectares of land at 223-233 Constable Road, Muriwai, Auckland. The vendors were Parihoa Farms Limited Storey Family, New Zealand (98%), Anne Kerr-Taylor Storey, New Zealand (1%) and Alfred Mackay Storey, New Zealand (1%); consideration was $6,250,000. The OIO states: “The Applicant wishes to spend a significant amount of time in New Zealand and is purchasing the land as a farm and lifestyle residence”. This property attracted some controversy a few years back when it was revealed a large house to be built on the property would be visible from Te Henga Walkway. The Auckland Regional Council failed to halt its construction.

William P Foley II United States of America received approval for the acquisition of a freehold interest in approximately 0.4 hectares of land at Western Lake Road, Palliser Bay, RD3, Featherston. The vendor was Chateau Wellington Limited David Charles Morris, New Zealand (33.4%), Grant Desmond Vinten, New Zealand (33.3%) and Karyn Morris, New Zealand (33.3%); consideration was $1,850,000. The OIO states: “The land comprises a substantial residential house and landscaped grounds and is situated within the Wharekauhau Lodge and Country Estate (owned by the Applicant). The Vendor currently operates a boutique luxury accommodation business on the Land. The Applicant intends to use the land as a residence when he visits New Zealand and, when not in use, as an additional luxury accommodation option for Wharekauhau Lodge”. See our commentaries on previous decisions involving Foley in November 1995, June 1996, August 1996, January 1999, July 2010, February/August/December 2011 and May 2012.

And finally for April, Anthony Selmes Australia (100%) received approval for the acquisition of a freehold interest in approximately 282.1 hectares of land at Whananaki, Whangarei District. The vendor was Colin Edge and Gai Marie Edge New Zealand (100%); consideration was $1,300,000. Selmes intends to reside here and operate the property as a working farm.

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