Foreign investment in Aotearoa/New Zealand
Overseas Investment Office – June 2018 Decisions
Hong Kong Insurance Group Buys Up ASB/Colonial Mutual Life From Commonwealth Bank
AIA International Ltd (various overseas 77.8%; JPMorgan Chase & Co., USA 9%; Capital Group Companies Inc., USA 8.2%; BlackRock Inc., USA 5%) has consent to acquire 100% of the shares in ASB Group (Life) Ltd from Commonwealth Insurance Holdings Ltd (Commonwealth Bank of Australia, Australia 100%). The gross consideration payable for both the Investment and the separate acquisition of rights or interests in 100% of the shares in The Colonial Mutual Life Assurance Society Ltd is $A3.8 billion (subject to adjustments at completion).
The OIO states that AIA Group Ltd, AIA International’s parent company, is a large life insurance business that operates in the Asia-Pacific region. As part of exiting its New Zealand and Australian life insurance businesses, the Commonwealth Bank of Australia undertook a competitive sales process in which AIA International was the successful bidder. AIA International has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and has also demonstrated financial commitment to the investment.
AIA Group’s Website announces that, subject to regulatory approvals, its wholly owned subsidiary AIA International is acquiring the life insurance businesses in Australia (The Colonial Mutual Life Assurance Society Ltd) and New Zealand (Sovereign Assurance Company Ltd) of the Commonwealth Bank of Australia and will enter into “20-year strategic bancassurance* partnerships” in both markets. *Bancassurance means selling insurance products through banks. Ed.
AIA Group and its subsidiaries are the largest independent publicly listed (Hong-Kong) pan-Asian life insurance group, with wholly-owned branches and subsidiaries in Hong Kong, Thailand, Singapore, Malaysia, China, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau, Brunei, Cambodia, a 97% subsidiary in Sri Lanka, a 49% joint venture in India and a representative office in Myanmar. The business that is now AIA began in Shanghai almost a century ago in 1919 and now has total assets of $US216 billion (as of 30/11/17).
NZ Herald (21/9/17) reported that the deal is being done at a price-to-earnings multiple of 16.9 times, which CBA said will mean a $A300 million loss with a $A1.4 billion write down in goodwill. But it will improve the bank’s capital ratio, releasing about $A3 billion of common equity tier 1 capital. The reason is that Australia’s banking regulator has imposed tougher prudential requirements on lenders.
Under the 20-year partnership mentioned, the Commonwealth Bank and its Kiwi subsidiary, ASB Bank, will continue to sell its life insurance products. Commonwealth Bank is Australia’s largest lender; AIA will now be the biggest life insurer in both Australia and New Zealand.
In March 2017 AIA International launched a specialist cancer treatment insurance product in the New Zealand market, despite acknowledging that we have one of the best public health systems in the world (Scoop 28/3/17).
US Flooring Manufacturer Buys Godfrey Hirst
Mohawk Industries Inc USA 99%; Luxembourg Public 1%) has consent from the Minister for Land Information and the Associate Minister of Finance to acquire 100% of the shares of Godfrey Hirst Australia Pty Ltd which has a freehold interest in approximately 6.7385 hectares at 3 Spey Street, Oamaru, from GHWW Pty Ltd (Australia 100%; shareholders of Rata International Pty Ltd, Australia 100%) for $208.4 million (being the New Zealand portion of GHWW’s assets).
The OIO consent states that Mohawk Industries is a worldwide flooring company incorporated in the US. The consent enables Mohawk Industries Inc to acquire 100% of the shares in Godfrey Hirst Australia Pty Ltd through its wholly-owned Australian subsidiary, Premium Floors Australia Pty Limited. Godfrey Hirst owns sensitive land in Oamaru upon which a wool spinning facility is located. Godfrey Hirst is an Australian company which has New Zealand facilities in Auckland, Dannevirke, Lower Hutt and Oamaru.
The acquisition is part of a large international transaction relating to assets in Australia, New Zealand and North America. In addition to maintaining business as usual, Mohawk Industries intends to source wool yarn from these facilities for export to its overseas production facilities, and increase exports of wool carpets to the US market. This increase in exports will increase wool yarn and wool carpet production at the New Zealand facilities. The benefits likely to result from this are increases in production, including additional jobs being created, increased processing of wool in New Zealand and increased export receipts.
Godfrey Hirst Group has spinning mills, dye houses, design studios and manufacturing plants in New Zealand, Australia, USA and Singapore, supplying domestic and commercial products to carpet and flooring stores all over NZ. Its acquisition by Mohawk ends five decades under the ownership of the McKendrick family in Australia. Scoop (Scoop, 4/12/17), states that Godfrey Hirst’s New Zealand profit in 2017, through local holding company Avon Pacific, was the largest since 2011, paying a $13 million dividend. Revenue had edged up 1.8% while expenses shrank 1.9% on a smaller wage bill and lower redundancy costs, as well as foreign exchange improvements. Godfrey Hirst bought Feltex out of receivership a decade ago, adding to its Clifton Wool Scour and Canterbury Spinners businesses.
Mohawk, based in Georgia USA (NYX), already has manufacturing sites in Australia and New Zealand through its Premium Floors and Floorscape subsidiaries, which distribute vinyl tile, laminate and wood products, and acquiring Godrey Hirst will strengthen its portfolio. The overall deal is said to be worth $A500 million.
NBR notes that Godfrey Hirst has been an ardent critic of NZ’s Commerce Commission approving the creation of a wool scouring monopoly on the trade-off that there was a broader public benefit in fending off competition from cheaper foreign rivals. Its most recent and unsuccessful appeal questioned the benefit to the wider public of foreign shareholders in such a monopoly because of the dividend outflows overseas (NBR, 21/11/17).
New Forests Equity Fund Buys Wenita And More Forest Land
ANZFF2 NZ Ltd, Otago Estates Ltd and The Trust Company Ltd as trustee of ANZF1F2 NZ has consent from the Minister for Land Information and the Associate Minister of Finance to acquire:
- a freehold interest in approximately 22,553 hectares of sensitive land situated in Otago;
- 38% of the shares in Wenita Forest Products Ltd, which owns approximately 5,830 hectares of sensitive land and forestry rights over the approximately 22,553 hectares situated in Otago; and
- an interest in a shareholder loan to Wenita and associated securities.
The Trust Company (Australia) Ltd is trustee for the New Forests Australia New Zealand Forest Operating Fund 2 (100%) which is wholly owned by certain overseas investment funds. The New Forests Australia New Zealand Forest Operating Fund 2 is managed by New Forests Asset Management Pty Ltd. The vendor is Otago Land Company (US Public 93%; various overseas 6.9%) and Fund 7 Foreign LLC (US Public 93%; various overseas 6.9%). The price is withheld under s.9(2((b)(ii) of the Official Information Act.
The OIO consent states that ANZFF2 NZ Ltd is a subsidiary of the New Forests Australia Forest Fund 2, an investment fund with the mandate to invest exclusively in forestry assets in Australia and New Zealand. The investment fund is managed by New Forests Asset Management Pty Limited ( New Forests). New Forests and its related companies manage existing assets across Australia, New Zealand, Asia and the USA with over $US3.5 billion of assets under management.
The acquisition is stated to have a substantial and identifiable benefit to New Zealand. The applicant intends to prune more of the trees on the land, improving the quality of wood produced from the land and increasing the likelihood that the wood will be supplied to domestic processors. It is also likely to advance the Government’s strategy to plant one billion trees between 2018 and 2027. The applicant has committed to additional protection for significant areas of indigenous vegetation, wetlands and the habitats of native freshwater fish across the land, being an opportunity to secure enduring protections for areas that are of significant environmental value.
The applicant will also undertake a significant pest control programme, which is likely to reduce predation of native species on the land and on adjoining conservation land, and prevent the incursion of wilding conifers on adjoining conservation land. The applicant has also agreed to create additional access routes and public access easements. These routes will be available via Wenita’s existing permit system at first but will eventually be accessible to the public without a permit.
This is more of Sydney-based New Forests investors targeting profits from NZ softwoods in the China market – “the investment that grows” that we described in February, May, September and October 2016, when they obtained consent to buy up forestry land in Wairarapa and Marlborough. Clearly, they know how to pitch an application to our Minister’s new policies.
US-owned Wenita Forest Products is the largest producer of timber in Otago, whose “operations centre on sustainable rotation forestry systems, and we set high standards for our care of the environment, the safety of our workers and the quality of our trees and timber”. As at 16/8/18 its Website stated it was a private NZ company owned by Sinotrans and Fund 7 Foreign LLC.
Aussie-Owned Winemaker Converts Grazing To More Grapes
Craggy Range Vineyards Ltd (Peabody family, Australia 100%) has consent from the Minister for Land Information and the Associate Minister of Finance to acquire approximately 132.03 hectares at 77 Te Muna Rd, Martinborough, Wairarapa, from John Quentin Hamilton Donald, Patricia Mary Donald and Raymond Prendeville Matthews as trustees for the Kowhai Flat Trust (NZ 100%).
The OIO consent states that Craggy Range is an established producer of New Zealand wine, with vineyards in Martinborough, Hawke’s Bay, and Marlborough. They intend to use the land to establish a new vineyard, with approximately 93 hectares to be planted in new vines and a water storage dam also being built on the property. Because the land would otherwise be used as bare grazing land, the investment is likely to result in much of the land being converted to a higher, more productive use.
The benefits that are likely to result include creation of a significant number of new permanent and seasonal jobs, an increase in the processing in New Zealand of grapes into wine, and an increase in export receipts to the value of several million dollars. These benefits relate to factors of high relative importance under the current Ministerial Directive letter. The investment will also increase the productivity of the land and introduce into New Zealand new capital for development purposes (including related to planting of the vineyard, purchasing new equipment, and constructing a dam and buildings on the land).
Craggy Range Vineyards has previously undertaken investments of benefit to New Zealand, including having previously established new vineyards and wineries, invested significant additional capital for development purposes, created a substantial number of jobs, and delivered a growing annual export receipt revenue. The proposed investment will effectively enable the expansion of its existing 120-hectare vineyard at 497 Te Muna Road (approximately one km away).
Craggy Range describes itself as a Hawkes Bay family-owned winery, with vineyards also in Martinborough and Marlborough. Te Muna Rd property, farmed by the Donald family for four generations will double the production at Craggy Range’s neighbouring Martinborough vineyard. Craggy Range is the winery that, in 2017, built a zig-zag walking path scarring the eastern side of Te Mata Peak, without consulting Māori on land believed to be the figure of an ancestral chief. After a six-month stoush, Craggy Range “backtracked” (Hurihanganui, RNZ, 2/6/18; Stuff, 23/12/17 ). For other OIO consents involving Craggy Range, see December 1998, October 2000, June 2004, October 2005, August, September and October 2006, October 2009, June 2011, September 2012, September 2013, July 2016 and April and September 2017.
Pengxin Buildings Change Hands
Ze Xin Investment Pte Ltd China PR 100%) has consent to acquire 100% of the shares of Pengxin Holdings (HK) Co Ltd , the value of its assets and its 25% or more subsidiaries being greater than $100 million, from Zhaobai Jiang China PR 100%) for $62,379,000. The OIO states that Ze Xin’s parent company Shanghai Hengda (Group) Co Ltd has management experience in a number of residential and commercial property developments across China.
The sole assets of Pengxin Holdings (HK) Co Ltd are two buildings located in central Auckland. Ze Hin has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character. Ze Hin has also demonstrated financial commitment to the investment. The OIO consent doesn’t name the two buildings or give addresses. See March 2015 OIO Decisions for Pengxin Holding’s acquisition of Hardinge/Victoria Street Building, Spark City, 167-169 Victoria Street West, Auckland (“Building D”).
On 23/3/15 the NZ Herald stated that Shanghai Pengxin (also Chinese billionaire Jiang Zhaobai) held Gulf Harbour property and Queenstown’s Hilton Hotel. Search CAFCA’s Website for Zhaobai Jiang and/or Pengxin for its acquisition history of the former Crafar and Synlait dairy farms and others, and the OIO’s decline of consent for it to acquire Lindisfarne. The current 29 farm group, under the unfortunately appropriate name Milk New Zealand, exports milk to 23 Chinese provinces selling through supermarkets, TV shopping channels and Websites including Alibaba. In June 2017 it adopted the name Theland Farm Group .
Ze Xin Investments is a business and management consultancy registered as a private limited company on 9 October 2017 at 137 Cecil St in the centre of Singapore. Hengda (Group) Co, founded in 1980, is a “diversified enterprise group combining real estate, specialised markets, external investment, greenery and gardening” with the value “win everlasting trust from clients”.
Shanghai Hengda Group is controlled by the Shanghai-based Zhou family who, as individuals, bought a 60% stake in 139 Cecil Street in September 2016 at a valuation of $US 91.7 million, adding it to the neighbouring office building they bought the previous year. It then went on the market at a 40% mark-up (Mingtiandi, 25/4/17, ).
Rocket Lab Buys Land In Mahia And Chathams
Rocket Lab Ltd (Peter Joseph Beck, NZ 21.5%; Khosla Ventures V, LP, USA 18.2%; Khosla Ventures Seed B, LP, USA 17.5%; Bessemer Venture Partners VIII Institutional LP., USA 14.2%; USA other 13.7%; Bessemer Venture Partners VIII LP, USA 11.8%; NZ other 3.1%) has consent to acquire a leasehold interest in 25.1800 hectares at Tawapata Road, Mahia East Coast Road and Portland Island, Mahia, Wairoa District; and a leasehold interest in 0.7835 hectares at Waitangi Tuku Road, Chatham Islands, from Tawapata South Inc (NZ 100%) and two New Zealand Individuals (NZ 100%). Rent is payable for each leasehold interest and is subject to review from time to time.
The OIO states that Rocket Lab is an aerospace company that designs, manufactures, and launches orbital launch vehicles which carry payloads into orbits from New Zealand. Having been engaged in research, development, and commercial activities in New Zealand for some time, Rocket Lab is currently approaching the initial phase of commercial launches. This consent enables it to acquire two long-term leasehold interests in sensitive land.
One land parcel is on the Mahia Peninsula, where Rocket Lab operates its launch facility and associated infrastructure. The other land parcel is on the Chatham Islands, which it uses for a tracking station that communicates with launch vehicles and satellites. This is intended to allow Rocket Lab to continue its launch vehicle development programme, and to progress from testing to commercial phase of operations. Its business activities have generated and, as a result of this investment, are likely to result in benefits to New Zealand.
The business employs a large proportion of highly-skilled and well-qualified engineers, technical staff, and business administrators. It has been expanding rapidly and increasing the number of individuals that it employs. Being a high-technology area, Rocket Lab’s activities in the launch service industry is associated with introducing new technology and business skills into New Zealand and increasing demand in certain materials manufacturers and suppliers.
This is likely to continue to enhance New Zealand’s strategic and security interests, as New Zealand continues to develop relationships with relevant nations that participate in launch services and space-oriented industries. This investment is likely to result in consequential benefits to New Zealand by attracting highly-skilled and educated individuals from internationally respected companies and jurisdictions and securing longer-term potential for increased demand for highly-skilled roles in the aeronautical engineering field. It is also likely to have a high degree of New Zealand participation and oversight.
On 25 May, 2018, Peter Beck’s Rocket Lab, now 75% US owned, launched the first orbital-class rocket launched from a private launch site in the world, making New Zealand the 11th country with potential to launch cargo (satellites, etc.) into space. Videos here.
NZ Lifestyles
Czech NZ Resident Buys Mt White Station, Canterbury
Southern Ranges Ltd (Lukas Travnicek, Czech Republic 100%) has consent to acquire 678.3636 hectares of sensitive land at 2514 Mt White Road, Bealey, Canterbury; and a Crown pastoral lease in 39,336.8818 hectares of land at 2514 Mt White Road, Bealey, Canterbury, from Mt White Station Ltd (various New Zealand citizens 100%). Price withheld under s.9(2)(a) and s.9(2)(b)(ii) of the Official Information Act.
The OIO states that Lukas Travnicek, the sole legal and beneficial owner of Southern Ranges, is a New Zealand permanent resident visa holder. Lukas Travnicek and his family have previously resided in New Zealand. However, at the time of submitting the application for consent to purchase sensitive land, Mr Travnicek and his family were in his country of birth so that his daughters could reconnect with family, culture and the language, therefore making him an overseas person. Mr Travnicek has satisfied the OIO, through providing definite plans with supporting evidence that he intends to return to New Zealand and reside in New Zealand indefinitely. Overseas persons intending to reside in New Zealand indefinitely are not required to show that their investment in sensitive land is likely to benefit New Zealand. This supports migrants in the process of moving to New Zealand to make New Zealand their home.
Stuff reports that Land Information NZ (LINZ) Deputy Chief Executive of Crown Property, Jerome Sheppard, as saying that current public access to Mt White Station and protection of its conservation values will continue. But there is uncertainty around the fate of Riversdale Flats, almost 1,000 ha of land which was set aside in 1901 for inclusion in a national park but not incorporated into Arthur’s Park National Park when it was created in 1929, instead being grazed and leased as part of the station. The issue was being discussed by LINZ, Department of Conservation and Travnicek’s representatives. Travnicek says the farm will continue to be run by its current long-standing manager. Travnicek’s wife and children are New Zealand citizens. (Dominic Harris, Stuff, 31/7/18).
Campaign Against Foreign Control of Aotearoa,
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