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Telecom, Optus and WorldCom building new communications cable to U.S.A.
A new fibre optic communications cable network is being constructed across the Pacific to the U.S.A. It is called the Southern Cross Cables Network Project, and Telecom Corporation of New Zealand Ltd, Optus Communications Pty Ltd of Australia, and WorldCom Inc of the U.S.A., will initially take 50%, 40% and 10% shareholdings respectively in the controlling company, Southern Cross Cables Holdings Ltd. However, each has approval to acquire up to 100% of the company. When originally released, the cost was suppressed, but was released on appeal in February 1999: “US$1 to 1.1 billion (estimated cost of the project)“. As will be seen below, this was already public knowledge at the time of the original release. Optus is the second largest telecommunications carrier in Australia and WorldCom is the fourth largest long distance telecommunications carrier in the U.S.A. The Southern Cross submarine cable network is being constructed because existing cables have reached capacity. The last one completed, PacRimWest, which entered service in March 1995, was fully sold by June 1996, according to Southern Cross Cables (http://www.southerncrosscables.com/project.htm). They attribute the demand to “the increasingly competitive international telecommunications scene and the remarkable growth of the Internet”. According to one commentary, “the new network would also end Telstra’s near-monopoly on overseas Net access into and out of Australia and dramatically increase trans-Pacific capacity and Internet access speeds” (http://www.ausmall.com.au/acnews20.htm, 7/10/97). The new cable network “will be using high capacity fibre optic cable linking Australasia with North America with landing points in California, Hawaii, Sydney and Auckland New Zealand… Phase one of the network, the Sydney-Auckland, Auckland-Hawaii and Hawaii-California segments will be ready for service in September 1999. Phase Two of the network, the Sydney-Hawaii (including a spur to Fiji) and a second Ha-waii-California segment will be ready for service in September 2000.” (http://www.southerncrosscables.com/content.htm) The cable will have a 40 gigabit per second capacity and will be designed as a “self-healing” ring so that if one part is damaged, traffic automatically is re-routed the other way round the ring. The ring will total 30,000 km in length. Southern Cross Cables has been set up to be the “developer, owner and marketer of the network” (http://www.southerncrosscables.com/project.htm). Although the OIC has suppressed the value of the companies’ shareholdings in the company, the project “has an estimated capital cost of $US1.1 billion”. In its financial statements for the quarter ended 30/6/98, Telecom says that in March 1998 it “signed a capacity use agreement committing the Company to purchase total capacity on Southern Cross of approximately US$140 million. The first payment of US$70 million is due on the first ready for service date (‘RFS’) in December 1999. The second payment of US$57 million is due in September 2000 with the balance payable over the following two years. No payments will be due in the event that the project is terminated. The Board of Directors has granted conditional approval to a 50% equity investment in Southern Cross Cables Limited. The equity investment of US$75 million is due on the earlier of RFS or early termination of the project.” (http://www.telecom.co.nz/invest/detail/finance/1998-08-18/1998-statement-q1-notes.html). According to a Telecom press statement, the three shareholders “have appointed Deutsche Bank AG, Barclays Capital and ABN AMRO as lead arrangers and underwriters to arrange a US$900 million project finance facility. Funding is currently scheduled to occur no later than third quarter 1998. The facility will be provided on a limited recourse basis and therefore will not be accounted for on the balance sheet of the Sponsors.” (http://www.telecom.co.nz/media/file/tech/bodies/894947170.html) The OIC calculates the ownership of Southern Cross Cables as follows:
This appears to assume that the ownership of the three companies is as follows:
In fact, Telecom’s 1998 Annual Report (p.20) gives its New Zealand shareholding as only 22%. The addresses of its beneficial (i.e. looking beyond nominee or “front company”) shareholdings at March 1998 were as follows:
Included in the 45% from North America was 24.94% belonging to Bell Atlantic (U.S.A.) and The Capital Group Companies, Inc (U.S.A.) 6.45%, both substantial security holders in the company (p.86). Bell Atlantic has announced its intention to sell its shares, and this will take effect from September 1999. So in fact the ownership of Southern Cross Cables will be
Vodafone of the U.K. buys BellSouth New Zealand for $750 million
Vodafone Group Plc of the U.K. has approval to acquire all the property of BellSouth New Zealand Partnership and take over BellSouth New Zealand Ltd for $750,000,000. BellSouth Partnership and BellSouth New Zealand Ltd are both 65% owned by BellSouth Corporation of the U.S., and 35% by Singapore Technologies Pte Ltd of Singapore. Vodafone is the largest cell phone company in the U.K., and was one of several bidding for BellSouth New Zealand after its U.S. parent decided to leave Australasia. BellSouth New Zealand has not made a profit since it began operating five years ago, though it expects a small profit this year. It has over 120,000 customers, or about 20% of the cellphone market in Aotearoa, compared with Telecom’s 492,500. Vodafone Australia is the third-biggest cellphone operator in Australia (Press, 27/8/98, “Vodafone cellular phone firm to buy BellSouth NZ”, p.26). Vodafone’s network is digital (using the GSM system), which allows services – such as paging, messaging, and electronic mail – not provided by Telecom’s analog service. It also has the advantage that its cellphones can be used in both Aotearoa and Australia. Telecom is currently considering constructing a new digital mobile phone network in order to compete (Press, 24/11/98, “Telecom ponders digital network”, p.30). Vodafone is considering a public float in the next 18 months (Press, 24/11/98, “Vodafone aims to list”, p.30).
Nobilo and Selak into National Liquor Distributors of Australia and Canada
National Liquor Distributors Ltd has approval to acquire Nobilo Vintners Ltd for an initially suppressed amount, released on appeal in February 1999 as $10,800,000. At the same time (and a condition of the first acquisition), Nobilo has approval to acquire Selaks Marlborough Ltd, putting both wine producers under the same ownership. National Liquor is 33.33% owned by BRL Hardy Ltd of Australia and 14.29% by Gardiner Capital Ltd of Canada. Its remaining shares are owned 33.33% by Brian Vieceli, 17% by the Nobilo family, and 2.04% by Geoff Cumming, all of Aotearoa. However a share float is in progress. It appears that the company will be known in future as Nobilo Wines rather than National Liquor Distributors. Nobilo Vintners was owned before the takeover 51% by the Nobilo family, 42.88% by Gardiner Capital, and 6.13% by Cumming. Selaks was owned by the I.P. & M.K. Selak Trust Partnership of Aotearoa. The sale involves 75 hectares of land:
According to the OIC, Nobilo before the takeover was the fourth largest wine company in Aotearoa by volume, with 50% of its sales being exported. In 1995 it accounted for 10% of the country’s wine exports by volume. National Liquor is the third largest liquor distributor in Aotearoa, behind New Zealand Wines and Spirits (a Lion Nathan subsidiary) and Allied Liquor (a DB Group subsidiary). Brian Vieceli is an executive director and distribution specialist with Nobilo. He has a long history with the liquor industry. Twelve years ago he was managing director of Quill Humphreys until it was merged into the DB Group (then Magnum). He ran Magnum’s marketing division from Auckland for two years, then bought the Halswell Tavern in Christchurch. He and a former Quill Humphreys associate, Tom Sexton, formed National Liquor, which marketed BRL Hardy’s Renmano wines. BRL Hardy is Australia’s second biggest wine company (Press, 2/12/98, “Nobilo Wines offers shares, plans market listing and expansion”, p.31). Gardiner Capital is the 90% owner of Emerald Capital Ltd, which owns both venture capitalist, Direct Capital Partners Ltd, and 82% of entertainment and leisure company, New Zealand Experience (see our commentary on the May and July 1998 OIC decisions respectively). Geoff Cumming is the other 10% shareholder in Emerald. Gardiner and Cumming were also shareholders in Fullers Group (including the Waiheke Island ferries) until its sale to Stagecoach: see below. Following this transaction, Nobilo announced a $7 million public share float to fund expansion. The Nobilo family will take up 1.25 million of the 8.75 million new shares. The shareholding will then be the Nobilo family 31.6%, BRL Hardy 23.6%, Emerald Capital 18.5%, the Vieceli family 9.2%, and the public 17.1%. The board of the company will include managing director Nick Nobilo, executive director Brian Vieceli, and non-executive directors Geoff Cumming, Stephen Nobilo, and David Woods of BRL Hardy. Its chair will be former chief executive of Heinz Wattie New Zealand, David Irving. All receive “a generous wine allowance” (Press, ibid.) See also the August 1998 decision relating to BRL Hardy and National Liquor.
Stagecoach buys Fullers Group, including ferries to Waiheke Island
New Zealand Bus Finance Company Ltd, which is a subsidiary of Stagecoach Holdings Ltd, has approval to acquire Fullers Group Ltd for $25,995,000. Fullers was previously owned 27.9% by Devonport Steam Ferry Company Ltd of Aotearoa, 12.08% by Gardiner Capital Ltd of Canada, 1.73% by Geoff Cumming of Aotearoa (see the item on Nobilo above) and 58.3% by the “New Zealand public”. Fullers appear to be doing well financially: “It is stated to-date the ferry service conducted by [Fullers] has been largely responsible for the growth of economic activity on Waiheke Island. At present Fullers Group Ferries are a high profile, attractive part of the Auckland maritime transport scene. The company has grown steadily with prudential management and without great access to capital.” Stagecoach intends to introduce more capital and integrate services with “the bus company” – presumably the Yellow Bus Company which they bought in August 1998, and Cityline, which they owned prior to that. For detail on Stagecoach see our commentary on the August decisions, where the privatisation of the Yellow Bus Company was approved by the OIC. Stagecoach is notorious in the U.K. In this decision, the OIC says that that Stagecoach “provides urban bus and rail transport services in the UK, Sweden, Finland, Portugal, Kenya, Australia and New Zealand”. In fact its activities in Kenya have all but ceased, its monopoly stripped from it because of continual fare increases and other failings. On 25/10/98, Africa Economic Digest (“Stagecoach pulls out”), reported: “UK-based Stagecoach Holdings, which operates the Nairobi and Mombasa city commuter bus services and the long distance Stagecoach Express service, has pulled out of the country, after selling its 95% share holding in the Kenya Bus Services, the company has announced…”
The East African (16/10/98, “Heavy losses force Stagecoach Holdings to leave Kenya”, by James Macharia,) explained: Stagecoach Holdings sold its stake in Nairobi’s commuter bus service last week after making losses of Ksh50 million (US$833,000) a month since April last year. The company sold its 95% shareholding to a group of Kenyan businessmen, headed by insurance broker Mr Karanja Kabage, at a “concessionary” price. The remaining five per cent is held by the Nairobi City Council. Company sources said they had also incurred a Ksh200 million ($3.3 million) repair bill for their fleet of 320 buses, 60% of which was related to damage to the vehicles inflicted by potholed city roads. Stagecoach’s exit from Kenya after eight years marks the end of the company’s investments in developing countries. It sold its 66% stake in a Malawi transport company in September last year. Indications that the company was planning to leave came in July, when it declared 160 drivers and conductors redundant and appointed two managing directors within six months. … The new team hopes to reclaim ground lost to competitors and announced a 30% fare reduction on several routes shortly after it took over. The Kenya Bus Services-Stagecoach partnership had lost out to matatus. Early this year, the company increased fares by 150% to make up for the cost of repairs incurred at the height of the El Nino rains, which rendered some roads in the city impassable. Apart from the stiff competition from matatus, recent moves in parliament to revoke the company’s 60 year monopoly had put it in an even more precarious position. In July, an Assistant Minister for Transport and Communications, Mr Chris Obure, confirmed its monopoly would be revoked to liberalise access to all city routes to other private transporters. “We hope to improve not only the profitability of the company, but also its image,” said Mr Thuo. The bus firm had been criticised for a number of failings, including high fares.
The Nation (Nairobi) confirmed this saying (3/11/98, “Team seeks KBS turn-around”): “Before the takeover of the Kenyan operation, Stagecoach had frequently raised fares to high levels, in many cases surpassing the rates charged by matatus (commuter taxis).The frequent fare raises provoked a public outcry and caused the company business losses, as many commuters opted to use matatus, leading to the withdrawal of the giant bus company from loss-making routes.”
Colonial takes over Prudential Assurance for $406 million In a decision almost completely suppressed until released on appeal in February 1999, Colonial Ltd of Australia has approval to acquire The Prudential Assurance Company New Zealand Ltd and Prudential Portfolio Managers New Zealand Ltd for $406,126,711 from their parent, the Prudential Corporation Plc of the U.K.
Prudential is engaged both in insurance and in deer farming, including a 68 hectare farm, at RD 1 South Kaipara Head, Northland. It also has properties at William Pickering Drive, Auckland; 271 Neilson Street, Onehunga, Auckland; 382-384 Manukau Road, Epsom, Auckland; and 11-17 Birmingham Drive, Christchurch. The OIC states that the takeover
Prudential gives Colonial 300,000 customers in Aotearoa. The purchase was part of an acquisition in both Australia and Aotearoa, for which Colonial paid A$1.35 billion (NZ$1.6 billion). It includes the former assets of NZI. Despite its modest protestations, Colonial is on the expansion trail: in July it bought the Australian operation of Legal and General for A$892 million. It is also establishing itself in China, becoming the first Australian insurer to win a foreign licence for selling life insurance, and through its subsidiary CMG Asia, which bought the Hong Kong pensions and life insurance business of Guardian Assurance (U.K.) for $24 million in September, making it fifth in Hong Kong’s pensions administration sector. Its next target is the U.K., where it already has $13.5 billion in assets and works with Skipton building society and the Unity Bank. The two Australian acquisitions make Colonial Australia’s second largest life insurer and fourth largest funds manager, the same as for Aotearoa. The company is now considering using its expanded presence in Aotearoa to introduce banking services including lending and mortgages. It already owns Colonial State Bank in Australia. (Press, 18/8/98, “Prudential NZ sold”, p.27; 26/9/98, “Colonial in Hong Kong”, p.29; 8/10/98, “Colonial eyeing British targets for expansion”, p.29; 23/11/98, “Colonial looks to banking”, p.27; 4/3/99, “Colonial result up 35%”, p.36.)
Housing Corporation sells further mortgages to Westpac
Westpac Banking Corporation Ltd or its subsidiary, The Home Mortgage Company Ltd, have approval to acquire further mortgages from the Housing Corporation of New Zealand for a suppressed amount. According to the OIC, the Home Mortgage Company bought mortgages from the Housing Corporation in 1996.
Chubb buys assets of Alarm Control and Answer Services
Chubb New Zealand Ltd, a subsidiary of Williams Plc of the U.K., has approval to acquire “part of the business assets and undertakings” of two local companies: Alarm Control (NZ) Ltd and Answer Services (NZ) Ltd of Aotearoa for a suppressed amount. In both cases, “Chubb wishes to acquire the client base” of the company “in order to spread the fixed cost for its monitoring station and to give Chubb New Zealand Ltd and its subsidiaries an opportunity to provide other security and protective services to its client base.” Alarm Control monitors security alarms. It has a control room in the ASB Bank Building in Auckland, from which it monitors alarms all over Aotearoa. The company’s Web site (http://www.nz-security.co.nz/monitoring/alarmcontrol/news/innovmag.htm) quotes a gushing piece from Innovative Magazine, May 1996. “Through glass the control centre to a casual observer looks something akin to space control at NASA. Buried deep in the heart of the ASB Bank building in Albert Street is not only a highly sophisticated intelligent monitoring station protecting one of the country’s most secure and intelligent buildings, but the nerve centre of the nationwide alarm monitoring company Alarm Control (NZ) Ltd, which looks after security surveillance needs of thousands of buildings throughout New Zealand… The national monitoring centre in the ASB Bank building is electronically secured, bullet proof, bomb proof, intruder proof and totally self sufficient operating environment. The security detail is testimony to the company’s commitment to provide complete and uninterrupted monitoring protection at all times and under any circumstances. Alarm Control’s chief executive Barry Ulyatt leads an organisation that proudly claims ownership of some of the most advanced monitoring technology available in the world. It is driven by software – written by Alarm Control – which Barry Ulyatt says is without parallel and takes Alarm Control to the forefront of alarm monitoring… Back at the ASB Bank building, the national monitoring centre has fail-safe systems that include its own power source, air conditioning, radio and telephone lines, all secured separate to the ASB Bank building’s own essential services.” It is not clear from the OIC decision just how much of this is being sold. However the company’s New Zealand Company Office record shows that on 6/10/98 it changed its name to Alcon Holdings Ltd and is in liquidation. Its shareholders are Barry and Linda Ulyatt, and Ian Papworth, all of Pakuranga, Auckland. Barry Ulyatt, Administration Manager, and Ian Papworth, Chartered Accountant, are directors of the company, along with John Delugar, solicitor, Jeffrey Meltzer, Chartered Accountant, and Adrian Osborne. What is being sold out though is a distinguishing features which it advertises as one of “ten reasons to choose Alarm Control”: that it is “Independent: Alarm Control is solely a specialist alarm monitoring company” (http://www.nz-security.co.nz/monitoring/alarmcontrol/TENREASO.HTM). Answer Services has been in business since 1964. It provides answer phone services through a number of call centres to “clients throughout New Zealand, processing in excess of 5 million inbound calls a year”. It has a “paging network [which] covers the major metropolitan areas transmitting in excess of three million messages a year”, and an alarm monitoring operation which “logs in excess of six million signals a year” (http://www.answer.co.nz/). Again, it is not clear from the OIC decision how much of its operation is being sold. Its directors are Colin Devine of Waiheke Island, Terence Nowland of Wellington, and Peter O’Connor, a Company Accountant, of Auckland. It is owned by Answer Services (Holdings) Ltd which has the same directors plus Jillian Devine of the same address as Colin Devine. The Devines and Nowland jointly own 281,250 A and B shares in the company, and Nowland additionally owns 468,750 A shares in his own right (the significance of the two types of share is not explained in the Companies Office record).
Quexco of the U.S.A. gets approval to buy GNB from Pacific Dunlop
Quexco Inc of the U.S.A. has approval to buy the GNB Technologies Group from Pacific Dunlop Holdings (NZ) Ltd of Australia. This includes “substantially all of the … industrial battery, automotive battery and recycling operations” of Pacific Dunlop. The principle asset in Aotearoa is a recycling plant on four hectares of leasehold land at 31-43 Seaview Road, Lower Hutt. This is the former Ford Motor Company workshop which is registered with the Historic Places Trust as a place with historical or cultural heritage significance or value. The price has been suppressed. However, according to the Australian Financial Review the sale almost fell through because of the international financial crisis which has made banks more careful about lending. Pacific Dunlop had to cut the original price of A$900 million for the international deal by 13% (A$117 million) and finance 20% of the amount itself (Australian Financial Review, “Doubts on Quexco fund raising to buy GNB”, September 1998; “PacDun says GNB sale may go flat”, October 1998; “PacDun’s battery hopes go flat”, October 1998; “PacDun cuts GNB price tag”, October 1998, http://www.afr.com.au). Quexco is based in Dallas, Texas. According to GNB itself (6/7/98, http://www.gnb.com/ourstory/quexco.htm) the original sale price was US$550 million and required regulatory approvals in the USA, Australia and New Zealand. “Quexco Incorporated is a closely-held, private holding company for a group of businesses whose main focus is the manufacture and distribution of recycled metals in the United States and Europe. Quexco Incorporated and its affiliates currently have sales in excess of $1 billion, and 2,300 employees.” It is “the largest industrial battery manufacturer in the USA, and the country’s third largest producer of automotive batteries”. Following the takeover, Quexco will have sales of over US$2 billion and more than 7,000 employees. “GNB Technologies was purchased by Pacific Dunlop in 1987 and is headquartered in Atlanta. With sales of US$730 million (A$1.2 billion) in its last fiscal year, it is one of the world’s largest manufacturers of automotive and industrial batteries under the brand names Champion, Marshall Absolyte, MarathonT and Sprinter. Manufacture takes place at 18 facilities in the USA, Australia and New Zealand… “Quexco Incorporated, operating through its United States and European subsidiaries, is principally engaged in the recycling of scrapped lead-acid batteries, and the production of refined lead and lead products. The manufacturing operations are conducted from fourteen locations, three in the United States, three in Germany, three in France, two in Italy, two in the United Kingdom and one in Austria… “GNB Technologies is an integrated provider of power technology products. It manufactures and recycles lead-acid batteries for the automotive, recreational, boating, farm, heavy duty truck, electric utility, electric vehicle, photovoltaic, railroad, telecommunications and uninterruptible power supply markets in more than 50 countries.” Given the large increase in employee numbers and apparent duplication of manufacturing facilities, it looks likely the merger will lead to staff cuts and asset sales, though none of the three companies acknowledge this.
VA Tech Group of Austria buys Rolls-Royce Industrial Power
Elin Energieversorgung GmbH, a subsidiary of VA Tech Group of Austria has approval to acquire the transmission and distribution business of Rolls-Royce Industrial Power (New Zealand) Ltd from Rolls-Royce Power Engineering Plc of the U.K., for a suppressed amount. It is “part of a global acquisition of the transmission and distribution business of Rolls-Royce Plc“.
TiGold of Canada buys Westland Ilmenite, including 1,380 hectares of land
TiGold Minerals Inc, which is 80% owned by Bradley A. Quam of Canada and 20% owned by the public in Canada and the U.S.A., has approval to acquire Westland Ilmenite Ltd for a consideration “to be advised”. Westland Ilmenite is being sold by New Zealand Titania Ltd. The sale includes 277 hectares of land at Barrytown, Westland and 906 hectares, also at Barrytown, over which Westland Ilmenite holds a mining permit. The land, including this land and the farm land mentioned below, is “the site of existing ore processing facilities and/or overlies the ore deposit and is required for mining and ore processing.” The project has been controversial amongst locals because of its effect on farmland and bush. According to the OIC, New Zealand Titania is owned by North Ltd of Australia, which bought the company from Fletchers Challenge Ltd in 1990. However, its relevant May 1990 decision said that Fletcher Challenge had sold its subsidiary, Fletcher Titanium Products Ltd, to Peko Wallsend Ltd, a North Broken Hill (Australia) subsidiary. The sale included 109 hectares of land, which in August 1990 was added to by an 87 hectare farm on State Highway 6 in Barrytown (by which time Fletcher Titanium’s name had been changed to Westland Ilmenite). North Ltd have been trying to sell the project since 1994. “Westland Ilmenite owns the Barrytown Ilmenite venture that includes the mining permit, resource consents, building equipment, ore processing plant and land related to the venture. Westland also owns a 50% shareholding in Amhana Farms Ltd which owns 196 hectares of farm land overlying ore deposits.” Presumably this is the 196 hectares involved in the two 1990 decisions. “North Ltd undertook feasibility studies on the viability of treating the ilmenite located at Westland and decided to dispose of its interest. North Ltd has been trying to dispose of its interest in the project since 1994… The applicant advises that they intend to acquire the project, update the feasibility studies and if practical develop it to the extent that is commercially viable as a producer of ilmenite concentrate and possibly Ti02 pigment for export.” Ilmenite is used in the manufacture of pigment that is an ingredient in paint.
CITIC gets approval to buy Brierleys out of Central North Island Forests
With the increasing senility of Brierley Investments Ltd, CITIC New Zealand Ltd has moved to get approval to take half of Brierley’s share of the Central North Island Forests Partnership, which bought the Forestry Corporation of New Zealand Ltd in 1996. The Partnership consisted of Citifor Inc. (37.5%, a CITIC subsidiary), Fletcher Challenge Ltd (through its forestry division, Fletcher Challenge Forests Ltd, 37.5%), and Brierley’s (25%). Citic New Zealand, which is 100% owned by the Government of China, has approval to acquire half of Brierley’s 25% share for an amount originally suppressed, but released on appeal in February 1999 as $2,475,738. Given that Fletcher Forests paid for its portion by issuing 46.65 million new shares worth $32.19 million (see below), CITIC got an unexplained bargain.. “The partnership agreement provides for the sale by a partner of all or part of its interest in the partnership subject to certain conditions. Additionally, the partnership agreement contains a dilution clause to the effect that if a partner is unable to meet its share of a cash call, the partners’ beneficial interest in the partnership may be reduced. Accordingly, while a partner cannot be required to increase its interest in the partnership, it has the opportunity to do so as a result of the operation of the transfer provisions or practically as a result of dilution of another partner’s interest.” However, at the time of the privatisation of the Forestry Corporation, it was reported that Brierley’s had been given an option to sell its 25% stake after three years to Fletcher Forests for the market value of 93.3 million Fletcher Forests shares, to be paid in cash or shares. Fletcher Forests may in turn force Citifor to buy half Brierley’s holding for cash (NZ Herald, 22/8/96, “BIL able to quit forestry holding in three years”). The consummation of the deal was made public only in December when it was announced that both Fletchers and Citic had bought half of Brierley’s share, giving each of them half of the partnership. Fletcher Forests issued 46.65 million new shares (worth about $32.19 million on the sharemarket at the time) to pay Brierley’s. Citic’s cost was still undisclosed (Press, 08/12/98, “CNI restructure”, p.24). Brierley’s exit will have been encouraged by financial problems in the partnership, which in July 1998 announced it was negotiating to restructure over $1.2 billion of debt after its Douglas Fir prices collapsed. The debt was raised to buy the Corporation. The partnership’s “cash flow forecasts were based on heavy early harvesting of the former corporation’s Douglas Fir crop. Unfortunately harvesting had to be reduced when Douglas Fir prices collapsed. The 12 banks involved have been kept aware of the situation.” (New Zealand Forestry Web server, http://www.nzforestry.co.nz/generated/news/13027.html, 2/7/98, “Debt restructure talks for forestry partnership”.) Brierley’s owned its share through Tethys Investments Ltd and Semele Investments Ltd. Its ownership is given as 20% by the Camerlin Group Bhd of Malaysia, 6.4% by the Government of Singapore, 6.7% by Franklin Resources Inc of the U.S.A., 40% by the “New Zealand Public“, and 26% by “unknown public” – presumably owned overseas. Brierley’s overseas ownership is therefore around 60%. The partnership’s “core activities” are listed as including:
Its assets include 181,683 hectares of Crown forestry licences. The balance of the forests it manages consists of
PPG (U.S.A.) buys technical coating business of Orica (formerly ICI)
PPG Industries Inc of the U.S.A., through its subsidiary PPG Industries New Zealand Ltd, has approval to acquire “part of the business assets and undertakings of” Orica New Zealand Ltd, a subsidiary of Orica Ltd of Australia for $40,711,234. Orica is the former ICL Australia which in February 1998 sold its pharmaceutical division to Zeneca Pharmaceuticals New Zealand Ltd, a subsidiary of Zeneca Group Plc of the U.K. In January 1998 it bought the rights to the Levene paint brand name and Levene’s Wairau Park “Levene Extreme” store on Auckland’s North Shore following Levene’s receivership, having bought Levene’s paint factory a year before (New Zealand Herald, 15/1/98, “ICI buys rights to Levene name”, p.D1). In February 1998 Orica also bought H. B. Fuller Powder Coatings (New Zealand) Ltd in New Zealand and Australia from H.B. Fuller Company Inc of the U.S.A., again for a suppressed price. The OIC says: “PPG is a global producer of industrial and decorative coatings, continuous-strand fibreglass, flat and fabricated glass and chemicals… It is stated the acquisition will enable PPG to extend its global reach and will provide synergies generated from the combined operation of automotive, automotive finish and industrial coatings business throughout Australia and Asia.” PPG’s own Web site (http://www.ppg.com) says PPG “operates 74 major manufacturing and nine research & development facilities worldwide”. The company in the year ended December 1997 had US$7,379 million in sales, US$1,175 million in profits before taxes and minority interests, and US$6,868 million in assets. It had 31,900 employees. It lists operations in the U.S.A., Argentina, Australia, Brazil, Canada, China, England, France, Germany, Ireland, Italy, Japan, Mexico, and the Netherlands. On 26/8/98, PPG announced that it “expects to complete the acquisition within a month, for about US$150 million, of the technical coating business of Orica Ltd., Melbourne, Australia, following government review. The business PPG is acquiring includes Orica’s automotive refinish, automotive original equipment, coil, packaging and production coatings, generating annual sales of about US$100 million. Orica, the largest producer of automotive and industrial coatings in Australia and New Zealand, retains its architectural and powder coatings businesses. PPG’s acquisition will include manufacturing, office, laboratory and warehouse facilities at Clayton, near Melbourne. About 600 Orica employees will join PPG.” (http://www.ppg.com/frames/corpnews.htm) According to PPG’s filing with the U.S.A. Securities and Exchange Commission (SEC) for the fiscal year ended 31/12/97 (see http://www.ppg.com/frames/edgar.htm), “PPG is involved in a number of lawsuits and claims … in which substantial money damages are sought. These lawsuits and claims relate to product liability, contract, patent, antitrust, environmental and other matters.” It says that “a significant portion of such exposure involves three operating plant sites and one closed plant site. Initial remedial actions are occurring at these sites. Studies to determine the nature of the contamination are reaching completion and the need for additional remedial actions, if any, is presently being evaluated.” Under “Environmental matters” it states that “PPG is negotiating with various government agencies concerning 65 cleanup sites, including 31 sites on the National Priority List. While PPG is not generally a major contributor of wastes to these sites, each potentially responsible party or contributor may face governmental agency assertions of joint and several liability as to each cleanup site.”
Matsushita (Panasonic) buys dealership for its products from Fisher and Paykel
Panasonic New Zealand Ltd, a subsidiary of Matsushita Electric Industrial Co. Ltd of Japan, has approval to acquire the distributorship of its products (including Panasonic, Technics, and Ramsa) from Fisher and Paykel Ltd for $10,000,000. Fisher and Paykel has had the distributorship for “over 30 years” but “has decided to restructure its business operations and concentrate on certain core aspects of its business.” The ownership of Fisher and Paykel is interesting. It is 67.11% owned by “the New Zealand public”, but the remaining 32.89% is owned by “unknown public” of unknown countries. Given that the OIC has given Fisher and Paykel an exemption from the regulations because it is considered to be controlled in Aotearoa, it seems that 32.89% is overseas owned.
Pacific Capital buys back shares after failure to finalise Britomart
Hudson Corporate (New Zealand) Ltd of Australia, and Idris Hydraulic (Malaysia) Berhad of Malaysia, have approval to increase their shareholding in Pacific Capital Assets Ltd for a price “to be advised”. Pacific Capital Assets, whose takeover by Counterpoint Equities was approved in August 1998, is the principal behind the controversial Britomart transport development on three hectares in Britomart Place, Customs Street East, and Quay Street, in central Auckland. Its shareholders are currently
“Pacific Capital entered into a “Master Development Agreement” with the Auckland City Council which was conditional on a number of things. Securities in Pacific Capital were issued to the public on the basis that if the Agreement was not declared unconditional by 30 June 1998, Pacific Capital would buy-back and cancel shares subscribed for by the public in the initial public offering. The Master Development Agreement has not been declared unconditional. Accordingly the buy-back process of the securities in Pacific Capital is presently under way.” Hence the proportion of shares held by Hudson and Idris will increase, requiring OIC consent. The decision allows the proportion to rise to 36% in the case of Hudson Corporate, and 28.8% in the case of Idris. On the completion of the share buy-back, the Counterpoint takeover will proceed.
Vermont completes acquisition of Viking Pacific after Maine/Skellerup collapse
Vermont Investments Ltd, which is 83% owned by merchant banker Goldman Sachs & Co. of the U.S.A. and 17% owned by “the New Zealand public”, has approval to take 100% of Viking Pacific Holdings Ltd for $3,675,000. Approximately 74.4% of Viking was already owned by Vermont, the other shareholders being West LB of Australia (47% of the remaining 25.6%), the New Zealand public (38%), and banks in Australia (15%). The sale includes nine hectares of land at 15-31 Thomas, Cass and Wilmhurst Streets, Temuka, South Canterbury, and seven hectares at 1-37 Mt Wellington Highway, Auckland. “The proposed acquisition arises as a consequence of the restructuring of the Maine Investments Ltd group of companies, and the establishment of the holding company Viking Pacific Holdings Ltd… In July 1998 there was a re-organisation of the Maine group resulting in the ‘industrial assets’ of the Maine group being transferred to Viking Pacific. The remaining businesses and assets stayed with Maine. Immediately following the asset transfers, new shares in Viking Pacific were issued … Vermont has offered to purchase certain shares in Viking held by former Skellerup Finance bondholders.” Viking was set up to own the eleven profitable companies taken from the ruins of the collapsed Skellerup group. The diversified group had been sold by Brierley Investments to former Skellerup chief executive, Murray Bolton, through Maine Investments, in a highly leveraged buyout with the help of Goldman Sachs. It crashed under the weight of its debt. The eleven companies include Skellerup Industries, Flo Max, Projex, Batavian Rubber, A and G Price, Harding Electronic Systems, Masport, New Zealand Insulators, Pacific Wallcoverings, and Paykel. The remaining companies, including DML Resources, Palmers Gardenworld, Brentex, Watkins, and Levenes, would be sold off. Bondholders who invested $77 million in Maine via high interest bonds issued by its subsidiary, Skellerup Finance, lost heavily. Goldman Sachs offered them shares in Viking and the option to buy more, making them large losses on the deal. Initially the offer was refused. After considerable haggling a deal was accepted in June – only to have Goldman Sachs almost reneg because of the rapidly falling New Zealand dollar which increased the cost of much of Maine’s debt. Goldman Sachs asked for further concessions from the banks holding $230 million of Maine’s first-ranking debt: Citibank (which broke ranks and sold its share before a deal was reached), BNZ, National Bank, Hong Kong and Shanghai Bank, Bank of Scotland, BBL (Belgium) and Societe Generale of France. Finally, a deal was settled in July, in which Goldman Sachs put in $32 million (reduced from $42 million) to reduce debt and provide working capital. (References: Listener, 28/3/98, “The Maine Chance”, pp.32-35; Press, 18/4/98, “Maine launches Viking Pacific”, p.27; 2/5/98, “Maine deal announced”, p.29; 17/6/98, “NZ dollar squeezes Maine Inv”, p.30; 18/6/98, “Crunch looms for Maine deal”, p.24; 23/6/98, “Citibank off-loads Maine Invest debt”, p.26; 29/6/98, “Skellerup patience wears thin”, p.28; 2/7/98, “Maine gets agreement”, p.26.) The price being paid for the Viking shares in the current transaction shows how much the bondholders have lost, leaving Goldman Sachs with control of the remains of the group.
U.S.A. resident buys 9,300 ha. Glenhope high country station
Douglas Alan Randles of the U.S.A. has approval to acquire up to 90% of Twin Rivers Ltd which will purchase Glenhope Station on the Lewis Pass Road, State Highway 7, Canterbury. The station consists of 30 hectares freehold and 9,265 hectares of pastoral leasehold land. The price is not clear. The mechanism is that Randles is purchasing 90% of Twin Rivers Ltd from Philip Wilson. Randles is “making an advance of $1,100,000 to the company to enable the company to complete the purchase of Glenhope Station”. Wilson retains the remaining 10% of the company. The owners of Glenhope since 1993, Mr and Mrs Milne, will continue to have day to day responsibility for management of the farm operation. Twin Rivers is “is committing itself to a minimum of $400,000 input for farm development and a total development programme that potentially could reach $1,350,000 over a six to eight year period.” While this is expressed as a commitment, there is nothing to indicate that the OIC has made it a condition of approval which it can monitor and require to be carried out under its legislation. The station is claimed to be “marginally economic” at current stock levels. “While small development programmes have been undertaken by the last three farm owners over the last 80 years, inadequate follow-up fertiliser, weed control and pasture management due to a lack of funding, have resulted in the land reverting to a state not much better than its original condition.” It is not stated whether the land can sustain any more intensive use than “its original condition”. However, “Glenhope is known as a property with potential but requiring a significant and sustained development programme in order to achieve the potential that exists on the property. Mr Randles intends to provide the necessary capital to realise that potential. “The proposal represents a significant injection of development capital into a farming unit with relatively low profitability compared to other high country properties due to its lower than average stock rate. It is stated that the access to such development capital will enable a sustained pastoral development programme to be undertaken thus increasing the stock carrying capacity of the property.” Tourist use is also planned. Wilson is owner of New Zealand Hunting and Fishing Ltd which “has the largest professional guiding operation in the South Island”. He will carry “overall responsibility” for the station. His hunting and fishing business “has increased by 30% per annum in the last three years and Mr Wilson has run into operational difficulties because of the difficulty in gaining access to suitable properties to accommodate his clients’ requirements. The purchase by Twin Rivers Ltd of Glenhope Station will provide New Zealand Hunting and Fishing Ltd with access to much sought after recreational facilities for its clients.” No mention is made of the implications of this for access by others wishing to hunt and fish from the station. The popular St James Walkway ends along the Boyle River, and according to the Hurunui District Council, “the [Boyle] river flats are private land, part of the Glenhope Station and should not be crossed” (http://www.hurunui.govt.nz/stjames/WHAT.HTM). Randles, owner of a 91 hectare, 150 head cattle farm in Washington State, U.S.A., “is a keen hunter and fisherman” and “also proposes to develop an outdoor recreational tourist venture targeting middle income U.S.A. citizens who have an interest in hunting and fishing safaris.”
Tasman Agriculture Ltd buys 920 ha in three Otago and Southland farms
Tasman Agriculture Ltd has approval to acquire three farms in Otago and Southland for conversion to dairy farming. They are:
It appears that there is one more such purchase to come: according to the company’s Chairman’s Address (announced to the New Zealand Stock Exchange on 30/10/98), four properties were purchased around that time. Tasman is 58.25% owned by Brierley Investments Ltd (Malaysia/Singapore/U.S.A.), and 7.41% by SoGen Funds Inc, New York, U.S.A. (according to substantial shareholding notices 16/2/98 and 30/9/98 respectively). It is one of the largest agribusiness firms in Aotearoa. According to the OIC, it has 69 dairy units in the South Island, comprising approximately 14,635 hectares. It also has 13 units in Circular Head, North West Tasmania, and an 87.5% shareholding in The Van Diemen’s Land Company which operates a further ten dairy farms in north-west Tasmania. The OIC says: “TasAg’s business is essentially the acquisition of suitable sheep and beef properties for conversion to dairy and the successful operation of such dairy units once fully converted. The Commission is advised that since 1988 TasAg has successfully converted 58 properties… All TasAg properties in New Zealand are farmed by sharemilkers, who operate the farms and who have a proven track record in the dairy industry… TasAg operates its farms under 50/50 sharemilking arrangements with the sharemilkers providing the livestock, plant and machinery to operate the business while TasAg provides the land, buildings and support services. Revenue from the milk is shared equally between the partners, while revenue from cull cows and calf sales accrues to the sharemilker.” In the Southland cases above, Tasman states it will supply South Island Dairy Co-operative Ltd; in Otago, Kiwi South Island Dairies Ltd. Tasman’s Chairman, in the address quoted above, says “TasAg’s share in South Island Dairy Co-operative Ltd is approximately 10% as measured by milk volume.”
Nikken Foods (Japan) buys 162 ha. in Amberley, Canterbury for organic farming
Nikken Foods Company Ltd of Japan, which is 67.63% owned by Dr Hirotomo Ochi, has approval to acquire 162 hectares of land at 360 Glasnevin Road, Amberley, Canterbury for $1,400,000. Nikken “intends to convert the existing farming operation on the property to an operation producing organic products including both organic sheep, cattle, vegetables and grain. Nikken Foods, as a manufacturer of natural seasoning, requires a large volume of vegetables for production.” It will also produce “other health products” for export to Japan. It will export the produce to Japan, and will also purchase other organic produce from other New Zealand farms. Development on the property will take 2-3 years, involving establishing a “wholly organic farm”, which will take some time in order to rid the property of residues; and then building a factory to undertake the “initial processing” of the produce. Once the factory is established the company will “do a costings exercise to determine whether the final stages of processing can be done in New Zealand … or should be done in Japan.”
Inghams of Australia buys land near Taupo for poultry farming
Inghams Enterprises (NZ) Pty Ltd, which is a subsidiary of Inghams Enterprises Pty Ltd of Australia, has approval to acquire 234 hectares at 387 Pokuru Road, Whakamaru, near Taupo, Waikato for $1,400,000 for poultry farming. The OIC reports that “the principal activities of Inghams are poultry farming, poultry processing and feed milling. The Company has been carrying on its principal activities in New Zealand since 1990, when they acquired the assets of Harvey Farms Consolidated Ltd (in statutory management)… Inghams currently own approximately 184 hectares of land throughout New Zealand on which it undertakes its existing business operations. Inghams intend to utilise the property as an extension of their existing New Zealand poultry operations.” In March 1990 we reported Inghams’ takeover of Harvey Farms, Mount Grain Driers Ltd and J. M. Thomas Ltd. These were being sold off by Equiticorp as part of its liquidation. According to the OIC, the Inghams Group was at that time “the largest producers of meat and layer chickens, turkeys and ducks in Australia, with excess of 50% of the market. Inghams is not currently in the business of poultry production, processing, marketing and distribution in New Zealand and sees this acquisition of assets as an opportunity to expand its core business.” In December 1995 Inghams received approval to acquire 59 hectares of land to extend their processing plant at Waitoa, Waikato, for $2,300,000. In July 1997, Inghams was given approval to acquire 67 hectares of land at Leslies Road, Putaruru, Hamilton, Waikato, for $580,000, to extend their existing poultry operations.
3,796 ha. land, forest rights from Flat Rock Forest Estate sold to U.K. companies
The receivership of Flat Rock Forest Estate has led to 3,796 hectares of forest rights and land (558 hectares of rights and 3,238 hectares of freehold land) being tendered and sold to three U.K. companies by the receivers. The receivers, John Cregton and Jane Muir, were appointed by the mortgagee, Countrywide Banking Corporation of the U.K. The three were clients of “forestry advisers” FIM (NZ) Ltd, through which the tenders were made.
Ellis Campbell (NZ) Ltd owned by Michael Campbell and members of his family are buying
for $712,620 from Clearwood Holdings Ltd (in Receivership) and Waimea Holdings Ltd (in Receivership). In May 1995, we reported that Ellis Campbell (New Zealand) Ltd, ultimately owned by Ellis Campbell Group of the United Kingdom, was buying a further 98 hectares of land in Marlborough for $150,000. It proposed “to develop the property, which is currently reverting scrub land into a commercial forestry operation.” Ellis Campbell bought 240 hectares of land in Marlborough in March 1990 and a further 807 hectares in December 1991. Some was existing forest; the rest was scrub land “reverting to weeds”, which would also be converted to forest. However, the OIC reports now that it previously owned only 656 hectares of “forest holdings” in the Marlborough area, and so must have disposed of some since 1995.
Utaraya Finance Ltd is buying
for $2,512,300 from Clearwood Holdings Ltd (in Receivership) and Kenilworth Forests Ltd (in Receivership). The ownership of Utaraya was initially suppressed, but in February 1995, we reported that Utaraya Finance Inc, owned by two family trusts named Tirox and Rotix in Liechtenstein but ultimately owned in the United Kingdom, was buying 460 hectares of land in Northland for $880,000, and 325 hectares of land near Rotorua for $1,600,000 on which it proposed to establish a commercial forestry operation. We put this ownership to the OIC who in December 1998 acknowledged that this was still correct. Utaraya owns forest holdings in Aotearoa of 774 hectares, valued at $3.1 million.
Highland Timber Plc, a publicly listed company, is buying
for $4,175,080 from Lake Alice Forest Ltd (in Receivership), Rangitumau Forest Ltd (in Receivership), and Waimea Holdings Ltd (in Receivership). In December 1997, we reported that Highland Timber Plc of the U.K. gained approval to acquire two blocks of land for forestry:
Waihi Gold buys out Coeur Gold and Viking from joint venture, buys more land
Land is being bought in relation to the Martha Hill gold mine at Waihi, Coromandel. The last was bought in August 1998, and was one of a series, but one of these purchases is different.
Waihi Gold Company Nominees Ltd of Australia has approval to acquire 1.42 hectares of land at Junction Road and Grey Street, Waihi from Coeur Gold New Zealand Ltd and Viking New Zealand Ltd for $45,000. Waihi Gold Company Nominees Limited is owned 67.06% by Normandy Mining Limited, and 32.94% by AUAG Resources Limited, both of Australia. Coeur Gold New Zealand is a subsidiary of Coeur d’Alene Corporation of the U.S.A. and abandoned the nearby Golden Cross Mine in the vicinity because of instability in its tailings dam, attracting heated criticism. The land is “a 2,095/10,000 share” of a seven hectare block. It “is owned as part of a joint venture between Waihi Gold, Coeur Gold Ltd and Viking Mining Company Ltd. Currently Waihi Gold own a 79% interest in the freehold estate, Coeur Gold own 17% and Viking Mining holds 4%. The acquisition of the remaining freehold estate by Waihi Gold results from the termination of the joint venture.” Waihi Gold is also buying more land for the Martha Hill gold mine at Waihi. It has approval to acquire 0.2694 hectares at 34 Grey Street, Waihi for $135,000 from E.S. Rae. As always , “Waihi Gold holds rural and urban land in around Waihi as trustee for the participants in the Waihi Gold Mining Joint Venture… The property is being acquired to assist in providing a buffer zone between the Martha Hill mine and existing residential areas and to enable the extension of the existing mining operation … The proposed extension of the mine will extend the life of the mine for approximately seven years and this will result in continued employment for the 135 people employed in the operation.” However, this time the OIC refers to the Waihi God Mining Joint Venture. It is not clear whether the companies, having heard that God is dead, believe they have found his burial place, or whether they are looking for a new God. We look forward to God being quoted on the futures market.
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