August 2007 decisionsPurchase of Taipo Forest land near Masterton declined approval Brunswick of US buys remaining 51% of Rayglass; government embarrassed Barbarians getting close: Kohlberg Kravis Roberts buys First Data Corporation Oji buys remaining 13.3% of Pan Pac Forest Products from Nippon Paper Valad buys 23 properties from Carter Holt Harvey for $173m for lease back AMP buys office buildings in Wellington and Auckland Barclays Bank takeover offer for ABN AMRO initially suppressed Prysmian of the US buys International Wire and Cable Company’s business Nobilo buys 24 ha. vineyard near Blenheim for $4.5m New Caledonian purchasers for 610 ha. Kia Ora Station, Gisborne
Purchase of Taipo Forest land near Masterton declined approvalIn the first refusal for five months, Marc Oliver Arthur Albert Boris Jacques LeClercq and Concetta Maria Agro LeClercq of Italy have been refused approval to acquire 5.4 hectares at Taipo Forest, Tinui Valley Road, Masterton, Wairarapa for $14,175 from David Ray Lowther and Pamela Christine Lowther (90%) and William Allison McKinnie (10%), all of the U.S.A.
According to the OIO,
The subject land is part of a larger 785 hectare property containing 610 hectares of pinus radiata forestry. The vendor has subdivided the property and is selling lots ranging in size from 4 to 20 hectares. The subject land contains approximately 2.5 hectares that was planted in pinus radiata in 1996 and 2.8 hectares of native remnant and regenerating forest. The Applicants view the acquisition as an opportunity to invest in forestry at an affordable entry level and propose to preserve and extend the existing native bush on the land.
The Overseas Investment Office considers that it is unlikely that the proposal will result in benefits to New Zealand or any part of it or group of New Zealanders.
It is not clear what differentiates this from the many purchases of small blocks of forestry land by overseas investors, which the OIO routinely approves.
The US would-be sellers received OIC approval to acquire a 780 hectare property at Tinui for $785,000 in May 1995, for forestry planting. McKinnie was also one of a number of US investors (including other McKinnies) who received approval to acquire “approximately 500 hectares” at Kotare Road, Marumaru, north of Wairoa, for $800,000 in June 1995, again for forestry planting.
[Decision number 200720019.] Brunswick of US buys remaining 51% of Rayglass; government embarrassedBrunswick International Limited, owned by Brunswick Corporation of the U.S.A., has approval to acquire all the shares of Rayglass Sales and Marketing Limited for a suppressed amount from Tony Hernbrow of Aotearoa. Rayglass’s assets include 0.53 hectares of leasehold at 7 Paisley Place, Mt Wellington, Auckland.
According to the OIO,
Brunswick Bermuda International Holdings Limited (Brunswick), currently holds 49% of the shares in Rayglass Sales and Marketing Limited (Rayglass). Brunswick proposes to transfer these shares to Brunswick International Limited (BIL) (the Applicant). Brunswick and BIL are subsidiaries of Brunswick Corporation and form part of the Brunswick Group of Companies (Brunswick Group).
Companies in the Brunswick Group have held a minority stake in Rayglass since 2003. This investment has been successful and, as the Rayglass business and the New Zealand operating environment are appealing to the Brunswick Group, the Applicant wishes to exercise the call option and acquire a further 51% of the shares in Rayglass.
The proposal is likely to result in synergies that Brunswick will be able to capitalise on if the proposed acquisition is completed.
Sail-World.com reports rumours that the sale price was $31 million, though if it were this low it would not have needed OIO approval, being well below the Overseas Investment legislation’s $100 million threshold for significant business investments. This would be true even if the value of the full company (approximately $61 million) was tested for the threshold. Our calculations estimate the price at around $70 million (and so approximately $140 million for the full company).
Sail-World says Brunswick is the world’s largest recreational boat builder and Rayglass is New Zealand’s largest boat manufacturer. Rayglass exports fibreglass runabouts and inflatables to 17 countries, building “almost four hundred” boats a year. It quoted owner Tony Hembrow: “The company’s 100 staff in Hamilton and Auckland had been assured Brunswick had big plans to continue to grow the business… the deal would continue to benefit other local businesses that enjoyed spin-offs from Rayglass’ success.” (Sail-World.com News, “Brunswick buys Rayglass”, 15/9/07, http://www.sail-world.com/indexs.cfm?nid=37501).
However Hembrow’s confidence does not square well with Brunswick’s record in Aotearoa. Brunswick was given approval by the OIC to buy 70% of the technology innovator, Navman, in May 2003, with an option to buy the remaining 30% by 2005 (see our commentary for that month for further details). But it then went on to “dramatically reduce” Navman’s staff numbers, and broke the company up to sell it off in 2007, leaving Navman founder Peter Maire “pretty pissed off”. As the New Zealand Herald reports, “After initially promising to help turn Navman into New Zealand’s first billion-dollar IT company, Brunswick changed its mind when chief executive George Buckley was wooed by giant multinational 3M. Its various divisions have since been carved up and sold off.”
The sale had a strong political angle to it. The New Zealand Herald continues:
… it was somewhat ironic that in the same week Hembrow announced to staff that he had agreed to sell all his remaining shares in the business to Brunswick, the world’s biggest boat company, Rayglass was touted in a Government review as an outstanding example of a local success story that had benefited from foreign investment without selling out. The review in question, a comprehensive critique of Investment New Zealand by the Ministry of Economic Development, was made public on August 30. But as it turns out, the review was actually completed a year ago, which explains why it also boasts about Brunswick’s other significant investment in New Zealand, satellite navigation company Navman. Even now, Rayglass continues to feature on Investment NZ’s website as a fine example of how bureaucrats can play a crucial role in greasing the wheels for foreign investors interested in taking a stake in innovative local companies.
… Around the same time Hembrow was announcing to Rayglass staff that Brunswick intended to pour even more money into the business, Economic Development Minister Trevor Mallard said he had gone off the idea of using taxpayers’ money to lure multinationals to our shores and had instead decided to focus on helping local companies be the ones to write the investment cheques.
That was prompted largely by the review of Investment NZ, which concluded that many of the organisation’s efforts to foster foreign direct investment had been a waste of time. While the agency claimed to be involved in 19 investments worth $500 million since 2002 (excluding movie projects), only four were associated with high-growth, local companies seeking strategic investment partners. The review found that most of the deals would probably have gone ahead anyway and that the flow-on effects from the rest were unlikely to exceed the $60 million cost involved (see Pg 18). It calls for the organisation to “significantly sharpen their focus”.
It appears the experience with Brunswick has had a significant effect on government thinking about foreign investment:
Mallard … happily admits the Government feels it got its fingers burned by Brunswick.
“In a funny way, Navman was seminal in some of our thinking, because it’s something that looked pretty flash at the time. It looked like we were going to get a lot of added value, but when you have an owner that’s not committed to New Zealand, some of the exciting stuff dropped away pretty quickly.”
The initiatives surrounding Export Year have also helped focus minds, he says. It’s all very well boosting exports, but if the company doing the exporting is not locally owned, then it’s not exactly helping our balance of payments deficit.
“I think there was a bit of a point where almost subconsciously we didn’t think carefully about ownership,” he muses. “We weren’t aware, as we are now, that asset ownership matters.”
(New Zealand Herald, “Does every Kiwi success have to end in foreign takeover?”, by Karyn Scherer, 1/10/07, http://www.nzherald.co.nz/category/62/story.cfm?c_id=62&objectid=10466381.)
[Decision number 200720015.] Barbarians getting close: Kohlberg Kravis Roberts buys First Data CorporationKKR 2006 Fund LP and New Omaha Holdings LP have approval to acquire First Data Corporation for $145,000,000 from its U.S. owners.
First Data Corporation of the U.S.A., a major electronic commerce and payment processing service supplier, took over local software house Peace Software International in 2006 (see our commentary for August 2006 for further details). At that time, the OIO reported that “in New Zealand First Data operates through subsidiaries TeleCheck Payment Systems Limited, Western Union Financial Services Australia Pty Limited, Paysys International Pty Limited and Western Union Network (Ireland) Limited”.
The price quoted is presumably just for the New Zealand operation, though it is surprisingly low compared to the price paid for only Peace Software International twelve months before – $114,989,156. The parent First Data Corporation was sold for $US29 billion (approximately NZ$40 billion) according to its media releases (“First Data Shareholders to Receive $34 per Share in Cash; Transaction Valued at $29 Billion”, 2/4/07, http://news.firstdatacorp.com/news/releasedetail.cfm?ReleaseID=236335, accessed 22/10/07).
KKR is Kohlberg Kravis Roberts, one of the largest private equity corporations in the world which also owns a number of the largest circulation magazines sold in New Zealand through joint ventures with the Australian Seven Network. KKR’s business is buying companies and selling them quickly at a profit. Henry Kravis, chief executive of KKR described it as follows: “To understand KKR, I always like to say, ‘don’t congratulate us when we buy a company’. Any fool can buy a company. Congratulate us when we sell it and when we’ve done something to it, and created real value.” The concern is who the value is created for, and is what is the “something done” to achieve it. (Press, “KKR to go public as debt costs rise, taxes set to grow”, by Robert Guy, 6/7/07, p.B8. For more information on KKR and the news media see the paper “News media ownership in New Zealand”, by Bill Rosenberg, at canterbury.cyberplace.org.nz/community/CAFCA/publications/Miscellaneous/index.html.)
KKR has set up New Omaha Holdings solely for the short term purpose of buying First Data. New Omaha is owned as follows: · 51.21% in the U.S.A.: · 13.25% by Citigroup · 6.97% by Lehman Brothers · 4.88% by Goldman Sachs · 3.49% by Merrill Lynch & Company Inc · 22.6155% by others · 11.64% in Switzerland by Credit Suisse Group · 10.46% in the U.K. by HSBC Holdings plc · 9.55% in Germany by Deutsche Bank AG · 17.1445% by “various overseas persons”.
According to the OIO,
New Omaha Holdings Corporation (New Omaha) has been established by KKR 2006 Fund LP investors (KKR Fund), a United States of America based private equity fund, for the purpose of effecting the acquisition by way of merger of First Data Corporation. First Data Corporation is a corporation established in the United States. It operates two separate businesses in New Zealand being First Data NZ and the Peace Software, and Telecheck.
Upon completion of the merger New Omaha will cease to exist and First Data will continue as the surviving corporation.
The operations of First Data Corporation will continue to be managed and run by the existing senior executive team in substantially the same way in which those businesses have been run to date.
The Applicants intend to undertake a strategic review of the business, to re-focus and improve efficiency in order to maintain and grow profitability. The Applicants believe that continued operation of First Data Corporation and its global businesses and expansion of those businesses will provide a general benefit to the New Zealand economy.
[Decision number 200720013.] Oji buys remaining 13.3% of Pan Pac Forest Products from Nippon PaperOji Paper Company Limited, owned 84.6% in Japan, 5.4% in the U.K., 5.3% by “various overseas persons”, and 4.7% in the U.S.A., has approval to acquire all of the shares of Pan Pac Forest Products Limited, including 4,983 hectares of freehold comprising 4,342 hectares at Tangoio Forest, Hastings District, Hawkes Bay and 641 hectares at Wairoa View Block, Wairoa District, Gisborne, and 1,593 hectares of leasehold at Te Kowhai Forestry Block, Hastings, Hawkes Bay.
The price is “$31,298,886 being an agreed value having taken into account specific joint venture arrangements and therefore does not necessarily reflect the market value of the land and the shares involved”. This is because the shares are being purchased from longstanding joint venture partner Nippon Paper Industries Company Limited of Japan.
As the OIO states:
The Applicant currently holds 86.7% of the shares in Pan Pac with the remaining 13.3% being held by Nippon Paper Industries Company Limited (Nippon). The acquisition will result in the Applicant acquiring the remainder of the shares from Nippon and therefore becoming sole shareholder of Pan Pac.
Through this further investment in Pan Pac, the Applicant expects to see further growth in Pan Pac’s operations which comprise the management of approximately 32,500 hectares of forestry and a pulp and lumber processing division situated at Whirinaki, Hawkes Bay. The Applicant will continue to assist Pan Pac through providing human resources, business administration and planning assistance. The Applicant intends that Pan Pac will produce and export more Thermo-Mechanical Pulping Product, to Japan.
The proposed investment will enhance the Applicant’s security of access to both pulp and wood materials to meet market opportunities in Japan.
The proposal is likely to result in the following benefit: The Applicant is a key person in a key industry of Japan, with which New Zealand is likely to benefit from having improved relations a leader in the international wood products trade, having supplied paper products for over 130 years.
Given the Applicant’s standing as a leader in the international wood products trade, declining this application would likely adversely affect New Zealand’s image overseas.
The mildly threatening tone of this last sentence seems to be becoming standard.
[Decision number 200720011.] Valad buys 23 properties from Carter Holt Harvey for $173m for lease backValad Commercial Management Limited “as responsible entity of” the Valad Property Trust of Australia, owned 100% in Australia, has approval to acquire twenty-three properties in various unspecified regions, for $173,250,000 from Carter Holt Harvey Limited and Carter Holt Harvey Properties Limited, owned by Graeme Richard Hart of Aotearoa.
The OIO states:
The Applicant proposes to acquire 23 properties in New Zealand, from Carter Holt Harvey Limited (CHH) and Carter Holt Harvey Properties Limited (CHH Properties), comprising 14 Carters depot properties, 5 packaging plants, 2 office buildings and 2 vacant lots used for car parking. It is proposed that CHH or CHH Properties will lease back the properties from the Applicant.
The acquisition of the properties will provide increased diversification to VPG’s property portfolio and provide an opportunity to foster an ongoing corporate relationship between VPG and CHH in New Zealand and Australia.
[Decision number 200720012.] AMP buys office buildings in Wellington and AucklandAMP Capital Investors Limited “as responsible entity for” the AMP Wholesale Office Fund, owned 100% in Australia, has approval to acquire properties in Wellington and Auckland for a suppressed amount from AMP Property Fund, owned 52.01% in Australia and 47.99% in Aotearoa. The properties are: · a 50% interest in Bowen House and a 100% interest in Novell House, Lambton Square and Telecom Networks House, all in Wellington; and · a 100% interest in Forsyth Barr Tower in Auckland.
The buildings were valued by AMP Property Fund at 30 June 2007 at $60,000,000 for Bowen House, $47,800,000 for Novell House, and $39,900,000 for the Forsyth Barr Tower implying the price paid for the acquisition (given it was for only 50% of Bowen House) was likely to be around $117,700,000 (“Our Properties”, http://www.app.co.nz/properties/default.asp, accessed 22/10/07).
The OIO states that “AMP Wholesale Office Fund has a strategy to invest in quality, well-let properties across the office sectors in Australia and New Zealand.”
[Decision number 200720016.] Barclays Bank takeover offer for ABN AMRO initially suppressedAn almost $1 billion approval has been given whose details were initially almost completely suppressed. After CAFCA appealed to the OIO, it was fully released (on 1 December 2007).
Barclays Bank PLC of the U.K., has approval to “indirectly acquire” up to 100% of ABN AMRO New Zealand Entities for $962,657,000 from ABN AMRO Bank N.V., owned in the Netherlands, 80.73% by minority shareholders, 19.27% by Ing Groep N.V..
The OIO states:
Barclays PLC (Barclays) believes that the proposed acquisition will create one of the world’s leading universal banks, in a sector that is fragmented in comparison to other global industries. The combination of ABN AMRO Holding and Barclays will benefit from a diversified customer base and geographic mix.
Under the proposed acquisition, Barclays’ existing ordinary shareholders will own approximately 52% and ABN AMRO Holding’s existing ordinary shareholders will own approximately 48% of the combined group. It is anticipated that the entities will continue to hold and operate the main banking and financial services activities.
The proposed merger of ABN AMRO Holding and Barclays will create strong synergies and provide an improved competitive combination for its clients with sustained future growth for shareholders.
The proposal was announced in March 2007, but in October 2007, Barclays announced the withdrawal of the offer. It would have created a group worth around £80 billion (approximately NZ$220 billion).
[Decision number 200720014.] Prysmian of the US buys International Wire and Cable Company’s businessPrysmian Power Cable & Systems New Zealand Limited, owned 77.1% in the U.S.A., 13.03% by “various overseas persons”, and 9.87% in the U.K., has approval to acquire the business assets of International Wire and Cable Company Limited, including 1.6 hectares of leasehold at 17-19, 21, 30 and 32 Binstead Road, New Lynn, Auckland, for $6,900,000 from International Wire and Cable Company Limited of Aotearoa.
According to the OIO,
The Applicant is part of a group of worldwide companies owned by Prysmian Cavi e Sistemi Energia S.P.A. (Prysmian Group) which is a market leader in major energy and telecommunications cables business activities. This acquisition is consistent with the overall strategy of the Prysmian Group, that is, to contribute to accelerated growth, generate value through synergies, and to limit risk and integration issues.
The Applicant will acquire the assets of IWC and therefore acquire leasehold interests in the relevant land. IWC operates a manufacturing plant specialising in the manufacturing of aluminium and copper transmission lines as well as aluminium and copper aerial and underground distribution cables. IWC supplies power utilities, is an electrical contractor and an electrical distributor throughout New Zealand. A partnership has been in place between IWC and Prysmian since 2002 to jointly develop the New Zealand businesses of IWC and Prysmian.
The Applicant wishes to improve its market position in markets with a history of profitability and growth prospects. There are opportunities for growth given the anticipated requirement to upgrade the capacity and capability of the power generation and transmission infrastructure. There are opportunities to obtain cost and efficiency savings. Prysmian’s purchasing power for raw materials and the implementation of its management and information technology systems will allow for this.
Prysmian is descended from the Pirelli Group in Italy. Prysmian Cables & Systems was created in 2005, indirectly controlled by The Goldman Sachs Group. In 2007 it was listed on the Milan Stock Exchange (http://www.prysmian.com/about-us/history.html, accessed 22/10/07).
[Decision number 200720018.] Nobilo buys 24 ha. vineyard near Blenheim for $4.5mNobilo Wine Group Limited, owned 100% in the U.S.A. by Constellation International Holdings Limited, has approval to acquire 24 hectares at 67 Tyntesfield Road, Blenheim, Marlborough for $4,500,000 from Altimarloch Joint Venture Limited, owned by Warren Boyce McNabb of Aotearoa.
The OIO states:
Nobilo Wine Group Limited (Nobilo) carries out a fully integrated viticulture business, which includes the growing and development of grapes, and the manufacture, importation, distribution and sale of red and white wine within New Zealand and, increasingly, for export markets. Nobilo advises that export growth has been constrained by grape supply. Nobilo proposes to secure additional grape supply and increased processing capacity.
Nobilo currently has a variety of interests in New Zealand, including land utilised for the growing of grapes, and as wineries and production sites. In total it either owns or leases approximately 790 hectares of vineyards, in New Zealand predominantly in the Hawkes Bay, Marlborough and Auckland regions. Nobilo also sources grapes from contract growers from around 1,400 hectares in area.
Nobilo proposes to acquire the land which is an established vineyard containing 20.41 planted hectares comprising 14.48 hectares of Sauvignon blanc, 4.48 hectares of Pinot Noir and 1.45 hectares of Pinot Gris. The proposed acquisition will provide Nobilo with an increase in grape supply which will allow it to continue to develop its export wine markets and enhance the reputation of New Zealand wine overseas. This is likely to result in significant increases in employment, processing of grapes and export levels.
[Decision number 200720020.] New Caledonian purchasers for 610 ha. Kia Ora Station, GisborneKia Ora Station Limited, owned 40% by Patrick Gaetan Marie Guesdon, 20% by Odile Marie Clemence Andree Guesdon, 15% by Nicolas Bruno Edmond Guesdon, 15% by Caroline Natacha Odile Mayerau-Lonne, all of New Caledonia, and 10% by Robert John Bryson of Aotearoa, has approval to acquire 610 hectares at Kia Ora Station, Ngakaroa Road, Ormond, Gisborne for $2,000,000 from the Bagley Family of Aotearoa.
The OIO states:
The Applicant holds substantial interests in the meat industry in New Caledonia. This has led the Applicant to an interest in farming and investments outside of New Caledonia.
The Applicant wishes to acquire the property, which is a relatively steeply contoured sheep and cattle property currently in an unproductive and underperforming state and through investment and experienced management, convert it into a fully productive unit.
The Applicant considers the relevant land to have potential for considerable development in terms of sub-divisional fencing, scrub clearance and fertiliser application. The present owners are not in the position to undertake this development work.
[Decision number 200720017.] Summary statisticsAll investments The gross value of investment approved in the year to August 2007 is more than triple that for the previous August year, and the net value (i.e. disregarding sales from one overseas investor to another, and discounting part New Zealand ownership of the assets) is about 60% higher. By far the greatest part of the value of the approvals is for sale from one overseas investor to another. The number of approvals is about 20% lower.
Investment involving land Gross and net sales of freehold land and other interests in land approved by the OIO during the years to August have fallen considerably in area. Refusals are similar in number, area and value to last year, and are still a tiny proportion of the total.
Fishing Quota No fishing quota have been approved for sale this year.
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Compiled by: Campaign Against Foreign Control of Aotearoa, P. O. Box 2258 Christchurch. |
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