Foreign investment in Aotearoa/New Zealand
Overseas Investment Office – October 2009 Decisions
ANZ Can’t Get Enough of ING
After three busy months at the OIO, a slightly quieter month. Firstly, just when you think the ANZ has had enough of its association with ING given the flak ANZ received for steering its clients into a couple of dodgy ING investment funds, ANZ buys out ING’s Australasian insurance arm. Perhaps they’ll change its name down the track? Specifically, Australia and New Zealand Banking Group Limited Australia (95.67%), New Zealand (4.33%) received approval for the acquisition of rights or interests in up to 100% of the ordinary fully paid shares of ING Australia Limited, the value of the assets of ING Australia Limited and its 25% or more subsidiaries being greater than $100m, $150m in fact. The vendor was ING Insurance International BV United Kingdom (26%), United States of America and Canada (25%), Netherlands (20%), Luxembourg (10%), Belgium (7%), Various (6%), Switzerland (6%). The OIO states:
“Australia and New Zealand Banking Group Limited (ANZ) and ING Insurance International B.V. (ING Insurance) currently control an incorporated joint venture in Australia, ING Australia Limited (ING Australia), which is an Australian based financial services provider. ING Insurance has agreed to sell its 51% shareholding in ING Australia to ANZ. ING Australia indirectly holds certain New Zealand assets, principally through ING (NZ) Administration Pty Limited in its capacity as trustee of funds offered to the public in New Zealand. The proposed investment will enable ING Insurance to end its involvement in ING Australia and enable ANZ to acquire full ownership in ING Australia thus expanding its wealth management business”.
As reported by Peter Ryan, Business Editor at ABC News in Australia: “The ANZ Bank has swallowed up the Australian and New Zealand operations of ING, further tightening a competition sector that continues to reel from the global financial crisis. The Dutch-owned financial services giant will reap $A1.86 billion by selling its insurance and wealth management stake it had shared with ANZ in a joint venture, making ANZ the sole owner. The sale does not include the online bank ING Direct or ING’s investment management, wholesale management or real estate operations in Australia and New Zealand.
“ING issued a statement confirming the deal this morning, while ANZ went into a trading halt ahead before the terms of the arrangement were officially announced to the stock exchange. ANZ’s acquisition of ING is subject to regulatory approval. While the sale does not impact ING banking arm, the increased consolidation of overall market share by ANZ is likely to attract the attention of Treasurer Wayne Swan, who has previously expressed concerns about the big four Australian banks becoming less competitive as they snare bargains from the global financial crisis.
“The Chief Executive of the Dutch-owned bank, Jan Hommen, said the transaction is part of a ‘back to basics’ strategy and confirmed the bank is busy reducing debt. ‘The sale of our insurance and wealth management operations in Australia and New Zealand is further proof of our determination to simplify the organisation by focusing on fewer, strong franchises that form a coherent group’. Mr Hommen said. ‘This shows once more that our continued transformation is well on track’. ING expects to use the $A509 million net profit from the sale to improve the bank’s debt to equity ratio and free up much needed capital. The current joint venture between ING and ANZ, which dates back to 2002, employs 2,200 staff in Australia and 500 in New Zealand.
“In a statement, ANZ said the agreement with ING will strengthen its profile in wealth management and life insurance. Chief Executive Mike Smith says the significant revenue and cost synergies would allow ANZ to expand without the constraints of joint ownership with ING.
‘ANZ has been able to take advantage of the global financial crisis and ANZ’s strong balance sheet to advance our strategy’, Mr Smith said. ‘This transaction also reinforces that ANZ’s super-regional objective is not just an Asian strategy – it’s a regional strategy founded on strong positions in our Australian, New Zealand and Asia Pacific markets’. ANZ recently acquired the Asian operations of the Royal Bank of Scotland (RBS), which scaled back its global reach as a result of the global financial crisis”. See our August 2005 commentary on ANZ/ING purchase of NBNZ Life Insurance and NBNZ Investment Services, and the 2009 Roger Award Judges’ Report.
Decision # 200920073
Citigroup Quick To Spend Uncle Sam’s Money
Citigroup Inc. United States of America (100%), who you may recall from my July 09 commentary, have just been bailed out by the US taxpayer, has received approval for overseas investment in significant business assets, being the acquisition of rights or interests in 68.11% of the shares of Nikko Cordial Corporation, the value of the assets of Nikko Cordial Corporation and its 25% or more subsidiaries being greater than $100m. The vendor was existing shareholders in Nikko Cordial Corporation Japan (77.26%), United States of America (10%), United Kingdom (9.46%), Various (3.28%); the asset value stated as $723,096,000. The OIO states:
“On 6 March 2007, Citigroup Inc (Citigroup) entered into an Alliance Agreement with Nikko Cordial Corporation (Nikko) to strengthen their relationship. As part of the Alliance Agreement, it was agreed that Citigroup, or a wholly-owned subsidiary of Citigroup, would make a tender offer for between 51% and 100% of the shares in Nikko. At that date, Citigroup, through a wholly-owned subsidiary, Citigroup International LLC, held approximately 4.9 percent of the share of Nikko. As a result of the acquisition of the Nikko shares, Citigroup has acquired an indirect interest in a group on New Zealand companies including the Hirequip Group and the Fleet Partners Group”.
This approval appears no different to the one the OIO gave in February 2008, but perhaps now they have some dosh to complete the deal, thanks to Uncle Sam. As we said then: “Nikko Cordial doesn’t make drinks: it is a financial corporation which owns Hirequip Group and the Fleet Partners Group in Aotearoa. See our commentary for October and December 2006 for further details of Nikko’s acquisition of the two companies”. A report in the Sunday Star-Times on 1/1/09 updates us on the situation, particularly as it pertains to Hirequip, under the heading “Hirequip caught in rumour mill”:
“Financial scandal in Japan and the crippling United States credit crunch have sent rumour mills into overdrive concerning the ownership of leading local equipment hire firm Hirequip. First, Nikko Cordial, the giant Japanese investment bank which bought Hirequip for $165 million through associated interests a year ago, was brought to its knees by exposed impropriety at home barely before the ink was dry on its Kiwi purchase. Then white knight Citigroup, the largest US bank, which secured a 68% stake in troubled Nikko, was itself prostrated by the sub-prime crisis six months later.
“Forced to sell assets to shore up its capital ratios, Citigroup set up a due diligence process in Sydney less than a month ago to seek buyers for the 11 businesses owned by Nikko private equity interests in Britain and Australasia, including Hirequip. Although that incipient sales process had not been made public, news of its existence had filtered across the Tasman and run through a fragmented but booming local equipment hire industry, itself spurred into overdrive by the frantic pace of infrastructure spend.
“In the past two weeks, it was industry knowledge that two recently appointed top Hirequip executives had chosen to leave. Hirequip Chief Executive Officer Brian Stephens confirmed the Chief Financial Officer and his second in charge had gone. ‘Yes, that is the case, but there are stories behind every resignation’, he told the Sunday Star-Times. Hirequip competitors said they had won business from some significant and long-standing Hirequip customers.
“Hirepool Chief Executive Tenby Powell said: ‘We have recently competed against them [Hirequip] on several preferred supply agreements, and have won on each occasion. I can’t quantify the business we gained, but it is not insubstantial’. Powell said substantiated reports of the Sydney sales process for Nikko-owned assets including Hirequip were ‘amazing’. ‘It was only sold last September, and here we are again with another apparent sale’, he said. Hirequip chairman Kim Ellis has heard the rumours, and is unfazed. ‘I am not aware we have lost traditional customers’, he said. ‘But if we have then we have certainly picked up plenty of new business because we are well ahead this year on last’.
“Ellis, former Waste Management Chief Executive and highly regarded in local business circles, was brought into Hirequip by new owners Nikko Principal Investments Australia when his former company was sold and delisted last year. He said Hirequip then had a dysfunctional structure which limited its ability to move forward. ‘We’ve had to start from the top: clean out the top layer and bring dynamic people in’, said Ellis. ‘When you do that, employees have to decide whether they are with you or whether to move on’. As for possible changes in ownership, ‘that is having nil impact on us. We have got our hands full with changes here’. Sydney investment banking sources have confirmed the sales process set up for the private equity assets of Nikko in Australia.
“But even if the sale goes ahead, it will not be of individual private equity assets held by Nikko, but of Nikko itself, the company which manages the various assets, including Hirequip. What usually happens in this situation is that the management successfully buys the management company out, meaning virtually no change for the individual assets within the company. But with the appointment of a new Chief Executive for Citigroup last week, there is speculation the sales process may not go ahead.
“The new Citigroup boss is Vikram Pandit, who was formerly head of Citigroup’s private equity investments division, who has already bought a new private equity business for the company, and who may decide to hold on to that side of the business after all. Citigroup will take full control of Nikko next month, and thus end the agony for the Japanese giant bank which was hit by accounting regularities within the bank which led to profits being restated down one-third”. Given the financial problems besetting Citigroup and ongoing life support from Uncle Sam (see our July 2009 commentary), don’t be surprised if there is more to this story to follow.
Decision # 200720140
More New Zealand Vineyards Sold To The US
Foley Family Wines, Inc United States of America (100%) received approval to acquire rights or interests in 100% of the shares of The New Zealand Wine Fund Limited which owns or controls: a leasehold interest in 37.41 hectares of land at Ugbrooke Rd and Redwood Pass Rd, Dashwood, Marlborough; and a freehold interest in 66.13 hectares of land at Redwood Pass Rd, Dashwood, Marlborough; and a leasehold interest in 4.61 hectares of land at 18 Causeway Rd, Waiheke Island; and a leasehold interest in 4.51 hectares of land at 2 Donald Bruce Rd, Causeway Rd, Waiheke Island; and a leasehold interest in 5.05 hectares of land at 198 Wilma Rd, Waiheke Island. The vendors were existing shareholders of New Zealand Wine Fund Limited New Zealand (59.8%), Various (34.1%), United States of America (6.1%); the consideration for the deal was kept confidential. The OIO states;
“The Applicant is committed to making some of the best wines in the world. Since 1996, it has acquired a number of assets including vineyards, land and wineries. The Applicant continues to seek global opportunities that meet its investment criteria. The brands and products produced by NZ Wine Fund have been identified and recognised by the Applicant for their high quality which is the fundamental requirement for any investment made by it. NZ Wine Fund is a substantial producer of Marlborough sauvignon blanc. It has quality brands in market segments that are very complementary to the Applicant’s wine business. The Applicant believes that, under its ownership, NZ Wine Fund will be able to access substantial opportunities to increase exports of its wines to the United States of America and elsewhere utilising the Applicant’s existing and planned distribution capabilities”.
The Marlborough Express shed some light on this deal on 10/8/09: “Marlborough-based wine company, the New Zealand Wine Fund, has been bought by a United States-based wine company. California-based Foley Family Wines has entered into an agreement with the New Zealand Wine Fund to buy the whole company, which includes Vavasour, Goldwater, Clifford Bay, Boatshed Bay, Dashwood and Redwood Pass. Vavasour Wine Company managing director Peter Scutts said the agreement included the sale of 100 hectares of vineyard, of which 80% is Sauvignon Blanc.
“Mr Scutts said the sale of the New Zealand Wine Fund to the Sonoma-based wine company, which was established in 1996, was subject to clearance by the New Zealand Overseas Investment Office. The agreement was signed on July 31 and investors were informed late last week of the decision. Mr Scutts said the company produced 280,000 cases of wine but had planned to expand to 350,000 cases within the next few years. ‘It wouldn’t surprise me if he wanted to grow that company beyond that number’. Mr Scutts said that while the company was not necessarily looking to sell it came at a time when some of the major investors were looking to potentially sell. He said company owner Bill Foley had approached the fund and made a good offer.
“Mr Foley had a distribution network in the United States which would be a huge benefit to the wineries in the future, Mr Scutts said. Mr Foley founded his company in 1996 and with acquisitions of other wineries it now produces nearly half a million cases a year. The fund will be its first overseas acquisition. About 100 hectares of vineyards 85% Sauvignon Blanc are included in the deal. Altogether, the fund produces about 280,000 cases a year. New Zealand Winegrowers Chief Executive Philip Gregan said the sale meant that nearly half of the country’s wine production was now in the hands of overseas-owned companies. ‘We take foreign investment as a sign of marketplace success for New Zealand wines’, he said. ‘It means we’re successful and people want to be part of it’. New Zealand Winegrowers Chairman Stuart Smith said overseas investment was a good thing for the New Zealand wine industry because the investing companies came with their own distribution channels”. When Philip and Stuart say “having half the country’s wine production overseas owned is successful and good for the NZ wine industry”, I presume they are referring to the overseas owners! And I’m sure these owners don’t buy into the old winemakers’ saying: “How do you make a small fortune? Start with a large one and go into the wine industry”.
Decision # 200920036
Auckland’s ASB Tennis Centre Needs UK Money For Upgrade
Next Generation Clubs Australia Pty Limited and Next Generation Clubs NZ Limited United Kingdom (91.8%), Various (8.2%) received approval to acquire a leasehold interest in 0.43 hectares of land at 1 Tennis Lane, Stanley Street, Auckland. The vendor was Tennis Auckland Region Incorporated New Zealand (100%); consideration was $2,566,872. The OIO states: “The ASB Bank Tennis Centre (Tennis Centre) is constructed on the land. Tennis Auckland Region Incorporated (Tennis Auckland) leases the land from the Auckland City Council (ACC).Tennis Auckland has agreed with ACC to take a new lease of the land for the purposes of allowing the Applicant to redevelop the tennis courts and other tennis facilities, developing the Tennis Centre into a sports and lifestyle centre (leisure centre) and to take a sub-lease of certain areas of the Tennis Centre for the operation of the leisure centre. The proposal will facilitate a substantial upgrade and redevelopment of the existing ASB Tennis Stadium and the associated facilities on the land, including the upgrading of the tennis facilities and the development of the leisure centre and new underground car parking”.
Decision # 200920031
Other October Decisions
RBC Trustees (CI) Limited Canada (100%) received approval to acquire rights or interests in 100% of the shares of Arden Properties Limited which owns or controls a freehold interest in 231.39 hectares of land at Craggy Range, Havelock North, Hawkes Bay. The vendor was The Murrayfield Trust New Zealand (100%); consideration was $3.1 million. The OIO states: “One of the trustees of the Vendor is Jonathan McHardy, a member of the Applicant’s pension plan. In 2007, the Applicant advanced funds to the Vendor to purchase the land at Craggy Range, using Arden Properties Limited as the investment vehicle. The Applicant holds a mortgage over the property. The Applicant is acquiring the shares in Arden Properties Limited solely as trustee of the pension plan of which Jonathan McHardy is a beneficiary. The Investment will cease when the shares of Arden Properties Limited are transferred to Mr McHardy once he reaches retirement age or leaves his employment”.
Decision # 200820027
Fletcher Concrete and Infrastructure Limited New Zealand (66.11%), Australia (33.56%), Various (0.33%) received approval to acquire a leasehold interest in 3.8 hectares of land at 31 Rewa Rewa Rd, Whangarei. The vendor was Stevenson Properties Limited New Zealand (100.0%); consideration was $1,575,000. On 13 February 2009, Fletchers received Commerce Commission clearance to acquire up to 100% of the assets of Stevenson Group Limited’s Whangarei and Auckland masonry businesses, having been previously turned down by the Commission in 2005. The difference this time was that Stevenson’s was losing money and was facing imminent closure.
Decision # 200920044
PIC NZ Holdings Limited New Zealand (50%), Australia (50%) received approval to acquire rights or interests in 100% of the shares of Bardfield Farms Limited which owns or controls: a freehold interest in 31.16 hectares of land at 118 Frost Road, Te Kohanga, Franklin; and a freehold interest in 30.89 hectares of land at 715 Mitchells Road, Dunsandel, Canterbury. The vendor was existing shareholders of Bardfield Farms Limited New Zealand (100%); consideration was $4,152,084 less the amount of the borrowings that are yet to be determined. The properties operate as pig farms which are planned to continue. See our April 2007 commentary regarding PIC NZ Holdings purchase of a pig breeding operation with 540 hectares, leasehold from Goodman Fielder.
Decision # 200920048
William John Tinning United States of America (100%) received approval to acquire a freehold interest in 18.11 hectares of land at McFelins Rd, Cromwell. The vendor was Gary Anthony Anderson and Jacqueline Marie Rose-Anderson New Zealand (100%); consideration was kept confidential. Tinning intends to establish an orchard on the property.
Decision # 200920054
And finally for October, The New Zealand Redwood Company United States of America (100%) received approval to acquire a freehold interest in 460.67 hectares of land at 715 Murimotu Rd, RD 5, Hunterville. The vendor was ASB Bank Limited Australia (100%); consideration was $1,575,000. It intends to plant the property in redwood trees which is adjacent to a 400 hectare redwood forest it already owns. The New Zealand Redwood Company is owned by the Soper and Wheeler Families of the USA. The Soper and Wheeler families have made a number of land purchases, the last being in December 2004 (see our commentary for that month for further details). They purchased 2082 hectares at Saddle Peak, Geraldine largely for forestry in February 2002 for $1,629,000. The Overseas Investment Commission stated at the time that a large area of the property was marginal for forestry purposes. This land was sold in March 2007 for a confidential amount to Blakely Pacific Limited, owned in the USA by the Eddy Family. Blakely have made a number of other land purchases here also.
Decision # 200920071
Summary Statistics October 2009
Asset value
| Oct 2009 | Jan-Oct 2009 | Jan-Oct 2008 | |
|---|---|---|---|
| Number of approvals | 9 | 131 | 117 |
| Net Investment $ | 22,630,182 | 835,107,091 | 1,221,116,991 |
| Gross value of consideration | 36,668,956 | 7,559,018,571 | 5,740,357,403 |
| Asset Value | 877,196,000 | 19,088,089,444 | 598,558,000 |
Freehold land approved for sale
| Oct 2009 | Jan-Oct 2009 | Jan-Oct 2008 | |
|---|---|---|---|
| Number of approvals | 5 | 110 | 86 |
| Net land area (ha) | 320 | 18,295 | 12,484 |
| Gross land area (ha) | 838 | 260,477 | 30,692 |
Other interests in land approved for sale (for example leases and crown pastoral leases)
| Oct 2009 | Jan-Oct 2009 | Jan-Oct 2008 | |
|---|---|---|---|
| Number of approvals | 3 | 18 | 26 |
| Net land area (ha) | 32 | 1,048 | 14,445 |
| Gross land area (ha) | 56 | 90,771 | 27,574 |
Applications denied
| Oct 2009 | Jan-Oct 2009 | Jan-Oct 2008 | |
|---|---|---|---|
| Number of declines | 0 | 0 | 4 |
| Total proposed purchase price ($) | 0 | 0 | 4,633,252,517 |
| Total proposed area to be acquired (ha) | 0 | 0 | 3,163 |
Fishing Quota
As usual there was no fishing quota approved for sale this month.
Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.