Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – March 2012 Decisions

A quiet month at the OIO, with the most significant transaction being the sale of Turners and Growers to BayWa.

Germans Nab Control Of Turners and Growers

BayWa Aktiengesellschaft various overseas persons (39.8%), Bayerische Raiffeisen-Beteilgungs AG, Germany (35.2%) and Raiffeisen Agrar Invest GmbH, Austria (25%) received approval for the acquisition of rights or interests up to and including 100% of the shares and options to acquire shares of Turners and Growers Limited which owns or controls:

a leasehold interest in 195.1 hectares of land in the Bay of Islands, Riwaka and Doubtless Bay areas; and
a freehold interest in 751.6 hectares of land in the Far North, Waikato, Hastings and Nelson Districts

Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests up to and including 100% of the shares and options to acquire shares of Turners and Growers Limited, the consideration of which exceeds $100m. The vendor was Shareholders of Turners and Growers Limited New Zealand Public (46.9%), various overseas persons (40.6%) and Pacific Fruit Group, United States of America (12.5%): the consideration was $217,300,000 (for 100% of the shares and options).

The OIO states: “BayWa intends to improve the operational performance and competitiveness of Turner and Growers Limited which will provide benefits to stakeholders, growers and the New Zealand economy”. BayWa has global investments across the building, energy and agriculture sectors. It originally secured 63.5% in Turners and Growers through an agreement with Guinness Peat Group to sell its stake for $137.4 million. See our December 1994 commentary for details of Guinness Peat’s original purchase of a stake in Turners and Growers and see our August 2002 commentary for details of Pacific Fruit Group’s original stake in Turners and Growers.

“New Zealand Was A Perfect Fit”

Owen Hembry in the New Zealand Herald (22/11/11) detailed BayWa’s interest in Turners and Growers. “German international trading and services company, BayWa, is prepared to be a majority shareholder in an NZX-listed Turners & Growers if its takeover bid for the horticulture firm is not fully successful, says its Chief Executive, Klaus Lutz. BayWa Aktiengesellschaft’s proposed takeover bid for Turners & Growers is at $1.85 a share – valuing the company at $216.5 million – with Guinness Peat Group having entered into a pre-bid agreement to sell its 63.5% stake. The Munich company’s offer is for all shares in Turners & Growers, conditional on getting more than half the voting rights.

“‘But we are prepared that Turners & Growers will stay as a stock-listed company here at New Zealand Stock Exchange and everybody is more than welcome who is not willing to sell the shares right now’, Lutz said. ‘We are here in a very respectful manner, we would like to listen, to learn; also maybe we can bring something to the party’. Shares in Turners & Growers, which has operations including growing apples, tomatoes and citrus, closed steady at $1.84 yesterday, having closed at $1.69 on the day the takeover offer was announced. Lutz said the offer price was fair, there was no plan to increase the price and he was optimistic of getting regulatory approval.

“BayWa had revenue of €7 billion ($NZ12.5 billion) for the nine months ended September (2011), with core segments of agriculture, building materials and energy. The company’s fruit business started about eight to ten years ago and was a success, but small, Lutz said. ‘And the question for us was how do we proceed with that because the customers, especially the retailers in Germany, were asking and are demanding for more supply all over the year’, he said. ‘We need either to expand the business or to get rid of it, and we made the decision strategically, we want to become a much more international company’.

“The company had investigated areas for expansion, including Latin America and South Africa. ‘But we are not willing to invest the money in these areas because it’s politically, legally and economically not secure enough’, Lutz said. New Zealand was a perfect fit, with similarities to Europe including the legal system. The company’s planning was long-term. ‘I think already whether an investment today is already, or has the chance to be, a success for the successor of my successor’, Lutz said. ‘So we are thinking over decades’.

“Turners & Growers merged with pipfruit exporter ENZA in 2003 and has 45 companies worldwide in the group, including growing, packing and transport operations, and gross turnover of $847.2 million for the year ended December 31 (2010). Fresh fruit consumption in Europe was in stagnation and declining a little in Germany because of a shrinking population, Lutz said. ‘If you want to be a part of this fruit business it’s really a global international business and the future market is Asia and we believe that Turners & Growers is already in a very good position to expand the business in Asia via different participations and subsidiaries’, he said.

“‘If this assumption’s right, that Asia is one of the future markets, Turners & Growers fits perfectly to our internationalisation strategy for BayWa as a whole group’. The head of Goldman Sachs in Germany had asked Lutz if he was interested in Turners & Growers and had also put the company together with Guinness Peat Group. Cooperative banks, which owned about 60% of BayWa, had been a winner out of the global financial crisis which meant the company was very strong financially. ‘Of course it (economic uncertainty) can affect us too’ Lutz said. ‘On the other hand agriculture, energy, building material are three fundamental segments of our human life'”.

Rangiora MDF Plant Gets Another Japanese Owner

Daiken Corporation Japanese Public (97.4%) and unknown overseas persons, various (2.6%) received approval to acquire rights or interests in up to 85.1% of the shares of Daiken New Zealand Limited which owns or controls a freehold interest in 159.1 hectares of land at Upper Sefton Road and Lower Sefton Road, Canterbury. The consideration was $10,640,708; the vendor was Itochu Corporation & Itochu New Zealand Limited Japanese Public (64.2%) and Unknown Overseas Persons, Various (35.8%)

In this decision the OIO states “The Applicant and Itochu Corporation began their joint venture arrangement in New Zealand in late 2008, incorporating Daiken New Zealand Ltd and acquiring the MDF (medium density fibreboard) manufacturing plant at Rangiora in early 2009. Itochu Corporation has now decided to close its New Zealand subsidiary (Itochu New Zealand Ltd), and to decrease its level of direct involvement in Daiken New Zealand Ltd. The Applicant wishes to purchase the shares being divested by Itochu. The joint venture ownership of the MDF manufacturing plant at Rangiora has already led to improved efficiencies and returns and the Applicant’s view is that those improvements will be further enhanced as a result of its acquisition of greater shareholding in Daiken New Zealand Ltd”. See our January 2009 commentary for details of Itochu’s original purchase of the plant.

And Nelson’s Euroglass Becomes Part Of An Aussie Joint Venture

Viridian Glass Limited Partnership Australian Public (56.4%), Euroglass Systems Limited, New Zealand (42%), United Kingdom Public (1.1%), New Zealand Public (0.4%) and various (0.1%) received approval for the acquisition of a leasehold interest in 0.7 hectares of land at 7 & 9 Tokomaru Place and 20 Elms Street, Nelson. The consideration was stated as confidential; the vendor was Tasman Glass Limited Euroglass Systems Limited, New Zealand (100%)

The OIO states: “Euroglass Systems Limited (“Euroglass”) and CSR Viridian (New Zealand) Limited (‘CSR NZ’) operate glass processing businesses in New Zealand. The assets of Euroglass include a glass processing facility in Nelson which is located on leased premises in an industrial estate (the ‘Leasehold Interest’). Euroglass and CSR NZ are seeking to merge their businesses in order to rationalise excess capacity, remove duplication and generally improve the efficiency of their operations. The proposed merger involves each company selling their business and assets (including, in the case of Euroglass and its subsidiaries, the Leasehold Interest) to the Applicant in return for cash consideration and being issued a partnership interest. The Applicant will then continue as the joint venture entity”.

Canadians To Develop Sidewinder Oil Discovery

TAG Oil Ltd. Canada (100%) has received approval for the acquisition of a freehold interest in 13 hectares of land at Upper Durham Road, Inglewood. The vendors were BFF Limited Russell Arthur Boddington, New Zealand (38.25%), Marguerite Elizabeth Boddington, New Zealand (36.75%) and Aaron R Boddington, New Zealand (25%); consideration was not revealed. The OIO states: “The Applicant is a Canadian oil and gas exploration and production company which operates exclusively in New Zealand. The Applicant has been exploring for petroleum from the relevant land and has made a petroleum discovery which it is in the process of developing (the Sidewinder discovery). It is acquiring the land in order to facilitate its current and proposed future operations and activities in relation to the Sidewinder discovery”.

According to the San Francisco Chronicle, TAG Oil Ltd is a Canadian-based production and exploration company with operations focused exclusively in New Zealand. With 100% ownership over all its core assets, including oil and gas production infrastructure, TAG is enjoying substantial oil and gas production and reserve growth through development of several light oil and gas discoveries. TAG is also actively drilling high impact exploration prospects identified across more than 2,953,810 net acres of land in New Zealand. TAG operates two lightly explored new field discovery areas, the Cheal and Sidewinder oil and gas fields. There are currently 19 wells at the Cheal field capable of production, eight of which are currently on-stream. The Sidewinder field has four wells, all currently on-stream.

Other March Decisions

Premier Dairies Limited Balreask Trust, Ireland (100%) received approval for the acquisition of a freehold interest in 57.5 hectares of land at 384 Collinson Road, Tussock Creek, Southland. The consideration was $2,100,000; the vendors were DF Drew Farm Limited Drew (Desmond Francis & Kathleen Cecilia), New Zealand (100%). The OIO states: “The land in question is bounded on its eastern side by land already owned and dairied by the Applicant Premier Dairies Limited. The Applicant also owns land across Makarewa-Browns Road which it dairies. The purchase and amalgamation of the land will allow the Applicant to ‘swap’ some land from one milking platform to another. This will balance up the use of cow shed facilities on the applicant’s existing land and avoid the need for cows to cross Makarewa Browns Road for milking’. Premier Dairies is owned by the Clinton family of Ireland and completed an almost $20 million buy-up of Southland farms during 2008 and 2009. From 2000 to 2002 they bought several properties near Winton, converting them to dairying. For more information, refer to OIC/OIO Decisions written up for December 2000, May/June 2001, February 2002, September 2008, and March and April 2009.

And finally for March, Philip Dean Griffith (as trustee of the Philip D Griffith Family Trust) United States of America (100%) received approval for the acquisition of up to 100% of the shares in Gibbston Valley Wines Limited which owns or controls a freehold interest in 43 hectares of land at Gibbston Valley, Queenstown. The vendors were existing shareholders in Gibbston Valley Wines Limited other than Phillip Griffith New Zealand Public (50.) and United States Public (50%); consideration was confidential.

According to the OIO: “The Applicant (together with his associated persons) owns 84% in Gibbston Valley Wines Limited. The Applicant (together with his associated persons) will acquire up to 100% of the shares in Gibbston Valley Wines Limited in consideration of the Applicant’s ongoing capital contributions and funding of Gibbston Valley Wine’s capital works programme”. See our March and December 2006, and January 2011 commentaries for details of Griffith’s earlier stakes in Gibbston Valley Wines.

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