Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – October 2012 Decisions

Iconic Fisher & Paykel Swallowed Up By Haier

Not many approvals this month, but a number of significant ones. Firstly, Haier (Singapore) Management Holding Co Pte Ltd Haier Group Corporation, China, People’s Republic of (100%) received approval for the acquisition of rights or interests in up to 100% of the shares of Fisher & Paykel Appliances Holdings Limited, the consideration of which exceeds $100m. Consideration was up to $741,616,806. The vendors were Existing shareholders of Fisher & Paykel Appliance Holdings Limited other Haier (Singapore) Management Holding Co. Pte Ltd various New Zealand Individuals, New Zealand (62.4%), Allan Gray Australia Pty Limited Australia (21.8%), Accident Compensation Corporation (9%) and AMP Capital Holdings Limited, Australia (6.8%).

The OIO states: “The Applicant currently owns 20% of the shares in Fisher & Paykel Appliances Holdings Limited (“Fisher & Paykel Appliances”) and seeks to acquire the remaining shares. The Applicant is a wholly owned subsidiary of the Haier Group Corporation, a multinational consumer electronics and home appliances manufacturer. The core products manufactured include refrigerators/freezers, washing machines, air conditioners, dishwashers and televisions”.

Christopher Adams in the NZ Herald sounds a warning about the deal (7/11/12). “As Fisher & Paykel Appliances falls into Chinese ownership a prominent fund manager is warning that more local companies will pass into foreign hands unless New Zealand deepens its capital markets. In the climax of an almost two month long takeover battle, Qingdao-based Haier yesterday secured ownership of over 90% of F&P Appliances’ shares, winning the right to compulsorily acquire the rest of the nearly eight decade-old Kiwi manufacturer. It can now de-list the East Tamaki-based firm from the NZX and have unrestricted access to its valuable technology, such as direct drive washing machine motors.

“Brian Gaynor, an Executive Director at Milford Asset Management, which had owned shares in F&P Appliances, said its slide into full foreign ownership began when Haier purchased a 20% stake in the company in 2009. At that time the New Zealand firm was struggling beneath almost $500 million worth of debt as it relocated its manufacturing to lower-cost countries while the global financial crisis was sapping demand in its key appliance markets. ‘The reality is that when this company got into trouble they had to go to the Chinese to help bail them out’, Gaynor said. ‘The slide starts that way – if you don’t have the capital resources in your country to support businesses who get into trouble they will go offshore’. Haier has indicated that it intends to keep F&P Appliances as a stand-alone business run by local management. The Chinese firm has also said it plans to expand the company’s New Zealand-based research and development team, and not shut down remaining Auckland-based manufacturing operations.

“Technology commentator Peter Griffin said such promises were often made during foreign takeovers of local technology firms, but history had shown they were not always kept. ‘It is a major hit when a company the size of Fisher & Paykel Appliances goes because we lose the control and then we’re just at the forces of international markets’, Griffin said. ‘It [F&P Appliances] could be gone completely from New Zealand shores within two years’. Figures from the Technology Investment Network show 33 of this country’s biggest technology firms, including F&P Appliances, have passed into foreign ownership over the past decade. Sir Peter Maire, who sold navigation device maker Navman to US firm Brunswick Marine in 2004, told the Business Herald in September (2012) that Kiwi tech companies were bought for their intellectual property but ‘in time they end up being gutted’.

“Labour economic development spokesman David Cunliffe said yesterday had been a dark day for high-tech manufacturing in this country, with crystal oscillator maker Rakon also announcing that it would shift manufacturing to lower cost plants in China and India, cutting up to 60 local jobs in the process. ‘New Zealand has lost an icon with Fisher & Paykel officially sold to Haier’, Cunliffe said. ‘It’s worrying news and Labour will hold Haier to its assurances that Fisher & Paykel’s research will stay in New Zealand’. Citing Statistics NZ figures, he said this country had shed 5,700 manufacturing jobs in the past year. “Haier’s Liang Haishan said the company was very pleased with the position it had achieved. ‘We are delighted that a significant majority of shareholders have recognised the value of our offer'”. While Haier maybe delighted, most New Zealanders will be sad at the passing of this once great NZ manufacturing icon.

Fulton Hogan Offloads 3,000 Hectares Of forest.

In another significant sale, Forestry Fund 9 NZ Limited various overseas persons (68.5%), United States Public (21.7%) and United Kingdom Public (9.8%) received approval for the acquisition of a freehold interest in:

656.9 hectares (Waitahuna Forestry Block);
209.5 hectares (Glenore Forestry Block);
434 hectares (Falla Burn Forestry Block);
739.8 hectares (Wetherstons Road Forestry Block);
353.9 hectares (Nugget Stream Forestry Block);
185.4 hectares (Scroggs Hill Forestry Block);
89.5 hectares (Christies Gully Forestry Block); and
344 hectares (Moeraki Bush Forestry Block).

The vendor was Fulton Hogan Limited New Zealand Public (85%) and Netherlands Public various (15%); consideration was kept confidential. The OIO states: “The Applicant is acquiring the land as a commercial forestry investment. The land is currently, and will continue to be, used as a forestry operation”. Paul McBeth in the National Business Review (27/11/12) comments on the deal: “Fulton Hogan has got Overseas Investment Office approval to sell forestry estates in Otago as it looks to dispose of non-core assets in a bid to strengthen its balance sheet. The Christchurch-based company sold 3,013ha of forestry land to Forestry Fund 9 NZ, a subsidiary of global investment manager GMO, after completing a sale and purchase agreement in June. The OIO granted approval on October 18 for an undisclosed sum, according to a decision summary.

“Fulton Hogan told shareholders in its annual review the contract was completed after ‘a lengthy period of due diligence’ and was conditional on OIO approval. That sign off and settlement of the purchase price was expected in December. Managing Director Nick Miller told BusinessDesk the company was selling non-core assets, including its forestry estate and some land blocks, to bolster its balance sheet and repay debt after buying out its partner in Victoria-based Road Pioneer Services and buying back 37% of shares held by Shell New Zealand. ‘We’ve done a review of non-core activities in Fulton Hogan, and in the report you will note that we have divested our forestry business, which we determined is not core’, he says. ‘We’re taking advantage of a strong market in that sector and have concluded a sale’.

“The privately-held construction firm is also selling land it has built up over the past 80 years, which will also go toward strengthening its books. ‘We’ve divested some of that surplus land in New Zealand and certainly two or three blocks in Oz that are surplus to our needs that we intend to divest over the coming year’. Last year (2011), the GMO fund bought 1,149ha near Taupo to plant pinus radiata. As a condition of the purchase, Forestry Fund 9 entered into a nitrogen management deed with Lake Taupo Protection Trust so that it has a nitrogen discharge allowance of 5kg or less of nitrogen per hectare per annum for the land for 999 years. The pine forest is expected to meet that requirement”. Details of the GMO Taupo purchase referred to above is in our March 2011 commentary. See our commentaries for May 1998, April, June and September 2005 for details of other GMO forestry purchases here.

Heineken Buys DB Breweries

Heineken International BV Heineken Family, Netherlands (22.6%), various (24.1%), North American Public (20.1%), Fomento Economico Mexicano, SAB de CV (FEMSA), Mexico (20%), United Kingdom Public (8.3%), Greenfee BV, Netherlands (2.9%) and Dutch Public (2.%) received approval for the acquisition of rights or interests in up to 100% of the shares of Asia Pacific Breweries Limited which owns or controls:

a freehold interest in 13.4 hectares of land at Waitemata Brewery, Otahuhu;
a freehold interest in nine hectares of land at Tui Brewery, Mangatainoka; and
a leasehold interest in 1.3 hectares of land at Glenfield Tavern.

Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests in up to 100% of the shares of Asia Pacific Breweries Limited, the value of the assets of Asia Pacific Breweries Limited and its 25% or more subsidiaries being greater than $100m. The vendors were Existing shareholders of Asia Pacific Breweries Limited other than Heineken International BV Fraser and Neave, Limited, Singapore (73.3%) and Singapore Public (26.7%); asset value was stated at $331,000,000 (being the asset value of DB Breweries Limited).

The OIO states: “The Applicant currently owns approximately 46% of Asia Pacific Breweries Limited (“APBL”) and aims to increase its shareholding up to 100%. APBL owns 100% of DB Breweries Limited. The Applicant’s goal is to grow its presence in emerging markets (such as Asia). Acquiring APBL provides a unique opportunity for the Applicant to achieve its goal”. 3 News (4/8/12) reported on the deal in the context of the larger global transaction this deal is part of. “A takeover battle among foreign beer companies has changed the ownership of Dominion Breweries, New Zealand’s second-biggest brewer. The maker of Tui beer, which is marketed as an iconic New Zealand brand, is owned by Asia Pacific Breweries, which is being shaken up by a multi-billion-dollar deal.

“The Dutch beer maker Heineken is spending $S5.1 billion ($NZ5 billion) to buy 40% of Asia Pacific Breweries from Singapore-based Fraser and Neave, taking its stake to 82%. It will attempt to move to full control. DB, which competes against Lion Breweries, has declined to comment on the ownership shakeup, which was first signalled in July (2012). Lion Breweries is owned by Japan’s Kirin Holdings, which was seen as a rival for Asia Pacific Breweries. Heineken is focused on building its share of beer markets in Asia because of lacklustre sales in Europe. DB already brews Heineken under licence along with Amstel and Tiger. Its biggest domestic brands are Tui and Export Gold”.

Olam Goes To 100% Of NZ Farming Systems Uruguay

Olam International Limited North American Public (26.6%), Singapore Public (24%), Kewelram Chanrai Holdings Limited, Singapore (20.2%), Singapore Government, Singapore (16.4%) and various overseas persons (12.8%) received approval for the acquisition of rights or interests in the remaining 14% of the issued share capital of NZ Farming Systems Uruguay Limited, the value of the assets of NZ Farming Systems Uruguay Limited and its 25% or more subsidiaries being greater than $100m.The vendors were Existing shareholders of NZ Farming Systems Uruguay Limited other than Olam International Limited New Zealand (100%); consideration was $25,800,000.

The OIO states: “The Applicant currently owns 85.929% of NZ Farming Systems Uruguay Limited and wishes to be in a position to acquire the remaining 14.071% of the shares. The investment will enable the Applicant to further its long-term growth strategy into the key dairy areas of Oceania and North and South America”. Olam International is a Singapore-based enterprise in the supply chain management of agricultural products and food ingredients, sourcing 20 products with a direct presence in over 60 countries and supplying them to over 10,000 customers in more than 55 destination markets. Olam International trades agricultural commodities such as cocoa, coffee, cashew, sesame, rice and teak. See our August 2010 commentary for details of Olam’s original purchase of a controlling interest in NZ Farming Systems Uruguay Limited.

Other October Decisions

RV Manufacturing Group LP Kea Manufacturing (New Zealand) Limited, New Zealand (50%), New Zealand Public (30.9%), United States Public (12%), various overseas persons (3.6%), Bermuda Public (3.5%) received approval for the acquisition of rights or interests in up to 30% of the shares of Fibre Reinforced Plastics (NZ) Limited, which owns or controls a leasehold interest in 1.1 hectares of land at 65 and 65A Keeling Road, Henderson, Auckland. The vendor was Kea Manufacturing (New Zealand) Limited New Zealand (100%); asset value was $731,625. The OIO states: “The overseas investment is part of a larger transaction that involves the merging of the vehicle manufacturing of Tourism Holdings Limited and Kea Manufacturing (New Zealand) Limited”.

Nancy Wong Hong Kong (SAR) (100%) received approval for the acquisition of a freehold interest in 4.7 hectares of land at 169B Union Road, RD3, Pukekohe. The vendor was Alistair Fleming & Lynda Fleming New Zealand (100%); consideration was $950,000. The OIO states: “The Applicant is the majority shareholder and director of New Zealand registered company Ultra Merit International Limited which owns a thoroughbred horse break-in, spelling and training facility on the adjoining property. The Applicant is also a director and majority shareholder of The Thoroughbred Trader Limited. The investment will enable the expansion of these businesses”. See our October 2010 commentary for details of Wong’s purchase of a neighbouring property.

And finally for October, Consulate-General of the People’s Republic of China in Christchurch Government of the People’s Republic of China (100%) received approval for the acquisition of stratum in freehold interests in approximately 0.9 hectares of land at Upper Riccarton, Christchurch. The vendor was Matangi Properties Limited Terence Leonard Pratley, New Zealand (50%) Amanda Dominique Hudson, New Zealand (50%); consideration was $5,600,000. The OIO states: “The Applicant is the Consulate-General of the People’s Republic of China in Christchurch, a diplomatic post similar to New Zealand’s Embassy in Beijing and Consulates-General in Shanghai, Hong Kong and Guangzhou, China. The Applicant intends to acquire the relevant land to provide accommodation for its staff and to host official functions”. The $5.6 million consideration was originally withheld by the OIO but was released in January 2013 after CAFCA appealed.

Liz McDonald in the Christchurch Press reports further on the deal (12/12/12): “Swanky tourist accommodation will give way to diplomatic parties after the Overseas Investment Office approved the Chinese Government’s bid to buy a historic Christchurch homestead. The office has allowed China to purchase Huntley Lodge, a former stately home turned hotel in Yaldhurst Rd in the suburb of Sockburn. The property had been put for sale by Hamilton-based owners Terence Pratley and Amanda Hudson, who have been running it as a boutique hotel, restaurant and event venue for the past three years. The lodge has also hosted the Christchurch Club since its Latimer Square clubrooms were damaged in the earthquakes.

“Pratley and Hudson, who bought the property from the receivers of bankrupted property developer Donald John Stewart Reid in 2009, said they would close their business at the end of the month. The Chinese Consulate-General in Christchurch intends to use the property for functions and staff accommodation. The Consulate-General was opened as China’s first in the South Island a year ago and had been issuing travel visas and passports from an office in Hansons Lane in Upper Riccarton. Built as a grand homestead in 1876, the Sockburn property includes the main house with original architectural features plus smaller buildings, 16 bedrooms, dining and reception areas, and just under a hectare of park-like grounds with a swimming pool”.

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Christchurch.