Foreign investment in Aotearoa/New Zealand

Overseas Investment Office November 2012 Decisions

Woolworths Restructures Its Property Holdings

Another month short on volume but high on value, featuring a number of ownership restructures of overseas-controlled New Zealand assets. Firstly Woolworths Limited, Shopping Centres Australasia Property Group Retail Trust and Shopping Centres Australasia Property RE Limited Australian Public (98.4%), New Zealand Public (1.1%) and various overseas persons (0.5%) received approval for an overseas investment in sensitive land, being Shopping Centres Australasia Property Group Retail Trust, and Shopping Centres Australasia Property RE Limited’s (“the Unit Trusts”) acquisition of:

a freehold interest in approximately 1 hectare of land at Fernlea Ave and Roberts Line, Kelvin Grove; and
a freehold interest in approximately 1.2 hectares of land at Kerikeri Road, Kerikeri; and
a freehold interest in approximately 1 hectare of land at Andersons Bay Road, Dunedin.

As part of this transaction, approval was also received for an overseas investment in sensitive land, being Woolworths Limited’s (“Woolworths”) acquisition of:

a leasehold interest in approximately 0.9997 hectares of land at Fernlea Ave and Roberts Line, Kelvin Grove; and
a leasehold interest in approximately 1.1907 hectares of land at Kerikeri Road, Kerikeri; and
a leasehold interest in approximately 1.0298 hectares of land at Andersons Bay Road, Dunedin.

Approval was also received for an overseas investment in significant business assets, being the Unit Trusts’ acquisition of property in New Zealand used in carrying on a business in New Zealand, the consideration of which exceeds $100m. The vendor was General Distributors Limited Australian Public (98.4%), New Zealand Public (1.1%) and various overseas persons (0.5%); the asset value was stated at $218,000,000. The OIO states: “Woolworths Limited (“Woolworths”), an Australian Stock Exchange-listed company, operates more than 3,000 stores across Australia and New Zealand. Its primary business is the operation and management of supermarkets, with 161 supermarket stores in New Zealand. Woolworths is proposing to restructure by establishing a real estate investment trust, which will comprise two unit trusts (Shopping Centres Australasia Property Group Retail Trust and Shopping Centres Australasia Property RE Limited).

“14 New Zealand properties, three of which are sensitive under the Overseas Investment Act 2005, together with 57 Australian properties will be transferred from General Distributors Limited, a subsidiary of Woolworths, to the unit trusts and leased back to Woolworths. Initially the unit trusts will be wholly owned, indirect subsidiaries of Woolworths, however, the units in the unit trusts will eventually be owned by existing Woolworths’ security holders, retail investors and possibly by institutional investors”. See our April 1999, December 2002, September 2004, June 2005, November 2009 and November 2011 commentaries for details on some of these original purchases by General Distributors.

Juken Northern Plantations Gets New Japanese Owner

Summit Forest Management of NZ Limited Sumitomo Corporation, Japan (100%) received approval for the acquisition of rights or interests in 100% of the shares of Juken NZ Northern Plantations Limited which owns or controls an interest in approximately 8,030 hectares of leasehold land and 816 hectares of freehold land located in Northland. Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests in 100% of the shares of Juken NZ Northern Plantations Limited, the consideration of which exceeds $100m. The vendor was Juken New Zealand Limited Wood One Company Limited, Japan (100%); consideration was confidential. The OIO states: “The Applicant intends to maintain and develop the forests on the relevant land in order to produce timber for domestic processing and export markets”.

Goodman Restructures Highbrook Business Park

Goodman Property Trust New Zealand Public (66.9%), Australian Public (13.2%), various overseas persons (10.3%), Accident Compensation Corporation (6.1%), Chinese Government, China, People’s Republic of (2.6%), APG Asset Management, United States of America (0.6%) and Abu Dhabi Investment Council, United Arab Emirates (0.4%) received approval for the acquisition of rights or interests in 100% of the issued share capital of Highbrook Development Limited and Highbrook Business Park Limited which own or control:

a freehold interest in 0.7 hectares of land at 201 Highbrook Drive; and
a freehold interest in 4.3 hectares of land at 52 Highbrook Drive and 107 Kerwyn Ave; and
a freehold interest in 32 hectares of land at 80 and 88 Highbrook Drive, 30 Sir Woolf Fisher Drive, 118 Kerwyn Ave, 12 Pukekiwiriki Place and two other locations; and
a freehold interest in 49 hectares of land at 67 Highbrook Drive and 17 Business Parade North; and
a freehold interest in 2.2 hectares of land at 8 Pukekiwiriki Place and 116 Kerwyn Ave; and
a freehold interest in 2.7 hectares of land at 36 Highbrook Drive and 111 Kerwyn Ave.

Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of property in New Zealand used in carrying on business in New Zealand for consideration exceeding $100m, that property being the remaining 50% of the issued share capital of Highbrook Development Limited that it does not yet own, and the remaining 25% of the issued share capital of Highbrook Business Park Limited that it does not yet own.

The vendor was Goodman Group and Fisher Trust Fisher Trust, New Zealand (50%), Australian Public (38.5%), Chinese Government, China, People’s Republic of (7.5%), APG Asset Management, United States of America (1.6%), various overseas persons (1.3%) and Abu Dhabi Investment Council, United Arab Emirates (1.1%); consideration was $186,600,000. The OIO states: “The Highbrook Business Park is presently around half developed. The Investment will ensure that construction of the business park can continue, as the development requires the further provision of substantial amounts of capital”. See our December 2007 commentary for details of Goodman’s earlier restructure of the Highbrook Park ownership.

Pepper Refinances Itself

Pepper Australia Pty Limited (as ultimate beneficiary of the Pepper NZ Residential Securities Trust 2012-1) Seumas Dawes, Australia (67.9%), IRG TMT Asia Fund, Cayman Islands (10.2%), Jonathan Laredo, United Kingdom (10.2%), Steven Simpson, Singapore (5.1%), Deutsche Bank AG, Sydney Branch, Australia (3.5%), Mark Attmore, United Kingdom (1.9%) and various overseas persons (1.2%) received approval for an overseas investment in significant business assets, being the acquisition of property in New Zealand used in carrying on business in New Zealand by Pepper NZ Residential Securities Trust 2012-1 for consideration exceeding $100m, that property being a residential mortgage portfolio and the repurchase, from time to time, of mortgage assets by the Pepper NZ Mortgage Warehouse Trust 2011-1 in the event of a repurchase transaction.

The vendor was Pepper Australia Pty Limited (as ultimate beneficiary of the Pepper NZ Mortgage Warehouse Trust 2011-1) Seumas Dawes, Australia (67.9%), IRG TMT Asia Fund, Cayman Islands (10.2%), Jonathan Laredo, United Kingdom (10.2%), Steven Simpson, Singapore (5.1%), Deutsche Bank AG, Sydney Branch, Australia (3.5%), Mark Attmore, United Kingdom (1.9%) and various overseas persons (1.2%), ie exactly the same shareholding; consideration was confidential. The OIO states: “The Investment is a refinancing of a residential mortgage portfolio”. We last reported on this in July 2011 when Pepper bought the residential mortgage portfolio of GE Custodians. Pepper is Australia’s own sub-prime mortgage lender.

Nib Nabs Tower Medical Insurance

Nib Holdings Limited Australian Public (90.7%) and Perpetual Limited, Australia (9.3%) received approval for the acquisition of rights or interests in 100% of the shares of Tower Medical Insurance Limited, the consideration of which exceeds $100m. The vendor was Tower Health & Life Limited Guinness Peat Group PLC, United Kingdom (33.6%), New Zealand Public (6.6%) and various (59.8%); consideration was $101,600,000. The OIO states: “The Applicant is the parent company of nib health funds limited, an Australian heath insurance provider. The purchase of Tower Medical Insurance Limited complements the Applicant’s existing business. The Applicant intends to emerge as a new brand and offer competition in the New Zealand market.”

The National Business Review reported on this deal (2/11/12): “Tower, the insurance and wealth management company, has agreed to sell Tower Medical Insurance to ASX-listed Nib Holdings for about $102 million and plans to return the capital to shareholders. The shares jumped 3.1%. The decision to sell Tower Medical, which has a market share of about 13%, came after Tower reviewed all of its insurance businesses this year and concluded it would not achieve ‘the necessary scale of return in this business in the immediate future’. Tower Managing Director Rob Flannagan also says net profit in the year ended September 30 (2012) was in a range of $51 million to $56 million, exceeding the upper end of analyst estimates.

“Nib says buying Tower Medical fits with its strategy of expanding in international markets. Tower Medical has annual premium revenue of about $140 million and reported net profit of $6.8 million in the second half. The unit ranks second in New Zealand’s health insurance market behind Southern Cross Healthcare with 60%. ‘We’ve been looking at the New Zealand market for about three years now’, Managing Director Mark Fitzgibbon told BusinessDesk. ‘We’re a believer in big trends, world trends. There’s more spending on healthcare and dismantling of international barriers’.

“He says the New Zealand market is like Australia’s health insurance landscape early last decade – ‘one dominant player, no obvious competitive tension and the Government knows budget constraints mean there must be more future private funding of healthcare. There is opportunity for a new player’, he says. Nib brands will likely be rolled out in the New Zealand market early in the New Year (2013). The sale to Nib is subject to Overseas Investment Office approval and is expected to settle before December 31 (2012). Nib will fund the purchase through surplus capital and a $70 million senior debt facility. It will not own hospitals or health clinics and expects to contract with doctors and private health providers including Southern Cross…”

GEA Buys Milfos

GEA Farm Technologies New Zealand Limited various (31.9%), United Kingdom Public (22.7%), French Public (13.6%), German Public (11%), Black Rock Inc., United States of America (9.8%), Kuwait Investment Office (6.4%), United States Public (3%) and Kuwait Public (1.7%) received approval for the acquisition of rights or interests in 100% of the issued share capital of Milfos International Limited which owns or controls a leasehold interest in approximately 1.2 hectares of land at 12-14 Quail Place, Hamilton. The vendors were Existing shareholders of Milfos International Limited New Zealand (100%); consideration was confidential.

The OIO states: “The Applicant manufactures a range of products for the agricultural industry. The Investment will allow the Applicant to strengthen its existing product range and increase the visibility of the GEA brand in New Zealand”. Background on GEA and Milfos below is courtesy of www.fil.co.nz. “GEA Farm Technologies increases its expertise in pastoral-based dairy farming with the acquisition of the Milfos International Group; with its headquarters based in Hamilton, New Zealand.

“Milfos is a leading designer and manufacturer of innovative dairy technologies offering a comprehensive range of milking, cooling, stalling and automation solutions along with service and maintenance programmes focused on grazing farm applications. This acquisition clears the way for GEA Farm Technologies to fully participate in growth opportunities within all pastoral farming markets worldwide and specifically within the key market of New Zealand. New Zealand exports 95% of its annual milk production representing more than one-third of all global cross-border trade.

“‘This acquisition is another important step in the GEA Farm Technologies Total Solutions Strategy. The Milfos product portfolio enables us to better meet the requirements of grazing markets by offering best-in-class tailored solutions. In addition, our combined sales channels will strengthen our position in Asia Pacific and increase GEA Farm Technologies influence in emerging markets’ says Dr. Ulrich Hüllmann, Chief Executive Officer and Segment President of GEA Farm Technologies. ‘This acquisition offers significant benefits to our customers. Our companies share strong common values and innovative spirit. These elements are at the heart of our daily activities and our drive to deliver technological advances that create sustainable value for our customers into the future’, says Jamie Mikkelson, CEO and Co-Shareholder of Milfos International Ltd.

“Milfos, exporting to more than 20 countries, was formed in 1987 and has more than 100 employees. It has a strong background in precision stainless steel manufacturing and the company has diversified into electronics, plastics and mild steel products. With a policy of adopting in-house manufacturing the company controls all aspects of the product life cycle, including research, design, production and delivery. The acquisition is subject to approval of the New Zealand Overseas Investment Office (OIO).

“GEA Farm Technologies with its main office in Bönen, Germany offers farmers integrated product and application solutions, which today’s producers require: From design and planning of barn and business concepts, up to the daily herd and farm management. Since 1926 the company is known for future-oriented technical innovations. With its combined key competences from milk production, manure systems, barn equipment, automatic feeding as well as state of the art service and hygiene concepts, GEA Farm Technologies provides a complete and up to date range of products and services. These products and services cover all herd sizes and meet the full range of customer requirements around the world, supporting the scale and nature of individual livestock operations. GEA Farm Technologies employs about 2,300 people worldwide in subsidiaries in over 60 countries.

“GEA Group Aktiengesellschaft is one of the largest suppliers of process technology and components for the food and energy industries. As an international technology group, the Company focuses on sophisticated production processes. In 2011, GEA generated consolidated revenues in excess of €5.4 billion, 70% of which came from the food and energy sectors, which are long-term growth industries. The group employed about 24,500 people worldwide as of September 30, 2012. GEA Group is a market and technology leader in its business areas. It is listed in Germany’s MDAX stock index”.

Other November Decisions

Boulcott Hospital Limited Evolution Healthcare Partners Pty Limited, Australia (100%) received approval for the acquisition of a freehold interest in 0.9 hectares of land at 666-672 and 678 High Street, Lower Hutt. The vendor was Boulcott Clinic Limited New Zealand (100%); consideration was confidential. The OIO states: “Boulcott Hospital Limited proposes to acquire the land and the business connected to Boulcott Hospital. It intends to continue to operate Boulcott Hospital in its existing form as a health care service provider. The opportunities for capital development and expansion at the Hospital make it a particularly attractive investment for Boulcott Hospital Limited”.

Alexander and Jayne Kim Schrantz Alexander Schrantz, United States of America (50%) and Jayne Kim Schrantz, United States of America (50%) received approval to acquire a freehold interest in approximately 4.5 hectares of land at Jacks Point, Queenstown. The vendor was Alfia Dance United Kingdom (100%); consideration was $1,563,000. The OIO states: “Mr and Mrs Schrantz seek to purchase the land to build a residence for their own use and will make donations to allow for the further development of the public walking/cycling track on the land. Mr and Mrs Schrantz will also make a donation towards research materials for one or more local schools or libraries in the Wakatipu Basin.”

And finally for November: AICA Kogyo Company, Limited Japanese Public (76.6%), Cayman Islands Public (7.2%), United States Public (6.4%), United Kingdom Public (6.3%) and various other overseas persons (3.4%) received approval for the acquisition of rights or interests in 100% of the shares of Dynea Asia Pacific Holding Pte. Ltd which indirectly owns or controls a freehold interest in 2.2 hectares of land located at 35 Sandeman Road, Richmond, Nelson. The vendor was Dynea Chemicals Oy Various European (100%); the asset value was stated at $35,500,000 (being the book value of the assets of Dynea NZ for the financial year ended 31 December 2011).

The OIO states: “The Applicant intends to continue and improve the existing business on the land (being the production of industrial formalin and resin)”. This deal is part of a much larger global transaction. Details courtesy of Borderless.net: “Dynea Chemicals (Helsinki), a leading global supplier of adhesives and surface solutions, today announced it has agreed to sell its Asian division, Dynea Asia/Pacific to AICA Kogyo (Aichi, Japan ), a leading Asian polymer chemistry company, for €150 million ($194.7 million), in cash on a debt-free basis. Dynea says that the sale of the Asian operations fits in with its strategy of concentrating resources in its European business and in particular its phenolic resin activities. Dynea is owned by IK Funds, which are advised by IK Investment Partners, a leading European private equity firm.

“Dynea has been present in the Asia/Pacific region for more than 40 years. It has 18 facilities in eight countries with approximately 1,200 employees and annual net sales of €220 million. The business is a largely independent operation serving many end market applications, the company says. ‘The sale is a natural step in our strategy of focusing on our core activities, particularly our industrial and other key resins business in Europe’, says Hans Pettersson, president and CEO of Dynea. ‘The transaction provides Dynea Asia/Pacific and its employees with an opportunity to develop within a broad based polymer manufacturer who is situated in the region’, he says. ‘The acquisition of Dynea Asia/Pacific provides AICA with a significant platform in the high growth countries of Asia/Pacific’, says Yuji Ono, President of AICA Kogyo. The business also offers material synergies with AICA’s existing activities… [and] the transaction is a major step in AICA’s strategy to develop its presence in overseas markets in Asia’, he says. The sale is conditional upon regulatory approvals”.

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