Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – February 2013 Decisions

Rayonier Takes Control Of Matariki Forests

Rayonier Canterbury LLC United States Public (99.9%) and various overseas persons (0.1%) received approval for the acquisition of rights or interests in up to an additional 74% of the shares of Matariki Forestry Group which owns or controls: a freehold interest in approximately 74,918 hectares of forestry land; and a leasehold interest in approximately 5,155 hectares of forestry land; comprised in numerous forestry plantations. Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests in up to an additional 74% of the shares of Matariki Forestry Group, the consideration of which exceeds $100m.

The vendor was Matariki Forests Australia Pty Limited & Waimarie Forests Pty Limited various overseas persons (100%); consideration was confidential. The OIO states: “The Applicant is increasing its current 24% interest in Matariki Forestry Group for commercial forestry purposes”. Matariki has been a significant purchaser of forests in New Zealand over the past few years. See our August 2005 commentary for details of Matariki’s original purchase of 92,000 ha, and AMP’s buy into Matariki in June 2006, as well as our February 2010 commentary of Phaunos’ purchase of 35% of Matariki.

Elworthy Sells Craigmore Farming

Craigmore Sustainables (Farming) NV Hong Kong Public (31%), United Kingdom Public (21%), Irish Public (20%), various overseas persons (14.6%), United States Public (13%) and New Zealand Public (0.4%) received approval for the acquisition of up to 95% (by 30 June 2016) of the securities in Craigmore Farming NZ LP (the Issuer) which indirectly owns or controls (via subsidiaries that are at least 80% and up to 100% owned by the Issuer) freehold interests in approximately :

1,744 hectares of land located at Kururau Road in Taranaki (Te Moata Farm)
1,594 hectares of land located at Mangapoike Road in Gisborne (Te Puna Farm)
323 hectares of land located at Pahau Reserve Road in Canterbury (Pahau Flats Farm)
109 hectares of land located at Broadside Road in Canterbury (Broadacres Farm) and
460 hectares of land located at Hinds River Road in Canterbury (Wairepo Farm).

Approval was also received for an overseas investment in sensitive land being the Issuer’s (or its at least 80% and up to 100% subsidiary’s) acquisition (pursuant to an existing conditional contract) of a freehold interest in approximately 423 hectares of land located at Pahau Reserve Road in Canterbury (Landsend Farm); an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests in 95% of the securities in the Issuer, the value of the assets of the Issuer and its 25% or more subsidiaries being greater than $100m; an overseas investment in sensitive land that may occur where the Issuer divests of a minority interest (no greater than 20%) in any of its subsidiaries for the purpose of introducing equity managers as anticipated in its Business Case, and then subsequently reacquires all or part of that minority interest on the exit of an equity manager, provided the reacquisition occurs by 30 June 2016.

The vendors were Craigmore Farming NZ LP Forbes Herbert Elworthy, New Zealand (66.7%), Mark William Cox, New Zealand (8.53%), the Applicant (24.77%) and Andrew and Anthony Dalzell New Zealand (100%); consideration was confidential. The OIO states: “The strategic objective of the Issuer is to generate superior long-term risk-adjusted returns by financing, acquiring, developing and improving management of its farming operations. The introduction of further capital by the Applicant will allow the Issuer to invest in on-farm development and beneficial land-use change”.

As we reported in June 2012, Craigmore Sustainables is a specialist manager of farmland and forestry assets. The group was established in 2009 by Forbes Elworthy. As of October 2012, Craigmore manages $NZ75m ($US62m) of investor capital invested in 13,000 hectares (33,000 acres) of land across 17 properties. The Elworthy family is a significant investor in both the farmland and forestry funds and has been farming in New Zealand for 150 years (Forbes’ father, Sir Peter Elworthy, was President of New Zealand Federated Farmers and Chair of the Independent Directors of the Reserve Bank of New Zealand).

Westpac Cheapens Its New Zealand Funding Arrangements

Westpac NZ Securitisation Holdings Limited Westpac NZ Securitisation Trust, New Zealand (81%), Australian Public (10.5%), HSBC Custody Nominees (Australia) Limited, Australia (2.9%), JP Morgan Nominees Australia Limited, Australia (2.3%), National Nominees Limited, Australia (2%), Citicorp Nominees Pty Limited, Australia (0.9%) and various overseas persons (0.4%) received approval for the acquisition of property in New Zealand used in carrying on business in New Zealand for consideration exceeding $100m, that property being loans, mortgages, other related securities and other financial assets secured by first ranking mortgages over land situated in New Zealand. Asset value was to be advised.

The vendors were Westpac New Zealand Limited Australian Public (55.4%), HSBC Custody Nominees (Australia) Limited, Australia (15.1%), JP Morgan Nominees Australia Limited, Australia (12.3%), National Nominees Limited, Australia (10.6%), Citicorp Nominees Pty Limited, Australia (4.6%) and various overseas persons (2%). The OIO simply states: “The investment will provide cheaper and more diverse funding to Westpac New Zealand Limited”. I don’t like the sound of this! Securitisation of mortgages, otherwise know as Mortgage Backed Securities, or MBS, were ultimately the financial WMD (weapons of mass financial destruction) that brought the world’s banking system to its knees just a few years ago. Is history about to repeat itself, already?

Italians Now Interested In Our Forests

Greendom Limited Ingolte Investments Corporation, Italy (40%), Italian Public (31.1%) and various overseas persons (28.9%) has received approval for the acquisition of: a freehold interest in approximately 490.6 hectares of forestry land located at 3137 Tiniroto Road, Hangaroa, Gisborne; and a freehold interest in approximately 262.3 hectares of forestry land located at Tutira, Hawkes Bay. The vendor was Roger Dickie Developments Limited New Zealand (100%); consideration was $4,260,300. The OIO states:”The Applicant intends to further develop the plantation forestry on the land for the sale of timber products and carbon sequestration”. See our September 2012 commentary for details of other sales by Roger Dickie to Austrian and Canadian investors.

While Germans Grab 1,000 Hectare Farm Near Te Kuiti

NMP Farm Investment GmbH and Oceania Agrar Investitions GmbH Oceania Agrar GmbH & Co. KG and Aquila AgrarINVEST III GmbH & Co. KG, Germany (100%) received approval for the acquisition of a freehold interest in approximately 1,027.2 hectares of land at Waipa Valley Road, Te Kuiti. The vendor was Koromiko Grazing Limited New Zealand (100%); consideration was stated as $6,600,000. The OIO states: “The Applicant intends to convert the farm to a sheep and beef breeding and finishing farm and to develop the farm to increase its carrying capacity, productivity and profitability with a simpler more focused production system”. See our March and December 2010 and March, April, May and August 2011, and May 2012 commentaries, for details of other dairy farm purchases here by this German investment fund.

Fletchers Plan Residential Development In Greenhithe

Fletcher Residential Limited New Zealand Public (48.1%), Australian Public (20.9%), North American Public (18.5%) and various overseas persons (12.5%) has received approval for the acquisition of a freehold interest in 4.3443 hectares of land at Eastvale Close, Greenhithe, Auckland. The vendor was Kyle Road Limited Cameron David Wilson, New Zealand (100%); consideration was stated as confidential. The OIO states: “Fletcher Residential Limited (FRL) is a subsidiary of Fletcher Building Limited (FBL), an NZX-listed construction company 48% owned by New Zealanders. FRL is the largest specialist home building company in New Zealand and is acquiring the relevant land to build around 84 residential houses”. Fletcher Residential is a regular buyer of land for subdivision. See our November 2004 commentary for details of Fletchers’ last significant land purchase in Auckland.

Aussies Grab NZ Wool Services Ltd

WSI Holdings Pty Ltd Lempriere (Australia) Pty Limited (ultimately owned by the Lempriere Family) Australia (100%) received approval for the acquisition of rights or interests in up to 100% of the shares of New Zealand Wool Services International Limited which, indirectly through a subsidiary (Whakatu Wool Scour Limited), owns and controls a freehold interest in approximately 1.4 hectares of land at 25-27 Railway Road, 1 Essex Crescent and 3 Essex Crescent, Whakatu, Hastings (“the Investment”). The vendors were Plum Duff Limited (in receivership) New Zealand (44.3%), Woolpak Holdings Limited (in receivership) New Zealand (20%), Michael Dwyer New Zealand (6.2%) and New Zealand Public (29.5%); consideration was stated as NZ$0.45 per share acquired.

The OIO states; “Lempriere (Australia) Pty Limited and its associated companies (together the Lempriere Group) is one of the world’s largest wool merchants and processors. The Applicant considers that the Investment will complement the Lempriere Group’s existing business operations in New Zealand, namely, The Merino Company Limited, Levana Textiles Limited and Encircle Medical Devices. The Investment will also give the Lempriere Group a substantial presence in the New Zealand coarse wool market”.

Simon Hartley in the Otago Daily Times commented on the deal (2/3/13): “The sale of New Zealand’s largest wool exporter to private Australian interests is unlikely to sit well with its New Zealand farmer-shareholders, but could provide a channel to new global markets. New Zealand Wool Services International is entering a new era, after completion of its more than $30 million takeover this week by Australian merino wool fashion specialist Lempriere Holdings.

“Undercapitalised, partially in the hands of receivers and facing two aggressive takeover bids, Wool Services staff and management have been fighting at every turn for the past two years. However, Lempriere had gained more than 90% of takeover acceptances, the outstanding 7% now compulsorily acquired. Wool Services’ annual turnover is about $200 million. It handles about 250,000 bales annually of scoured strong wool destined for the carpet market, bales fetching an average of $800.

“Family-owned Lempriere is a specialist merino merchant with businesses in the United States, Argentina and South Africa and is a major supplier of fine wool to European, Japanese and US fashion houses. Lempriere’s takeover bid was revealed in September 2012, the company having gained a 75% stake for $23.2 million, including an 11% management stake worth $3.41 million, and there was an additional $7.8 million on offer for the outstanding 25% of shares it did not own at the time.

“Wool Services Chairman, Derek Kirke, said the takeover would usher in a “new era”. Lempriere had no intention of “turning over” its scouring assets to Cavalier, had no company restructuring plans and would be an “active owner”, Mr Kirke said. “They’ve a very large global wool structure, which will strengthen the company [Wool Services].’ The Commerce Commission granted authorisation to Cavalier Wool Holdings in 2011 to make an offer for Wool Services wool-scouring assets, the scourer later confirming it was planning capital-raising in its attempt to buy the 64% of the company, which was owned by Plum Duff and Woolpak Holdings and under the control of a receiver. It is understood Wool Services will be delisted within two months and its board likely replaced”.

But Sell The Lake Grassmere Salt Farm

Maehtech Pty Ltd Gold Rainbow International Limited, Hong Kong (45.3%), Hong Kong Public (25.2%), Trueway International Limited, Hong Kong (22%), and Triluck Assets Limited, Hong Kong (7.5%) received approval for the acquisition of rights or interests in 100% of the shares of Cheetham Salt Limited (the Target) which indirectly jointly owns or controls a freehold interest in approximately 1,629 hectares of land located at Lake Grassmere in Marlborough. The vendor was Ridley Corporation Limited Australia (100%); asset value was stated at $41,700,000. The OIO states: “The Applicant intends to grow the Target’s business (production of salt products) through international expansion”. See our September 1996 commentary for details of Ridley’s original purchase of the salt works from Skellerup.

Confidential Decision

And, finally for February, a completely confidential Decision. All the OIO states is: “The overseas investment transaction has satisfied the criteria in sections 16 and 18 of the Overseas Investment Act 2005. The ‘benefit to New Zealand’ criterion was satisfied by particular reference to the following factors:

Overseas Investment Regulations 2005
- 28(a) – Consequential benefits
- 28(e) – Previous investments
- 28(f) – Advance significant Government policy or strategy
28(g) – Enhance the viability of other investments”.

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