Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – November 2013 Decisions

Australians Grab 42% Of Powerco

A busy month at the OIO. Firstly AMP Capital Investors Limited (as manager of a consortium of funds) Australian Public (86.2%), New Zealand Public (10.6%), United Kingdom Public (2.8%) and various overseas persons (0.4%) received approval for the acquisition of rights or interests in up to 42% of the ordinary shares and the redeemable preference shares issued by Powerco NZ Holdings Limited (“PNZHL” and the “Shares”) which owns or controls:

a freehold interest in approximately 50.1 hectares of land at 157 Kaimarama Road, Kaimarama;
a freehold interest in approximately 1.4 hectares of land at Rangitikei Line, Palmerston North;
a freehold interest in approximately 13.4 hectares of land at Kopu-Hikuai Road, Kopu;
a freehold interest in approximately 0.2 hectares of land at 11 Main Road, Tairua;
a freehold interest in approximately 4.1 hectares of land at 31 and 35 Junction Street, Highlands Park; and
a freehold interest in approximately 0.9 hectares of land at Alach and Sherson Street, Greerton, Tauranga.

Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of the shares, the outstanding amount of the loan notes issued by PNZHL to Prime Infrastructure Networks (New Zealand) No. 2 Limited (PINNZ-2) and the outstanding amount of the loan owed by PNZHL to PINNZ-2, the consideration of which exceeds $100m.The vendor was Prime Infrastructure Networks (New Zealand) Limited and Prime Infrastructure Networks (New Zealand) No. 2 Limited United States Public (76.8%), Canada Public (22.4%) and various (0.8%); consideration was $525,300,000. The OIO states: “The Applicant has applied for and been granted consent to acquire a 42% interest in the parent company of Powerco Limited (along with related assets). The Applicant supports Powerco Limited’s capital investment plan which provides for substantial investment into the Powerco network over the next eight years”.

Jamie Grey in the New Zealand Herald (4/7/13) summarised the background to this deal: “US-based utilities investor Brookfield Infrastructure has sold its 42% stake in New Zealand electricity and gas company, Powerco, to a consortium led by AMP Capital for $525 million, Powerco said. The sale is conditional on approval from the New Zealand Overseas Investment Office and is expected to be completed by the end of 2013. ‘This sale provides another opportunity to harvest capital from one of our mature businesses at attractive returns, with the objective of recycling the proceeds into higher returning investments’, Sam Pollock, Brookfield Infrastructure’s Chief Executive, said in a statement.

“Powerco is New Zealand’s second largest electricity and gas distribution utility with around 420,000 consumers connected to its networks. The company’s networks are in Western Bay of Plenty, Thames, Coromandel, Eastern and Southern Waikato, Taranaki, Wanganui, Rangitikei, Manawatu and the Wairarapa. Its gas pipeline networks are in Taranaki, Hutt Valley, Porirua, Wellington, Horowhenua, Manawatu and Hawke’s Bay. New York-listed Brookfield Infrastructure Partners is a global asset management company focused on property, power and other infrastructure assets with over $US175 billion. Brookfield acquired its initial interest in the business in 2009 as part of the recapitalisation of Australia’s Babcock & Brown Infrastructure. Powerco said it did not expect the sale to have any impact on Powerco’s business or operations”. See our October 2004 commentary for details of Prime’s controversial purchase of 100% of Powerco for $780million, and subsequent sale of significant shareholdings to other overseas investment funds, November 2009 and November 2010.

Office Depot Buys OfficeMax

Office Depot, Inc. United States Public (95.5%) various overseas persons (2.5%) and United Kingdom Public (2%) received approval for an acquisition of rights or interests in up to 100% of the shares of OfficeMax Incorporated, resulting in the Applicant indirectly acquiring OfficeMax Holdings Limited which owns or controls:

a leasehold interest in approximately 5.8 hectares of land at 196-208 Middleton Road, Johnsonville, Wellington; and
a leasehold interest in approximately 2.4 hectares of land at 460 Rosebank Road, Avondale, Auckland.

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 OfficeMax Incorporated, resulting in the Applicant indirectly acquiring OfficeMax Holdings Limited, the value of the assets of OfficeMax Holdings Limited and its 25% or more subsidiaries exceeds $100m.The vendors were existing shareholders of OfficeMax Incorporated United States Public (93.9%), various overseas persons (2.6%), French Public (1.8%) and United Kingdom Public (1.7%). The asset value was $217,835,000.

The OIO states: “The Applicant proposes to amalgamate its business operations with OfficeMax Incorporated which will indirectly result in the acquisition by the Applicant of OfficeMax Holdings Limited (the operating company for the OfficeMax business in New Zealand). Among other things, the transaction will result in OfficeMax’s New Zealand business upgrading its ‘in store’ retail offering, selling additional product lines to OfficeMax Australia and new sponsorship in New Zealand”. This deal is part of a much larger global transaction which was subject to US Federal Trade Commission approval before being finalised.

Further Restructuring Of GFC WMDs

(Translation =Global Financial Crisis weapons of mass destruction. Ed.)

Sankaty Advisors LLC United States Public (86%), China Public (3%), United Kingdom Public (2%), Indian Public (2%), Canada Public (2%), French Public (2%), German Public (1%), Belgium Public (1%) and Japanese Public (1%), The Trust Company (Australia) Limited Australia (100%), Deutsche Bank AG Germany (45%), European Union (excluding Germany) (33%), United States Public (13%), Switzerland (6%) and other (3%) 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, for consideration exceeding $100m, that property being:

the acquisition by The Trust Company (Australia) Limited (TCAL) of certain debt and associated securities of BOS International (Australia) Limited and associated derivatives of both Lloyds TSB Bank plc and Bank of Scotland plc; and
the acquisition by Deutsche Bank AG (as purchaser nominated by TCAL) of certain debt and associated securities of BOS International (Australia) Limited and associated derivatives of both Lloyds TSB Bank plc and Bank of Scotland plc

The vendor was BOS International (Australia) Limited Lloyds Banking Group Plc, United Kingdom (100%); consideration was confidential. The OIO states: “TCAL, as trustee of the Murray Opportunities Trust has agreed to purchase debt and associated securities from BOS International (Australia) Limited, including assets in New Zealand exceeding $100,000,000 in value. TCAL considers some of the New Zealand assets are more appropriately held by Deutsche Bank AG and it will nominate Deutsche Bank as purchaser of those assets. TCAL has appointed Sankaty Advisors LLC as the manager and servicer of the Murray Opportunities Trust. The Applicant intends to work with the management teams and other stakeholders in the underlying companies to maximise the assets and believes it has substantial resources and specific expertise to enable it to work with the borrowers to achieve this”. See our December 2011 commentary for previous sales of the BOS/Lloyds loan book as a consequence of the Global Financial Crisis (GFC) in 2008.

Aussies To Buy Cooperative Bank Mortgages

In another significant transaction in the financial sector, AMAL New Zealand Limited AMAL Asset Management Limited, Australia (100%) 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 (in a series of related or linked transactions) that property being security arrangements, for a total consideration exceeding $100M, by:

the PSIS Warehouse Trust from The Cooperative Bank Limited; and
a new trust from the PSIS Warehouse Trust and/or the Cooperative Bank Limited where the Applicant, as Trust Manager with the powers to control the appointment of the Trustees of both trusts, is an overseas person.

Interestingly, the OIO used the phrase “consent decided” rather than the usual “consent granted”. The vendor was The Cooperative Bank Limited New Zealand Public (97.9%) and various overseas persons (2.1%); the asset value will exceed $100 million. The OIO states: “The Applicant (AMAL) is the trust manager of the PSIS Warehouse Trust which currently holds equitable interests in loans and mortgages (under $100 million) the legal interest in which remains held by The Cooperative Bank Limited. AMAL proposes establishing a second trust on similar terms. The Cooperative Bank Limited proposes to increase the value of each of the trusts beyond the $100,000,000 threshold by transferring the equitable interest in additional loans and mortgages of each of the Trusts over time”.

Two More Otago Farms Sold Overseas

Craigmore Farming NZ LP Craigmore Sustainables (Farming) NV, being mostly (New Zealand Public 4.2%), various overseas persons (up to 95%, currently 69.6%), New Zealand Public (currently 12.2%) and various overseas (18.2%) received approval for the acquisition of:

a freehold interest in approximately 403 hectares of land located at 96 Pig Island Rd, Windsor, North Otago (Waiareka Farm) and:
a freehold interest in approximately 428 hectares of land located at Pig Island Road, North Otago (known as Windsor Farm).

The vendor of the first farm was North Otago Farm Limited New Zealand (100%); the second Windsor Dairies Limited New Zealand (100%). Consideration for both transactions was confidential. For both transactions the OIO states: “The Applicant intends to develop the land in order to realise the full potential of the dairy farming operation carried out on the land”. See our previous commentaries in June 2012, February 2013 and March 2013 for background on Craigmore Farming and other land purchases here.

Japanese Control Of Five Star Beef Diluted

ANZCO Foods Limited Itoham Foods Inc, Japan (48.28%), New Zealand Public (26.52%), Nippon Suisan Kaisha Limited, Japan (25.17%) and Toyotsugu Matsuzawa, Japan (0.03%) received approval for the acquisition of rights or interests in up to 100% of the shares of Five Star Beef Limited which owns or controls:

a freehold interest in approximately 602.5 hectares of land at Wakanui, Canterbury; and
a leasehold interest in approximately 4 hectares of land at Wakanui, Canterbury.

The vendor was Itoham Foods Inc Japan (100%); consideration was confidential. The OIO states: “ANZCO Foods Limited, one of New Zealand’s largest meat companies, seeks to increase its shareholding in Five Star Beef Limited from 50% to 100%. This will result in Five Star Beef Limited becoming a wholly owned subsidiary of ANZCO Foods Limited, and will increase New Zealand ownership and governance of Five Star Beef Limited. ANZCO Foods Limited has made substantial previous investments in New Zealand, and has a significant number of employees and a large exporting business. The Investment is also likely to lead to some efficiencies when Five Star Beef Limited is consolidated into the Applicant’s business”. See our September 2011 and January 2012 commentaries for details of other land purchases made by ANZCO Foods.

English To Expand Boutique Waiheke Island Vineyard

In two separate decisions, Liszt Investment Trust Solina Holly Chau Hoi Shuen, United Kingdom (100%) received approval for the acquisition of a freehold interest in:

3.5 hectares, together with a 1/3 share in 0.4 hectares of land at 27 Dolphin Lane, Waiheke Island; and
4.9 hectares, together with a 1/3 share in 0.3 hectares of land at 160 Nick Johnstone Drive and 14 Te Miro Lane, Waiheke Island.

The vendor of the first parcel was Dougal Justin Alexander McPherson, Cecilia Gerard McPherson and Donna Marie Hamilton as trustees of the Hungry Duck Trust New Zealand (100%); consideration was $4,500,000. The vendor of the second parcel was Home International Limited United Kingdom (100%); consideration was $9,120,000. The OIO states: “The purchase of land at Dolphin Lane will bring further land into viticultural production. The purchase of the land at Nick Johnstone Drive and Te Miro Lane will result in all of the vineyard land being registered under one structure”. $1.6m per hectare! There are obviously some serious improvements on this small slice of paradise.

Americans To Establish Another Redwood Forest

The New Zealand Redwood Company Soper and Wheeler Families, United States of America (100%) received approval for an overseas investment in sensitive land being:

a freehold interest (including a half share interest in Kirikau A Block) in approximately 695 hectares of land located at 649 Paparoa Road, Taumarunui owned by the trustees of the GM Woolston Family Trust (In Receivership); and
a freehold interest (including a half share interest in Kirikau A Block) in approximately 695 hectares of land located at 649 Paparoa Road, Taumarunui owned by the trustees of the GM Woolston Family Trust (In Receivership); and

The vendors were Trustees of the GM Woolston Family Trust (In Receivership) New Zealand (100%) and various owners of an undivided half share in Kirikau A Block New Zealand (100%); consideration was $2,100,000. The OIO states: “The Applicant intends to establish a Redwood forest on the land”. The Soper and Wheeler families have made a number of land purchases, the last being 461 hectares near Hunterville in October 2009

Aussie Buys Perpetual Trust

Coulthard Barnes Capital Limited Andrew Howard Barnes, Australia (100%) received approval for the acquisition of rights or interests in up to 100% of the shares of Perpetual Trust Limited which indirectly owns or controls various interests in sensitive land around New Zealand. The vendor was Pyne Gould Corporation Limited New Zealand (100%); consideration was $11,900,000. The OIO states: “Andrew Barnes and his family intend to reside indefinitely in New Zealand. Mr Barnes has experience in estate planning businesses similar to that operated by Perpetual Trust Limited (Perpetual). Mr Barnes intends to grow the Perpetual business by focusing on its core business of will, trustee, estate management and asset planning services”.

Other November Decisions

Nakashimato Co., Limited Japan (100%) received approval for the acquisition of rights or interests in a further 12.5% of the shares of Folium Vineyard Limited which owns or controls a freehold interest in 8.4 hectares of land at 221 Brancott Rd, Marlborough. The vendor was Shigehiko Sugiura Japan (100%); consideration was $450,000. The OIO states: “The Applicant is the majority shareholder of Folium Vineyard Limited and intends to purchase shares from a minority shareholder, which will increase the Applicant’s shareholding from 75% to 87.5%. The Applicant intends to acquire the shares to continue its support of, and investment in the company, and the business activities it undertakes”. See our March 2011 commentary for details of Nakashimato’s original purchase of this land.

Ohana LP The Giannamore Family, France (100%) received approval for the acquisition of a freehold interest in approximately 1,404 hectares of land at 529 Matiere Road, RD, Aria, known as Pukewai Station. The vendor was Simon Francis Beveridge, Paula Ann Beveridge and Lamb Trust Services Ltd New Zealand (100%); consideration was $3,050,000. The OIO states: “The Applicant intends to take over the farming operation at Pukewai Station and to use it as a support and finishing property for the Applicant’s existing farming operation located in the Coromandel Peninsula”. See our December 2010 commentary for details of the Giannamores’ purchase of 377 hectares in the Coromandel.

CDL Land New Zealand Limited New Zealand Public (44.5%), Hong Leong Group, Singapore (28%), Singapore Public (19.2%), various overseas persons (7.6%) and United Kingdom Public (0.7%) received approval for the acquisition of a freehold interest in approximately 5.6 hectares of land at 4 Hobsonville Road, Hobsonville. The vendor was The Crown New Zealand (100.0%); consideration was $4,600,000. The OIO states: “Pursuant to section 40 of the Public Works Act 1981, the Applicant is acquiring land. It intends to develop the land into residential sections”. CDL Investments has been actively buying up properties in Aotearoa for subdivision for many years and has come before the OIO almost every year since the 1990s.

Middle Mount Limited Heinrich Martin Henny, Switzerland (100.0%) received approval for the acquisition of a freehold interest in 440 hectares of land at Rongoio Station, 1055 Ruakaka Road, Tiniroto, Gisborne. The vendor was William Richard Copeland Purvis & Phillippa Robyn Purvis New Zealand (100%); consideration was $1,600,000. The OIO states: “The Applicant intends to further extend its sheep and beef farming activity in the Gisborne location”. See our commentaries for August and December 2006, September 2009, September 2010, August 2011, August 2012 and January 2013 for details of Henny’s growing portfolio here.

Toula Elizabeth Finlayson Australia (100%) received approval for acquisition of a freehold interest in approximately 7.9 hectares of land at 5 Lakeshore Drive, Lakeside Estates, Queenstown. The vendor was William Dorothea Maria Siddik and Canterbury Trustees Limited as trustees of the Remarkable Horizons Trust No.1 New Zealand (100%); consideration was $2,200,000. The OIO states: “The Applicant intends to become ordinarily resident in New Zealand and is acquiring the land to use as her primary residence and as an office for her business”.

RHL NZ Limited Belize (100%) received approval for acquisition of a freehold interest in approximately 295 hectares of land at Wairoa Gorge, Nelson (“the Land”). The vendor was C-Scape Farms Limited Stephen Craig Cary, New Zealand (76%) and Renee Cary, United States of America (24%); consideration was $750,000.The OIO states: “The Applicant has previously built a mountain bike trail adjacent to the Land at Wairoa Gorge. The Applicant intends to acquire the Land to extend the existing mountain bike trail”. See our May and September 2010 and February 2011 commentaries for details of other land purchases here by RHL NZ Limited including Wairoa Gorge. Previous approvals have RHL being owned by an American, who now appears to reside in Belize.

Imanaka Limited Doshomachi Feass Limited, Japan (33.3%), Shumpei Imanaka, Japan (19%), Ryohei Imanaka, Japan (9.5%), Naoko Imanaka, Japan (9.5%), Imanaka Realestate Limited, Japan (9.5%), Doshomachi Corporation, Japan (9.5%) and Yasuko Imanaka, Japan (9.5%) received approval for acquisition of rights or interests in up to 100% of the shares of Thos Corson Holdings Limited which owns or controls a leasehold interest in approximately 0.7 hectares of land at Cochrane Street, Elgin, Gisborne. The vendors were existing shareholders of Thos. Corson Holdings Limited Thomas Corson and John Corson, New Zealand (17.8%), TN Corson Family Trust, New Zealand (17.7%), JA Corson Family Trust, New Zealand (17.7%), Robin Corson, New Zealand (14.3%), John Corson, New Zealand (11.2%), Thomas Corson, New Zealand (11.2%) and Sally Wait, New Zealand (10.2%); consideration was confidential.

The OIO states: “The Applicant’s business includes the import, export, and domestic sales of a range of products including dairy, poultry, agricultural, seafood and livestock products from the Oceania region. In 2010, lmanaka acquired Cedenco Foods Limited in New Zealand. lmanaka considers that by acquiring the business and assets of Corson Holdings Limited (Corson), which has subsidiaries in New Zealand and Australia it can strengthen its services to its customers both inside and outside New Zealand. In addition, lmanaka expects that expanding its business in New Zealand will increase its business in Oceania as a result of synergies from the integration of Corson with lmanaka’s existing operations in the Oceania region”. See our August 2010 commentary for details of Imanaka’s purchase of Cedenco from the previous and rather dodgy American owners.

And, finally for November, a completely confidential decision. All we know at this stage is that “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(e) – Previous investments
28(g) – Enhance the viability of other investments”.

Campaign Against Foreign Control of Aotearoa,
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