Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – June 2016 Decisions

Nuplex Sold Despite Some Shareholder Angst

Allnex New Zealand Limited, United States public (43.1%), Canada public (9.8%), United Kingdom public (7.8%), Cayman Islands public (5.8%), Dutch public (5.2%), Singapore public (4.6%) and various overseas persons (23.7%) received approval for the acquisition of rights or interests in 100% of the issued share capital of Nuplex Industries Limited at the time of settlement (and in accordance with the court ordered scheme of arrangement).

The vendors were existing shareholders of Nuplex Industries Limited, New Zealand public (48%), National Nominees New Zealand Limited, New Zealand (10.5%), HSBC Nominees (New Zealand) Limited, New Zealand (10.1%), Australian public (9.6%), Citibank Nominees (New Zealand) Limited, New Zealand (8.5%), Accident Compensation Corporation (6.7%), HSBC Nominees (New Zealand) Limited a/c State Street, New Zealand (6.2%) and various overseas persons (0.4%): consideration was $1,045,000,000.

The OIO states: “The Applicant is ultimately owned by 14 limited partnerships (GPE VII Funds). The GPE VII Funds are managed and advised by Advent International Corporation. The Applicant is part of the Allnex group of companies (Allnex Group).The Allnex Group has sales of approximately $US1.3 billion and is a leading global producer of coating resins and additives for architectural, industrial, protective, automotive and special purpose coatings and inks”.

“Nuplex is a public company, listed on the NZX and the ASX. The Nuplex group of companies consists of Nuplex and 32 subsidiary entities (Nuplex Group). The Nuplex Group is a global manufacturer of resins and has 16 production sites located across Asia, Europe, America, Australia and New Zealand. The Applicant will acquire 100% of the shares in Nuplex from the shareholders of Nuplex, by way of a scheme of arrangement under section 236, Part 15 of the Companies Act 1993”.

“Together, Nuplex and Allnex will form one of the leading global independent coating resins companies (NewCo). The attractiveness of a merger is particularly highlighted by the complementary technology and customer access and production positions. NewCo will be able to leverage the combination of Nuplex’s excellent position, market know-how and customer access in the Asia-Pacific region, as well as Allnex’s strengths in North America and Latin America”.

“Offer Not A Great Deal For Shareholders”

Fiona Rotheram in the National Business Review (NBR) backgrounds the deal (7/7/16): “Sixty four years after it was founded and 49 years since it listed on the NZX, New Zealand-based global resins company Nuplex Industries [NZX:NPX] is set to pass into the hands of private equity-backed Belgian company Allnex following a shareholder vote today. Proxy votes filed to the NZX and ASX this morning made Allnex’s $1 billion takeover bid a fait accompli ahead of today’s vote at Nuplex’s special meeting of shareholders where many long-time investors expressed their disappointment at the change of ownership just when the company was starting to show good returns from their support”.

“At least 75% of the votes cast and more than 50% of the total number of Nuplex shares were needed for the takeover to proceed. That is less than the typical threshold required because it was made under the first scheme of arrangement of a significant size since law changes in 2014. Independent directors had recommended shareholders accept the offer of $5.55 per share, which includes the 12 cents per share interim dividend already paid. That was a premium of 44% to the share price at the time the offer was made in February. The board had rejected three previous Allnex offers, which first approached Nuplex in October last year (2015)”.

“Chairman Peter Springford told shareholders today the Board felt obliged to put the final offer before them, given it was a premium to the share price, which has since risen to $5.30, and was above analysts’ valuations. An independent report by Grant Samuel said the company’s underlying value was in the range of $5.36 to $5.86 per share. Shareholders’ Association Chairman, John Hawkins, speaking in his private capacity as a shareholder, said the offer was not a great deal for Nuplex shareholders despite the premium, which was only 15% above the share price at the end of last year”.

“The share price of technology companies were marked back substantially in January, a situation that has since reversed, he said. He accused the Board and management of bailing out rather than being ‘willing to do the hard yards to grow a good company into a great company. If other boards adopted the same approach we would never have had Microsoft, Google, or Bayer Chemicals’, Hawkins said. ‘Allnex has been very smart in buying an increasing earnings stream and new technology at a modest premium, even before the value of the synergies is taken into account’”.

“When asked by shareholders if the two companies were such a good fit why the Nuplex board hadn’t tried to take Allnex over, Springford said they had considered it three years ago when the balance sheet was not as strong as it is today, and felt the financial risk and need to raise more money from shareholders would not have been acceptable. ‘We would have loved to have done it’, he said”.

“Broadcaster and shareholder Michael Wilson questioned why the offer didn’t include paying a final dividend which would have been around the 17 cents per share mark but Springford said the Board wasn’t able to negotiate that. One of the conditions of the offer was that the directors agreed to sell their shares. Richard Oliphant, whose 97-year-old mother Rona was the first shareholder in the company and whose family members combined have a substantial shareholding, said they had gone through ‘some thin times and some buoyant times’ and were ‘not making a killing’ out of the Allnex offer, despite their loyalty and long-time support”.

“The scheme still requires High Court approval and is taking longer than expected to receive anti-trust clearance in the European Union. If the acquisition is not completed by August 2nd because of the clearance delay, the company has to pay a compensatory dividend of 0.075 cents per share to shareholders for every day of delay in addition to the $5.43 cash offer. The final deadline for getting all approvals is November 9th unless both parties agree to an extension”.

“Nuplex had a run of profit downgrades and shareholder bailouts from 2009 but its financial results turned around in 2015 after cutting back its operations in Australia and New Zealand and focusing solely on global resins. In May the company said the 2016 financial year earnings before interest, tax, depreciation and amortisation were expected to be between $157 million and $161 million, more than the previous guidance of $145 million to $157 million announced in February. The company said it was in a strong position to achieve an annual return on funds of greater than 16% by the end of the 2018 financial year”.

“Last year the company launched a breakthrough coating technology, Acure, which had an estimated global market opportunity of $US1 billion to $US2 billion per annum and is expected to become a significant contributor to Nuplex’s earnings”. The EU authorities eventually gave approval to the deal in September 2016. See our March 2009 commentary for details of Nuplex’s previous “forced” capital raising exercises.

Chinese To Establish Milk Processing Plant Near Gore

China Animal Husbandry Group, State-owned Assets Supervision and Administration Commission of the State Council of the People’s Republic of China (100%), received approval for acquisition of rights or interests in up to 90% of the shares of Mataura Valley Milk Limited (directly or indirectly through Bodco Limited), which owns approximately 22.5 hectares of sensitive land at Gore, Southland and will have an option to purchase approximately 8878 square metres of sensitive land at Gore, Southland. Approval was also received for an overseas investment in significant business assets, being the establishment by Mataura Valley Milk Limited of a business in New Zealand where the business will be carried on for more than 90 days in any year and the total expenditure expected to be incurred, before commencing that business, in establishing that business is likely to exceed $NZ100 million.

The vendors were existing shareholders of Mataura Valley Milk Limited, Annette and Ian Tulloch, New Zealand (37.6%), Ole Andersen, Denmark (23.4%), Woga Trustee Limited, New Zealand (19.4%), Tompkins Wake Trustees 2008 Limited, New Zealand (13.1%), Simon Winn, Hong Kong (SAR) (3.3%), Dean Michael Pratt, New Zealand (1.7%) and Paul Alexander Johnstone, New Zealand (1.6%) and Ballast Holdings Limited, Annette and Ian Tulloch, New Zealand (100%); consideration was $71,757,090.

The OIO states: “The Applicant intends to invest in Mataura Valley Milk Limited through subscription for new shares in that company and the acquisition of shares from some of the minority shareholders. Following the Applicant’s subscription and acquisition of shares, Mataura Valley Milk Limited will establish a dairy processing plant in Gore. The establishment of the dairy plant and its operation is likely to result in the creation of numerous jobs in Southland as well as added market competition in the dairy processing industry”.

Gerard Hutching reports further at www.stuff.co.nz (26/7/16): “A State-owned Chinese company is investing in a Southland company to build a $200 million dairy processing plant with the promise of creating 100 new jobs. Mataura Valley Milk has announced China Animal Husbandry Group (CAHB) will have a 71.8% stake in the plant, 20% will be held by Southland farm suppliers and the remainder by Hamilton-based milk powder company BODCO, and Mataura directors. The new plant, which is yet to be built, will manufacture infant formula, ultra-high temperature (UHT) cream and small amounts of skim milk powder”.

“CAHB’s investment in Mataura Valley Milk was approved by the Overseas Investment Office as well as the Chinese government. Based in Beijing and in operation since 1982, CAHB produces veterinary medicines, feeds, feed additives, herbages, milk powder, whey powder, pet food, and seeds. It has annual revenues of $1.6 billion and more than 10,000 employees, and wholly or partially holds ten subsidiary companies operating inside China”.

“BODCO, run by businessman Gary Mollard, already sells infant formula brands in China and is partially owned (40%) by CAHB. The plant, which is to be built just north of Gore on State Highway 1 starting in October (2016), was first mooted in 2008, but with a different management and investment set up. Development was hit by the global financial crisis. Of the promised jobs, 60 would be created in Gore and 40 in the BODCO business in Hamilton.

“Gore resident and Mataura director, Aaron Moody, said the plant was designed to tap into the growing global demand for nutritional powders, especially infant formula. Moody is a son-in-law of the former Mayor of Gore, Ian Tulloch, who became the largest Mataura shareholder in 2009 and remains as a director. Moody said farmer suppliers had not yet provided any capital for the plant, which had received consent from the Gore District Council. Investment was being provided by CAHB, BODCO and Mataura Milk. He did not say which company the farmers were currently supplying”.

“Federated Farmers spokesman Allan Baird said they were likely to be Fonterra suppliers because they would be cashed up after selling their shares. Open Country was the other player in the district, but less significant. Baird said he was cautious about the proposal. ‘I’m concerned about the high level of offshore investment; I would have preferred to see it sourced more from local funding’. There was also ‘plenty of stainless steel’ in Southland, with Fonterra’s Edendale drying plant not working to full capacity”.

“Gore District Mayor, Tracy Hicks, said news of the plant was ‘massive’ for the district, and would inject an estimated $90m into the local economy. ‘It’s fantastic to see this investment opportunity come to fruition. We haven’t seen that kind of investment here for a very long time’, he said. Moody said most of the products from the plant were destined for the China-Asia market, although the company did not want to be totally dependent on one region. ‘The global infant formula market was worth $57b in 2013, and the market in China alone is expected to reach $38b by 2017’, he said”.

“CAHB was importing some infant formula from New Zealand and was able to offer a distribution network throughout China. Asked if he was concerned about the risks of dealing with a Chinese partner, Moody said there was risk in any market. ‘The relationship with CAHB provides us the confidence to proceed with the plant and excellent access to the rapidly growing demand in the Chinese market’”.

“’At the same time, 20% of the company will be held by Southland dairy farmers who have the ability to meet Mataura’s raw milk and quality requirements, enabling them to be part of a value-added business operating at the premium end of the market’, Moody said. Invercargill Mayor, Tim Shadbolt, was delighted the project had found investors. Despite the new plant being in the Gore district, the Southland and Invercargill districts were bound to prosper because of the interdependent nature of the region, he said. ‘When one benefits, in a way we all indirectly benefit’.

“Southland Mayor, Gary Tong, echoed Shadbolt’s comments, saying it would assist the Southland region. ‘It’s another industry in Southland that will be for the benefit of employers and the greater good of New Zealand’. Mataura Valley Milk has acquired 26.2 hectares of land at McNab and has obtained the necessary consents to build and operate a dairy plant. Southland Regional Development Strategy (SoRDS) governance group chairman, Tom Campbell, said the new plant was exactly the kind of development the group was looking for in the region”.

“Attracting major projects into rural areas away from Invercargill was difficult and its significant investment would have a big impact on Southland, he said. He said the project could be expected to create indirect jobs as well as 60 direct jobs. ‘This is exactly what SoRDS wants to happen’. Clutha-Southland MP Todd Barclay called the investment a ‘vote of confidence in the industry and in Southland’. CAHB’s ‘cornerstone’ investment in Mataura Valley Milk would give access to rapidly growing demand for nutritional powders in the Chinese market, he said”. “’We need to grow our value-added dairy exports, so I welcome Mataura Valley Milk’s announcement their pharmaceutical standard plant is designed to tap into the growing global demand for nutritional powders, especially infant formula’”.

“Chinese Not World Leaders”

“While Southland representatives were positive about the investment, NZ First Leader Winston Peters called it a saddening pattern where offshore investors were coming into New Zealand and taking over its export industry. In the space of three years Chinese investors had taken over the New Zealand infant formula industry and now companies wanting to export formula into China had to get Chinese government approval, he said. ‘This country built its dairy industry itself, it became world leaders all by itself … the Chinese aren’t world leaders’”. As a consequence, this deal was selling ‘our people and our interests’ down the drain, he said. ‘I’m just very saddened to hear it, particularly of Southland which is one of our great export regions’”.

Blackstone To Buy Five Retirement Villages

Four Five New Zealand Limited, United States public (65.1%), Cayman Islands public (11.1), various overseas persons (8.4%), United Kingdom public (6.2%), China public (4.7%) and Taiwanese public (4.5%), received approval for the acquisition of rights or interests in 100% of the shares of PLT New Zealand Limited which owns or controls:

a freehold interest in approximately 12.6 hectares of land at 21 Graham Collins Drive, Mairangi Bay, North Shore; and
a freehold interest in approximately 4.4 hectares of land at The Peninsula Club, 441 Whangaparaoa Road, Whangaparaoa, Hibiscus Coast.

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 PLT New Zealand Limited, the consideration of which exceeds $100 million: The vendor was PLT New Zealand Pty Limited, various, Australia (38.5%), HSBC Custody Nominees (Australia) Limited, Australia (22.8%), JP Morgan Nominees Australia Limited, Australia (16.2%), National Nominees Limited, Australia (15.8%) and Citicorp Nominees Pty Limited, Australia (6.6%); consideration is $240 million.

The OIO states: “PLT New Zealand Limited (PLTNZ) owns (through various subsidiaries) five retirement villages in New Zealand; four are located in Auckland (Knightsbridge, Mayfair, Parklane and The Peninsula Club) and one is located in Mt Maunganui (Ocean Shores). The Applicant has submitted that it is attracted to PLTNZ and its subsidiaries because it considers there is a substantial growth requirement for housing the ageing population in New Zealand, and that it has the capital depth and the risk-return profile suited to investing in existing and completed retirement villages”.

Four Five NZ Ltd are actually Blackstone, a huge global private equity firm. Anne Gibson reports on this acquisition a few months earlier in the New Zealand Herald (17/2/16): “One of the world’s biggest investment businesses, New York Stock Exchange-listed global funds manager The Blackstone Group, is boosting its focus on New Zealand with plans to buy five big retirement villages – and that’s just the start. Kishore Moorjani, a Blackstone senior managing director, arrived in Auckland yesterday revealing major growth plans in the Auckland and Tauranga areas”.

“Blackstone announced this morning that it would initially buy five large, well-established villages from ASX-listed, Australian-headquartered Lendlease, subject to Overseas Investment Office approval. They are Peninsula Club at Whangaparaoa, Parklane Village in Forrest Hill, Knightsbridge Village at Mairangi Bay, Mayfair Village on Oteha Valley Rd near Albany and Ocean Shores Village at Mt Maunganui”.

“But Moorjani, originally from India, based in Singapore and here until Friday, said a much larger presence was planned, buying further existing villages. ‘We’re very keen to put additional capital to work’, he said. Blackstone might own about ten New Zealand villages in the next few years with about 3,000 units. ‘We’re looking to unleash this business and make it a growth business, working with the villages we have and working with others’”.

“Just over a year ago, Blackstone bought $A150 million ($162.8 million) of Australian retirement village assets and now has $490 billion of assets internationally, providing benefits to 29 million pensioners in the United States and elsewhere, more than 2,000 employees in 17 offices and investments in real estate, private equity, credit, hedge funds, new opportunities and strategic partnerships”.

“In New Zealand, it owns the franchise for the Burger King chain, which continues to lose money as sales growth is swallowed up by finance costs and other expenses. In 2011, Blackstone paid almost $108 million to buy the franchise to 75 Burger King restaurants. Blackstone also owns chemical business Ixom here. Moorjani said Blackstone had partnered with Auckland investor Todd Strathdee, who would take an active role, and Jill Darcey, regional manager for the five villages, who would remain with the business, which employs 141 staff and manages and owns 1,000 residences, which are home to 1,200 people”.

“Moorjani is not responsible for Blackstone’s Burger King investment: ‘We’re continuing to persevere with that, right? We look at that, and every single investment, on a stand-alone basis. The idea is to work with that and not run for the hills at the first sign of a challenge’. Tarun Gupta, Lendlease’s Property Chief Executive, said the conditional sale of its retirement village portfolio was in line with a strategy to recycle capital into its development pipeline”.

“’We will work closely with Blackstone to ensure a smooth transition for village employees and residents’, Gupta said. ‘The retirement living sector remains an important business for Lendlease and we are the largest owner and operator of retirement villages in Australia, with more than 70 villages across the country’. See our October 2011 and February 2015 commentaries for details of the other Blackstone NZ purchases referred to in the above article.

Retrospective Consent Given For Former Hubbard Farm After OIO Fines Paid

Andrew Phillip Turney, United Kingdom (37.4%), Paul Robert Turney, United Kingdom (25%), Fiona Louise Peck and Andrew Edward Peck, New Zealand (22%) and Diana May Pye, New Zealand (15.6%), received retrospective approval for the acquisition of:

a 23.8% interest in the Balrath Partnership, which owns or controls a freehold interest in approximately 780.8 hectares of land at Barnswood Road and Hackthorne Road, Mayfair; and
a freehold interest in approximately 14.1 hectares of land at Arundel Rakaia Gorge Road, Ashburton.

And approval was received for an overseas investment in sensitive land, being Paul Robert Turney’s acquisition of rights or interests in an additional 6.2% of the Balrath Partnership, which owns or controls a freehold interest in approximately 780.8 hectares of land at Barnswood Road and Hackthorne Road, Mayfair. The vendor was Margaret Jane Hubbard, New Zealand (100%), Ashburton District Council New Zealand (100%) and Andrew Phillip Turney, United Kingdom (100%): consideration was $6,299,702.

The OIO states: “The Applicant is a partnership that owns Balrath Farm, which is used for dairy farming. Two transactions have been granted consent retrospectively. The purpose of the third transaction is to correct an imbalance between two partners’ interests in the partnership”. Why the OIO is giving retrospective approval to the Turneys is questionable at best. As reported below by Alan Wood at www.NZFarmer.co.nz (8/8/15), it seems the Turneys and Hubbards have been given approval despite the acknowledged previous breaches of the Overseas Investment Act

“Two farming syndicates linked to deceased businessman Allan Hubbard have been penalised $173,400 for breaches of the Overseas Investment Act. Investigation and enforcement action by the OIO has resulted in the two South Canterbury farming syndicates being penalised. The syndicates, with overseas investors, own property near Ashburton. Both syndicates involve United Kingdom investors Andrew and Paul Turney, while one also involves United States company, Schooner Agribusiness LLC”.

“The farming syndicates are two of six established by the late Allan Hubbard that were investigated by the OIO. The other four syndicates have disbanded and sold their properties that were located near Ashburton and Culverden. Hubbard died in a car crash in September 2011. At the time of his death, Hubbard remained a ‘person of interest’ in a Serious Fraud Office (SFO) investigation and faced 50 SFO charges for his private investment companies. Under investigation was Hubbard’s finance company, South Canterbury Finance, and alleged fraud that took place around that entity. Hubbard had set up many companies during his business career”.

“OIO Manager, Annelies McClure, said the six syndicates, or their investors, had breached the Overseas Investment Act 2005 and Overseas Investment Act 1973 multiple times since 2001. ‘The syndicates breached the acts by acquiring sensitive land without consent, and the investors breached the act by investing in the syndicates without consent’, McClure said. The investigation found the breaches to be due to the overseas investors’ reliance on advisers in New Zealand to take care of the necessary legal work”.

“Allan Hubbard established the syndicates, and a variety of legal advisors were involved in the transactions. From the limited records available, it appears that the advisers overlooked the requirements of the 1973 and 2005 Acts. ‘Until the breaches were discovered in 2013, the investors were unaware that breaches had occurred. The investors and syndicates admitted the breaches and have cooperated with our investigation’”.

“Hubbard and his wife, or an entity controlled by Allan Hubbard, had set up the two syndicates penalised, in 1990 and 2006. The other four were established in 1995, 1996 and two in 2007. The two syndicates have collectively paid $150,400 in penalties to charity: $93,400 to the Advance Ashburton Community Foundation; $43,000 to the Nuffield Farming Scholarship Trust; $5,000 to the Canterbury West Coast Air Rescue Trust; $5,000 to the Timpson Peel Forest Community Trust; and $4,000 to Order of St Johns (Ambulance Service) at Geraldine”.

“The syndicates have also paid $23,000 including GST to cover the OIO’s investigation costs. ‘We believe that this is a very good outcome, as contested court proceedings would have meant further uncertainty and delay in penalising the breaches’, McClure said. One of the two remaining syndicates had obtained consent from the OIO to keep its property, and the second had recently applied for consent to keep its property, McClure said. If consent was declined, the syndicate would be required to sell the property”. Looks like the OIO has now given consent with the proverbial slap on the hand with a wet OIO consent ticket. See our August 2014 commentary for details of Turney’s other farm purchases here.

Todd’s Sell Former Gold Mine Site To Americans

Coeur Gold New Zealand II, LLC Van Eck Associates Corporation, United States of America (12.9%), Donald Smith & Company, Inc, United States of America (7.8%), The Vanguard Group, Inc., United States of America (6.5%), BlackRock Fund Advisors, United States of America (4.8%), United States of America (55.3%), Canada (4.2%) and various overseas persons (8.5%) received approval for the acquisition of a 20% interest in the Golden Cross Joint Venture, a joint venture constituted pursuant to a Joint Venture Development Agreement dated 1 June 1990, which will result an overseas investment in sensitive land, being the Applicant’s acquisition of:

an undivided 20% freehold interest, as tenant in common, in approximately 735.7 hectares of land at 295 & 604 Golden Cross Road, Waikino; and
a 20% interest in mining licence 32 2954, a mining licence covering an area of approximately 388.9 hectares of land at 295 & 604 Golden Cross Road, Waikino.

The vendor was Viking Mining Company Limited, The Todd Corporation Limited, New Zealand (100%): consideration was stated as a cash settlement and the assumption by the applicant of all obligations and liabilities associated with the vendor’s 20% participating interest in the Golden Cross Joint Venture. The OIO states: “The overseas investment relates to the Applicant’s acquisition of a 20% interest in the Golden Cross Joint Venture. Coeur Mining, Inc currently holds the remaining 80% interest in this joint venture through another subsidiary”.

“The Applicant will continue to rehabilitate the former mine site on the land which ceased operation in 1998. This includes additional planting and fencing to protect and enhance sites of indigenous vegetation, enhancing public access to the land and enhancing the historic heritage on the land though providing signage explaining the site’s history”. The silver and gold mine in the Waikino Valley, near Waihi, operated from 1991 to 1998. It yielded gold and silver worth about $400 million as at 2000 prices, but became uneconomic due to falling gold prices and a landslip which cost $30 million to stabilise, the New Zealand Herald reported at the time. Coeur Gold and Todd Corp have worked to return the land to farmland surrounded by native bush, as it was prior to mining

Boulcott Hospital Sold In Two Separate Deals

Pulse Health Limited, Australian public (97.4%), New Zealand public (1.7%) and various other overseas persons (0.9%), received approval for the acquisition of a leasehold interest in approximately 0.7 hectares of land at 666 & 678 High Street, Lower Hutt (also known as Boulcott Hospital). The vendor was Boulcott Hospital Limited, Australian public (60.1%), United States public (39.5%) and New Zealand public (0.4%): consideration was $16,000,000.

The OIO states: “The Applicant is an operator of specialist private hospitals in Australia. It operates seven hospitals and five day surgeries across Queensland, Victoria and New South Wales. The Investment is the Applicant’s first New Zealand investment. The Applicant views the acquisition of Boulcott Hospital’s business as a quality and low risk platform to expand into the New Zealand healthcare market. The Vendor is required by the Commerce Commission to sell the business and assets of Boulcott Hospital…”

In a second decision granted 13 days later Vital Healthcare Property Limited, New Zealand public and Various Entities, New Zealand (69.7%), Canadian public (24.5%), North American public (2.5%), Asian public (1.2%), Australian public (1.1%), European public (0.9%) and United Kingdom public (0.05%), received approval for the acquisition of a freehold interest in 0.9 hectares of land at 666-678 High Street, Lower Hutt (which includes Boulcott Hospital).

The vendor was Boulcott Hospital Limited, Australian public (60.1%), United States public (39.5%) and New Zealand public (0.4%)): consideration was $31,660,000. The OIO states: “The Applicant is a 100% subsidiary of Vital Healthcare Property Trust – a unit trust established under the Unit Trusts Act 1960 and listed on the NZX Main Board. The Applicant’s current interests in New Zealand include the ownership of five health and medical related facilities located in Auckland, Napier and Whangarei”.

“The Applicant does not operate medical facilities itself – it leases its facilities to experienced operators. In this case, the majority of the Land will be leased to Boulcott Pulse Health Limited. The Applicant expects that the Investment is likely to provide scale and diversification benefits to its property portfolio, including: diversification of tenants; geographic diversification (Boulcott Hospital will be the Applicant’s first asset in the Wellington region); and scale (Boulcott Hospital will increase the value of Vital Healthcare Property Trust’s New Zealand portfolio from approximately $160 million to approximately $191 million”.

The NBR provided a brief commentary on the deal (24/12/15): “Vital Healthcare is investing in private hospital facilities in New Zealand and Australia as it expects demand to increase from an ageing population, a rise in chronic disease and higher patient expectations. About 47% of Australians have private health care cover for hospitals, compared to about 30% of New Zealanders. Boulcott Hospital was put on the market by Evolution Healthcare as a condition for the Australian private healthcare investor getting regulatory approval to buy out its partners in local private hospital operator Acurity Healthcare”.

“New Zealand’s Commerce Commission was satisfied that Evolution wouldn’t be able to exert too much control over the Wellington market if it divested Boulcott when taking over operations of the city’s Bowen and Wakefield hospitals. Pulse acquired the operating business earlier this month for a $16 million payment up front, and a further $4 million contingent on the hospital meeting earnings targets. The ASX-listed company may have to wait for up to six months to get regulatory approvals to buy the business”.

Canadian Pension Fund Buys Another Southland Dairy Farm

Appleton Dairy Farm Limited, Canadian Government (100%), received approval for the acquisition of a freehold interest in 918.9 hectares of land at Puketoi Runs Road, Maniototo, Otago. The vendor was Belmont Dairy Farm Limited, Gary Keith Mollard, Louise Mollard & Peter De Luca, New Zealand (24%), Anthony Mark Joblin, Ainsely Lee Joblin & Whitney Lee Joblin, New Zealand (24%), Dallas Brent Fisher & Joeli Scott Ratuki, New Zealand (24%), Grant Lewis Hopkins & Rosemary Hopkins, New Zealand (12%), Derek Roy Hopkins, New Zealand (10.1%) and Tim Sloss, New Zealand (5.9%): consideration was “withheld under section 9(2)(b)(ii) of the Official Information Act”.

The OIO states: “The Applicant is ultimately, indirectly, owned by the Public Sector Pension (PSP) Investment Board. The land is currently being used as a dairy farm. The Applicant intends to acquire the land for the purpose of dairy farming and milk production and will engage FarmRight to manage the land for that purpose. In particular, the Applicant intends to:

increase the milking platform on the farm, largely through significant investment in irrigation infrastructure; and
increase the herd size run on the farm”.

“The Applicant will also offer approximately 160 hectares of wetland area into public ownership for nil consideration if the Department of Conservation recommends that the indigenous flora, fauna and wildlife would be best protected by this”. Gerard Hutching at www.NZFarmer.co.nz reports in detail (29/7/16): “Canadians are continuing to buy into New Zealand dairy farming with the purchase of a property in the Maniototo, Otago”

“Last year (2015) a report by KPMG showed Canadian investors were the biggest foreign investors in New Zealand in 2014 with 22% of total investment. Despite media attention over Chinese investment, they accounted for only 14%. The sale of the 918 hectare Maniototo farm to a Canadian government pension fund has been approved by the OIO. The farm was bought by Appleton Dairy Farm Ltd, wholly owned by Canada’s Public Sector Pension Investment (PSP) Board”.

“As part of the deal, the OIO buyer had to set aside a 160 ha wetland, part of a feature called the Taieri Scroll Plain, which is a large wetland in the Maniototo and Styx Basins, in the upper reaches of the Taieri River, and described as ‘the only one of its kind in New Zealand’, by the Department of Conservation. DoC Central Otago Operations Manager, Mike Tubbs, said DoC had been approached and recommended the protection of the wetland on the property. ‘The OIO’s condition that the wetland be offered for public ownership is an excellent result and will allow this wetland to be protected in perpetuity’, Tubbs said”.

“The fourth longest river in New Zealand, the Taieri follows an s-shaped course from the Central Otago block mountains to the sea near Dunedin. The upper catchment is a mosaic of tussock grasslands, farmland, wetlands and bogs which help store water and release it slowly into the river, protecting fish, wildlife and cultural values, and water sources. The river is well known for a number of rare native fish species and is an important trout fishery”.

“PSP is one of Canada’s largest pension investment managers, with about $C116.8 billion ($NZ125.2b) of assets. It invests pension funds for Canada’s public service as well as its forces and the Royal Canadian Mounted Police. Earlier this year the OIO gave approval for the PSP to buy two dairy farms near Oxford, North Canterbury, following an earlier September 2015 dairy farm purchase”.

“In 2014, the OIO approved PSP buying 18 commercial and retail properties for about $1b and it increased its holding in Kaingaroa Timberlands. The sale price of the Maniototo farm at Puketoi Runs Road was withheld under the Official Information Act. The OIO said the new buyer intended to continue dairy farming and would engage management company FarmRight to run the property. The milking platform would be increased, largely through ‘significant’ investment in irrigation infrastructure, along with the herd size”.

Japanese Buy 20,000 Hectare Nelson Forest From Uncle Sam

Sumitomo Forestry Co., Ltd, Japanese public (73.2%) and various other overseas persons (26.8%) received approval for an overseas investment in sensitive land, being the Applicant’s (or its 100% subsidiary, Tasman Pine Forests Limited’s) acquisition of a freehold interest in approximately 20,436 hectares of forest land and a leasehold interest in approximately 154.8 hectares of forest land in the Nelson/Tasman region; and significant business assets, being the Applicant’s (or its 100% subsidiary, Tasman Pine Forests Limited’s) acquisition of property in New Zealand used in carrying on business in New Zealand for consideration exceeding $100m.

The vendor was Tasman Bay Forests Company, United States public (88.9%) and Danish public (11.1%): consideration was $370,000,000. The OIO states: “The Applicant has operated in New Zealand since 1984 when it established Nelson Pine Industries Limited (Nelson Pine), which owns a manufacturing facility which specialises in the production of high quality buildings materials. The Applicant wishes to secure wood resources for Nelson Pine’s processing facilities and to increase the vertical integration of its Nelson operations. The Vendor owns, and procures the management of, certain commercial timber plantations in the Nelson/Tasman region. It is the New Zealand investment holding company for Hancock Timberland Fund VII (Fund), and it is selling the land as part of the overall process of winding up the Fund”.

Bill Moore at www.stuff.co.nz reports on the deal (29/12/15): “Giant Japanese company Sumitomo has bought out Hancock Forest Management’s 30,000 hectares of Nelson region pine forests in a $370 million deal that gives its big Richmond timber processing plants long-term security of supply. Sumitomo is 100% owner of Nelson Pine Industries (NPI), which produces large export volumes of medium-density fibreboard (MDF) and laminated veneer lumber (LVL) from its sprawling site just outside Richmond”.

“The purchase was concluded just before Christmas and was still subject to Overseas Investment Office approval, NPI Managing Director, Murray Sturgeon said. NPI already has 5,000ha. The buyout covers the former Baigent forests to the east of Golden Downs, and a smaller area at Hira, east of Nelson city. Hancock, a huge US-based forestry investor and management company, had decided to sell its South Island forests ‘because their term was up for that investment’, Sturgeon said. ‘So it was going to be sold, and we encouraged Sumitomo to support the bid’”.

“He said the investment was made ‘to secure the investments they already have in the MDF and LVL business. You don’t need to be Argus the Boy Wonder to believe that if a successful bidder was from China, then the logs might have been going offshore, and expose Sumitomo’s investment’. Sumitomo would own the forests through its New Zealand arm, which holds all of NPI. ‘It shores up the security of the existing investment’, Sturgeon said. ‘In my view it’s a better owner than previous, and we can control our destiny now’. He said the management of the forests was yet to be worked through, with Sumitomo not taking over until June”.

“West Coast-Tasman MP, Damien O’Connor, said Sumitomo was a key player in the region’s economy, and was a clear example of positive foreign investment. ‘The whole timber and forest industry has been through a period of disintegration in terms of ownership of forest rights and processing. It’s a positive move to see more vertical integration, even if the reality of that in many cases will mean total ownership by foreign interests’”.

“O’Connor said Sumitomo’s investment in Richmond was a great example of foreign investment in greenfields projects that added real value to an economy. ‘What we’re seeing too much of is, of course, a transfer of assets into foreign hands with no substantive additional benefit. Sumitomo has invested huge amounts in additional processing and this move to secure supply is an understandable one, and probably beneficial to the region’”.

“Nelson MP Nick Smith said Sumitomo had always felt a vulnerability around the supply of wood to its investment of more than $800m in its Nelson plant. Sumitomo was one of the more constructive long-term investors in the New Zealand economy and he wouldn’t foresee ‘major difficulty’ in getting OIO approval for the buyout. Over the last 30 years NPI was one of the few examples of increased investment in processing domestic logs, and he hoped this new investment would give Sumitomo the confidence to further expand its processing, Smith said”.

“Nelson Regional Economic Development Agency Chief Executive, Bill Findlater, also welcomed the news as positive for the region. ‘It just makes things stronger for Nelson Pine. It gives them more surety and then gives the region more surety. Sumitomo have got a very good reputation. From what I’ve heard of them world-wide, I don’t think you could have a better international partner’. Findlater said many people were not keen on foreign ownership by multinationals, ‘but there’s some really positive aspects to it as well’”.

“Some facts:

Established in 1984, NPI has grown to employ a highly-skilled workforce of 220 at its Richmond complex, and contributes about $250m a year to the regional economy.
Its 35-hectare site contains 8.3ha of buildings that house five production lines processing 40% of Nelson-Marlborough’s pinus radiata.
Its first MDF line was commissioned in 1986, a second in 1991 and a third in 1997.
The veneer plant for LVL production started up in 2001.
By October 2014 NPI had produced eight million cubic metres of Golden Edge MDF from 466,000 truckloads of wood. MDF is made by breaking down wood chips into fibres, and using resin to bind them together before they are pressed under heat into the final thickness.
LVL is made by peeling logs on a lathe, clipping the sheets of veneer together and laminating them in a hot press to make beams.
Murray Sturgeon has been Managing Director for the whole 30 years of the company’s existence”.

New Overseas Owner For Log Exporting Business

BAPS BidCo Pty Limited, Canada public (37%), United States public (29.8%), Qatar Investment Authority, Qatar (11%), GIC Private Limited, Singapore (11%), British Columbia Investment Management Corporation, Canada (11%) and various (0.2%), received approval for the acquisition of an indirect interest in up to 100% of the shares of C3 Limited, which is valued at over $100 million (the NZ Target), through the Applicant’s acquisition of up to 100% of the shares of the NZ Target’s parent company, Asciano Holdings (General & Bulk) Pty Limited, (the Transaction).

The vendors were existing shareholders of Asciano Limited, Australian public (60.7%), North American public (15%), various overseas persons (10%), United Kingdom public (6.5%), European public (4.2%) and Asian public (3.6%); asset value was $102,800,000. The OIO states: “The Applicant’s largest shareholders are Brookfield Asset Management Inc. and Brookfield Infrastructure Partners LP, which are currently involved (with co-investors) in a takeover bid for ASX-listed Asciano Limited (Asciano). The takeover is sought to be effected by a scheme of arrangement under the Australian Corporations Act 2001 (the Scheme)”.

“Prior to implementation of the Scheme, the Applicant seeks to effect the Transaction, by purchasing the bulk and automotive ports services business (BAPS business) of Asciano Holdings (General & Bulk) Pty Limited, from Asciano. The NZ Target sits within the BAPS business and is involved in the handling of log exports and other forestry products, warehousing for bulk cargo, as well as marshalling and stevedoring. The Transaction will not be facilitated by the takeover Scheme described above, but its completion is conditional upon successful implementation of the Scheme”.

Aussies Take Full Control Of Viridian Glass

CSR Viridian (New Zealand) Limited, Australian public (96.4%), New Zealand public (2.4%) and Other Investors, Various (1.2%) received approval for the acquisition of rights or interests in up to 100% of Viridian Glass Limited Partnership (VGLP), which owns or controls a leasehold interest in approximately 0.7 hectares of land at 7 and 9 Tokomaru Place and 20 Elms Street, Stoke, Nelson (the “Land”); and the shares in Viridian Glass GP Limited (GPCo), a New Zealand incorporated company, which acts as the general partner of VGLP, (the Investment).

The vendor was EGS Investments Limited, New Zealand (100%): consideration was $11,890,000 subject to adjustments. The OIO states: “CSR Viridian (New Zealand) Limited (CSR NZ) currently holds a 58% partnership interest in VGLP, with the remaining 42% partnership interest currently held by EGS Investments Limited (EGS). CSR NZ’s ultimate parent company is CSR Limited, an ASX-listed building products company, operating in Australia and New Zealand. EGS is a New Zealand incorporated company, unrelated to the CSR group (apart from arrangements relating to VGLP and GPCo)”.

“VGLP is in the business of importing, supplying, processing and installing glass products. CSR NZ and EGS have been operating VGLP as a joint venture arrangement. As described above, the Investment involves the acquisition of EGS’s 42% interest. The Investment will therefore result in CSR NZ having full ownership and control of VGLP and GPCo. The Investment will improve VGLP’s balance sheet position through the introduction of new capital by CSR NZ; this will assist VGLP to retain existing jobs”.

“The Investment will also facilitate expenditure into VGLP’s information technology systems and related infrastructure. The above initiatives will improve the ongoing viability of CSR NZ’s investment in VGLP. CSR NZ and other members of the CSR Group have also previously made investments which have been of benefit to New Zealand”. See our March 2012 commentary for details of Viridian’s original purchase of the site/business.

Other June Decisions

Fletcher Concrete and Infrastructure Limited, various overseas persons (37.3%), New Zealand public (27.5%), Australian public (19.6%) and North American public (15.6%) received approval for the acquisition of a freehold interest in approximately:

1.7 hectares of land at 369 Hunua Road, Hunua, Auckland; and
2.9 hectares of land at 397 Hunua Road, Hunua, Auckland.

The vendor was Bryan Patrick Casey, Elaine Hazel Casey and Lynette Maree Duncan, New Zealand (100%) and Charles Gabriel Tioriori and Wendy Maree Aitken, New Zealand (100%): consideration was $2,350,000.

The OIO states: “The Applicant owns a quarry in Hunua known as the Hunua Quarry which supplies aggregate to various building and roading industries in the Auckland market. The Applicant has been granted consent to acquire a freehold interest in two adjoining parcels of residential land in order to act as a natural noise buffer, allowing the Hunua Quarry to increase their hours of quarrying operation”. For details of other land purchases here by Fletcher Concrete, see our commentaries for March and July 2007, March and June 2008, June, September and October 2009, and April and November 2011.

Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.