May 2001 decisions

One application declined

PDL sold to Schneider Electric Industries of France

Westfield buys AXA out of Manukau City Centre

Macquarie buys The Gate, Penrose, for industrial complex

McCain buys Heinz-Wattie’s Feilding potato and vegetable processing business

Carter Holt buys back a lifestyle property at Waipu, Northland

Land for forestry

Land for wine

U.S. sheep farmer with fetish for new breeds buys another 220 ha near Waitomo

Other rural land sales

One application declined

One application was declined this month – the first this year. Forest Securities Ltd, owned 51% by William Roth and 39% by J.E. Roth, both of Canada, and 10% by P.L. and W.E. Kerr of Aotearoa, wished to acquire land in Wairarapa, whose description and price has been suppressed. Forest Securities “has invested in several forestry investments in New Zealand”. The latest consent was in April 1999 when it gained approval to acquire the 530 hectare Te Haroto property in Ngahape Road, RD 10, Masterton, Wairarapa for $540,000. A farm manager was to be employed to oversee the sheep and cattle farming operation, which was to continue on part of the property with the assistance of P. Kerr. Pinus radiata forestry was to be established on 121 hectares considered marginal for agricultural purposes.

In this case, Forest Securities “initially intended to undertake a further forestry development on the land ... However, having obtained a report from its forestry consultant the proposed development was deemed not to be viable” because there is no road access to the property, and creating it would be virtually impossible due to the terrain. In addition, regulatory approvals would be unlikely for any scrub clearing as most of it is regenerating native bush over three metres tall. “This means that only approximately 60 hectares of the land could be afforested which the Applicant states would be uneconomical. Given the non-viability of the forestry development the Applicant now proposes to continue to operate the property as it is currently with approximately 30 hectares being used for grazing. This does not equate to the proposal being in the ‘national interest’.”

PDL sold to Schneider Electric Industries of France

One of New Zealand’s most innovative electrical and electronic goods manufacturers and one of the first New Zealand owned transnational companies, the PDL group, has been sold to Schneider Electric Industries of France for a sum “to be advised” (but see below). Schneider is acquiring 93.76% of PDL Holdings Ltd, and AXA of France (which owns National Mutual Life Association of Australasia Ltd) will have the remaining 6.24%.

Schneider already owned 18.6% of PDL, and AXA 0.09%. The shareholders selling included Gold Peak Industries (Holdings) Ltd of Hong Kong, which Schneider had fought for control of the company (of which more below). By the time of Schneider’s victory, Gold Peak had 3.69% of the company. The principal shareholders remained the founding Stewart family – Sir Robertson Stewart 27.10%, Lady Adrienne Stewart 22.46%, and sons Mark and Robert Stewart with a further 10% – with a controlling interest of 59.56% of the company. The remaining sellers were minority shareholders in Aotearoa (14.33%), Singapore (2.05%) and France (1.68%).

Schneider starting buying shares in PDL in February, obtaining 18.1% at $5.20 a share, though at that stage seeking only 19.9%. Gold Peak’s 49.3% Singapore subsidiary, Clipsal Industries, began increasing its stake shortly afterwards, and by March had 8.25% of the company, paying up to $6.45 a share (Press, 10/3/01, “PDL stake lifted”, p.23). Clipsal had been both a major customer of PDL, selling PDL’s products in Australia, and selling its own products to PDL with a warehouse in Christchurch and a manufacturing plant in Auckland (Press, 2/3/01, “Clipsal buys 5% of PDL”, p.14). Gold Peak has a number of subsidiaries, including Clipsal, Dragon Star Enterprises, and Peak Power Investments, and held some of its PDL shares through these other subsidiaries. Clipsal also owns farms near Oxford, Canterbury, through Wharfdale Farming Co. Ltd – a pastoral lease of 8,167 hectares at Mt Pember Station, Lees Valley; a 2,271 hectare sheep and deer farm; and a further 1,889 hectares at Lees Valley.

Clipsal claimed to be making a long-term strategic investment in PDL, but wouldn’t say how many shares it was after, given the dominant shareholdings by the Stewarts and Schneider (Press, 13/3/01, “Clipsal ‘long-term’ in Chch’s PDL Holdings”, p.12). However it was quickly in trouble: Schneider challenged Gold Peak in the High Court on the basis that it had gone over 5% without lodging a substantial security holder notice and thus breached the Securities Amendment Act 1988. Schneider asked for an injunction to stop Gold Peak buying more PDL shares, and an order that the shares be forfeited or disposed of (Press, 31/3/01, “PDL buying subject of legal action”, p.25). Both companies then agreed not to buy any more shares until the court heard the case (Press, 12/4/01, “PDL standoff”, p.17).

On 4/5/01, the court ordered Gold Peak to sell 2.1% of its shares, saying it had broken the law. It allowed those who had sold the shares to Gold Peak to claim damages. By then the share price had dropped to about $4.75 (Press, 5/5/01, “Court orders Gold Peak to sell shares”, p.21). Schneider immediately moved in, building its stake to 26.5% at between $8.02 and $8.80 a share as the share price rose rapidly (Press, 9/5/01, “French move on PDL”, p.36; 10/5/01, “Schneider adds to PDL holding”, p.12). The court’s judgement, released in June, found that “it was very much to Gold Peak’s advantage that Schneider was in the dark as to its activities”, particularly so that it could accumulate shares without competition. Gold Peak was a sophisticated company which had engaged in a sharemarket play in circumstances where it knew there were disclosure obligations but did not bother to check the detail of the obligations. At the very least, it had been extremely lax (Press, 16/6/01, “PDL sellers can sue for damages”, p.24).

Gold Peak tendered the 2.1% shareholding in June, with the price of shares on the stock exchange then $10.00, and Schneider having offered the Stewart family $12.00 per share. By then however, Schneider was the only realistic bidder for Gold Peak’s shares, and could offer whatever it liked because any profit made by Gold Peak would go to PDL – which Schneider was well on the way to owning in any case (Press, 20/6/01, “Benefit for new PDL owner”, p.21). It bought the shares for $11.50, the gain on Gold Peak’s original buy price being $1.4 million, all going to PDL. It bought Gold Peak’s other shares for $10.96 (Press, 27/6/01, “Defaulter shares to Schneider”, p.32). The episode was strangely incestuous: Schneider has an 18% shareholding in Clipsal.

By then, Schneider had control of PDL. The Stewarts received more than $97 million for their shareholding. Mark Stewart, the son of founder Sir Robertson Stewart, remained as chief executive – temporarily, as it will be seen. He said: “We had a plan to develop a worldwide distribution for PDL, and this is the fastest way to achieve it. We’ve got the ideas and the technology, but lacked the distribution. Schneider is a very big global player.” However this sounds like rationalisation after the event: Schneider had surprised them when it bought its initial stake (Press, 19/6/01, “PDL sale nets $97m for family”, p.1).

PDL was at the time in the process of dismantling itself to focus on a limited range of products. In July 2000, it moved the base of one of its two core divisions, electrical products, to Australia. At the time, Mark Stewart said that “Christchurch was the historic base of PDL, and would remain its base for a while. New Zealand however, was becoming increasingly uncompetitive. Unskilled jobs were too expensive compared with Asian rates, and skilled jobs were not paying enough, compared with Australia” (Press, 22/7/00, “PDL moves divisional manager to Australia”, p.24). In October 2000, it sold PDL Plastics for over $25 million to the subsidiary’s management and ANZ Private Equity, a subsidiary of the ANZ bank, who renamed it Alto Plastics (Press, 20/10/00, “PDL Plastics goes in management buyout”, p.16). PDL’s strategy was to focus on electrics and electronics.

In May 2001, PDL sold its Mistral fan business to a Malaysian firm, Khin Holdings for an undisclosed price. PDL had bought Mistral in 1987, and it was part of its manufacturing operations in Malaysia, to which it began moving in 1974. PDL has retained a wiring accessories factory it built in Johor Bahru in 1993, which employs about 230 staff (Press, 24/5/01, “Malaysians buy PDL fan business”, p.13).

Then in June PDL announced the move of its electrical commodity production to China – 30% of its electrical production – with 300 staff in Christchurch either losing their jobs or being forced to reapply for jobs to which they were redeployed. A further 100 people are employed in Australia. Products which would no longer be manufactured in Aotearoa included single switches and double sockets, which were competing with production from hundreds of factories from around the world. “By moving production to China, PDL could make money on these products.” Staff were shocked, some having worked at the company for more than 30 years. Immigrant staff – some having worked there for more than ten years – were angry at having to sit English and mathematics comprehension tests to reapply for their jobs. The Pasefika Education and Employment Training Organisation said the test seemed unfair, because some could speak but not write good English. In the end 113 staff lost their jobs, but with little guarantee for the remainder that Schneider would not rethink the company’s niche in its empire (Press, 1/6/01, “Move to China will cost jobs at PDL”, p.1; “Margin squeeze on PDL electrics”, p.14; 19/6/01, “Tests nettle PDL staff”, p.6; 21/7/01, “Stewart family hands control of PDL to French giant Schneider”, p.21).

PDL was founded in 1947 as Plastics and Diecasting Ltd and Robertson Stewart bought the company in 1957. It was listed on the stock exchange in 1972 but remained tightly controlled by the Stewart family. It was one of the first New Zealand companies to manufacture plastics products, and one of the first manufacturers to focus on exports. Though never a large company, it was also one of the earliest New Zealand-owned transnational companies with subsidiaries, including manufacturing, in Malaysia and later Australia (Press, 19/6/01, “PDL sale nets $97m for family”, p.1; 21/7/01, “Stewart family hands control of PDL to French giant Schneider”, p.21).

Schneider was attracted to PDL by its electronic drives for AC motors, which it makes in Napier. Schneider had just formed a joint venture with Toshiba to market AC motor drives, which are displacing dearer DC motors using the type of electronics PDL had developed. PDL’s electronic household automation systems also attracted Schneider, which “had been scouting for a company well established in Southeast Asia and the Pacific”, and was looking to expand in Latin America, Asia, and what its executive, Jean-Louis Andreu, described as “southern hemisphere Ango-Saxon countries – Australia, New Zealand and South Africa” (Press, 21/7/01, “PDL high-tech attracted buyer”, p.22).

Whether PDL is allowed to continue to export world-wide and develop innovative products, or becomes just another cog in Schneider’s machine, remains to be seen. In October 2001, just months after the takeover concluded, Schneider announced it was selling PDL subsidiary, MasterTrade (a plumbing and electrical wholesaler with 51 branches), and would fully merge PDL’s remaining activities with its own. Mark Stewart announced he would step down as chief executive because of the near-complete integration of PDL with Schneider, saying PDL was now a “truly global company” which was “very satisfying” (Press, 6/10/01, “Schneider puts MasterTrade on the market”, p.21).

Westfield buys AXA out of Manukau City Centre

Manukau City Centre Ltd, owned by Westfield Trust of Australia, the largest mall owner in Aotearoa, has approval to buy out its joint venture partner in the Manukau Shopping Centre Joint Venture, National Mutual Life Association of Australia, which is owned by AXA of France, for $83,000,000. The company owns 3.5 hectares of freehold and 9.9 hectares of leasehold land between Great South Road and Wiri Station Road, Manukau. NMLA had a 50% interest in the centre.

Macquarie buys The Gate, Penrose, for industrial complex

Macquarie Goodman Funds Management Ltd of Australia has approval to acquire 6.0 hectares of land at “The Gate”, 373 Neilson Street, Penrose, Auckland, for a sum “to be advised”, but greater than $10 million, from Willis Bond Company Ltd.

Willis Bond will use the money from the sale to develop the property. The property is to be developed into an industrial complex known as “The Gate”. “Whilst Macquarie are a significant investor in industrial property in Australia, this is to be the first investment by the entity in New Zealand.”

McCain buys Heinz-Wattie’s Feilding potato and vegetable processing business

McCain Foods (NZ) Ltd, owned by the McCain Family of Canada, has approval to acquire a number of assets of Heinz-Wattie Ltd, owned by H. J. Heinz Company of the U.S.A., for $53,229,000. They are:

· 27 hectares at Kawakawa Road, Feilding, Manawatu;

· 34 hectares of leasehold at Works Road, Feilding;

· the potato and vegetable processing assets and business (excluding the retail business) of Heinz-Wattie Ltd at Feilding;

· Up to 25% of Feilding Potato Storage Ltd; and

· Up to 33.30% of The Trailer Company Ltd.

“The proposal is seen as a strategic move to enable the Applicant to expand and operate more economically. McCains already has existing processing plants in Timaru (manufacturing potato and vegetable products) and Hastings (manufacturing potato products only).

The acquisition is viewed as enhancing McCain’s export capability, by having the Fielding operation as a back up for its Timaru plant, by securing a continuation of supply in the event of an adverse season or crop failure in the South Island.

The Applicant believes that, as a large, globally focussed company, it has the calibre to enhance and expand its existing New Zealand interests. With its plants in Timaru and Hastings, the company is in a strong position to provide direct and indirect benefits to the domestic and export markets through economies of scale. McCain’s existing interests and established international products will allow the retention of existing employees, product lines and supply lines.”

Note that in a decision in September 2001, the OIC gave approval for McCains to acquire the assets of Feilding Potato Storage Ltd rather than the 25% of its shares approved above.

Carter Holt buys back a lifestyle property at Waipu, Northland

In an unusual story, Carter Holt Harvey Forests Ltd has approval to buy back for $200,000 a 4.5 hectare “lifestyle property” at Glenmohr Road, Waipu, Northland it had sold in a programme of selling surplus properties for lifestyle properties or farming.

“In 1996, Carter Holt Harvey Limited entered into a programme to acquire land for afforestation, to provide the basis for significantly expanding its resource base. … Over recent times, CHH has addressed the best use of these land-holdings, disposing of property that is surplus to the company’s forestry requirements. This has resulted in the selling back of small properties to New Zealanders for use as ‘lifestyle blocks’ or farming opportunities. As part of this ‘disposal’ process, the company does advise potential buyers of the likely activities that are to be carried out on the adjoining land by forestry developers. In 2000, the company sold the subject property to the Vendors, drawing attention to the likely activities that could affect neighbours to the forestry development. Due to a misunderstanding the Vendors did not fully appreciate the extent of the activities within a plantation forest. To resolve the issues raised, CHH has agreed to buy back the property. CHH intend to complete the decoration of the dwelling that the vendors have erected on the property and then re-offer the property for sale.”

Land for forestry

· Trident Management Group LLC, owned by the Becker family of the U.S.A., has approval to acquire 378 hectares at Bushy Knoll, Hangaroa, Gisborne, from Roger Dickie New Zealand Ltd for $561,200. It will be developed into a commercial forestry operation. Roger Dickie “is providing the necessary expertise to the operation”.

· GMO Glenburn Ltd, owned by GMO Renewable Resources LLC of the U.S.A., has approval to acquire 196 hectares of land at Glenross Road, Waiwhare district, Hastings, Hawkes Bay for $618,750 to expand its forestry investments in Aotearoa. Our last record of a purchase by GMO was in March 1999, when a joint venture between GMO Renewable Resources LLC and Rayonier Inc, also of the U.S.A., gained approval to acquire 5,537 hectares of forestry right at Te Awahohonu Forest, approximately 70 km north west of Napier, Hawkes Bay. GMO Renewable Resources bought the historic 5,899 hectare Glenburn Station in Wairarapa in May 1998, amid considerable controversy. GMO is a subsidiary of Grantham, Mayo, Van Otterloo and Co., LLC, which was a major shareholder in Trans Tasman Properties Ltd.

Land for wine

· Kingsley Estate Vineyards Ltd, owned in the Channel Islands, U.K. (the OIC says the Chanel Islands, but we scent a typo), has approval to acquire three blocks of land between Gimblett Road and State Highway 50, Hawkes Bay for development into a “premium” commercial organic vineyard. Kingsley Estate Vineyards is owned 35.5% each by Ian Hugh Thurston and Robert Hugh Chapman both of the Channel Islands, and 29% by Kingsley Norman Tobin of Aotearoa, who is also selling the first of the three blocks of land, which are:

· 6.3 hectares (an established vineyard) being sold for $720,000 by Kingsley Tobin;

· 17.7 hectares being sold for $614,089 by Gimblett Stones Vineyard Ltd of Aotearoa; and

· 4.0 hectares being sold for $320,000 by the Hawkes Bay Deerstalkers Association.

· Nobilo Wines Ltd, owned by BRL Hardy Ltd of Australia, has approval to acquire two blocks of land in Marlborough for vineyards:

· 44.5 hectares of leasehold land at Giffords Creek Lane and Hammerichs Road, Blenheim, Marlborough, for $675,000; and

· 124 hectares of freehold land at Castles Road and Renners Road/Redwood Pass for $3,487,500.

“The lease of the property and its development into a vineyard will allow Nobilo Wines Limited to support, expand and develop its wine making activities. In particular, the lease of the property is part of the Applicant’s plans to expand its grape supply in the Marlborough region. Nationally and internationally, Marlborough is seen as a quality grape growing area, and therefore the proposal is a strategic move providing security of grape supply for the next 20 years.” Regarding the second block: “The property is located within the Awatere Valley in Marlborough, which has been identified as a quality grape growing area. This will be Nobilo’s first investment in this part of Marlborough.”

U.S. sheep farmer with fetish for new breeds buys another 220 ha near Waitomo

Willow Bay Company Ltd, owned by David Dean Smith of the U.S.A., has approval to acquire a 220 hectare station at Taumatatotara West Road, Te Anga, near Waitomo, King Country for $478,125. It adjoins a lake, park, and conservation land. In October 2000, Willow Bay gained approval to acquire the adjoining 867 hectare Te Anga Station at Taumatatotara West Road, Te Anga, for $1,406,249. In March 1999, the same company gained approval to acquire a 315 hectare farm at Kaweka Road, Taihape, King Country for $400,000. Smith obtained consent to buy his first farm, of 86 hectares, in Aotearoa in April 1998 for $375,000, and a nearby 11 hectare property including a house in July 1998, for $128,000.

On acquiring the 315 hectare sheep farm, we were told that while “recognising that sheep farming is probably at its lowest economic return ever, but having a fetish for introducing new strains and breeds of animal, the applicant is enthusiastic to become fully involved in the breeding of existing breeds and also exotic sheep”.

The acquisition of Te Anga Station was to establish a sheep and beef operation which would involve development of sheep farming and breeding by introducing new exotic breeds; the introduction of Simmental semen from Smith’s farm in America; and the introduction of East Friesian rams with Romney rams to promote better milk, meat and lamb production. We were told that the purchase of that property would mean that the total number of stock units able to be farmed by him would be “approximately 10,330 stock units”. We are now told that the present acquisition will mean that he can farm “approximately 9,100 stock units”, so the number appears to be dropping as he acquires more land. The new land will be used for access to the existing property and for breeding. He is now also developing the Dorper sheep breed.

For further details see our commentary on the October 2000 decision.

Other rural land sales

· In an unusual “technical” approval, Mountain Landing Properties Unlimited, a company owning a 338 hectare sheep and cattle farm in Wairoa Bay, Bay of Islands, Northland, has approval “to become an overseas person as a result of the migration of Mountain Landing Properties Unlimited to Delaware in the United States”. That is, the company itself is moving to Delaware. It is owned 80% by Peter Charles Cooper “a New Zealand citizen and part time resident”, and 20% by Brian Stebbins of the U.S.A.

· Alfons Reitsma of the Netherlands has approval to acquire 43 hectares of land at 504 No. 2 Line, Wanganui for $399,375. He does not have permanent residency status: he “proposes to seek and take up New Zealand residency” and live on the property. “At present, the property is extremely run down and unproductive.” Reitsma has farming experience including maintaining heavy agricultural equipment, and financial resources. He “intends to establish a more intensive crop farming operation on the property. The Applicant proposes to use the flat part of the property for intense rotational cropping and to protect the balance of the land by planting in native trees.”

· In a change of ownership which appears to be for tax purposes, Oldfield Corporation Ltd, incorporated in the Isle of Man, U.K., 80% owned by Lisa Levare Chase of Aotearoa and 20% by Peter Clifford of the U.K., has approval to acquire 57 hectares of land at 4652 Vinegar Hill Road, Otairi, Rangitikei, Manawatu for $450,000 from the same Lisa Chase. “In March this year Lisa Chase, a New Zealand citizen … acquired the Rangitikei property with the intention of leasing it to a local farmer…. The property, which prior to the purchase by Lisa Chase had been on the market for 18 months and was in an extremely run down and unproductive state will leased back to Lisa Chase who in turn will continue to sub-lease it to a local farmer. The sub-lessee intends to establish an intensive cattle farming operation on the property.”

· Abel Real Estate (H.K.) Co Ltd, owned by Abel Real Estate International Ltd of Japan, has approval to acquire four hectares of land at Napier Road, Havelock North, Hawkes Bay, for $427,500 from the trustees of the estate of Sir James Wattie, G.J. Wattie and R.K. Wattie. The land, which has a cottage on it, adjoins Mangapapa Lodge, and the lodge provides its only access. Abel Real Estate gained approval to buy Mangapapa Lodge in February 1999 (see our commentary for that month for more details). Abel describes the lodge as “one of New Zealand’s finest small luxury hotels”. So-Con Co. Ltd, which is associated with Abel, bought the Waimarama Estate Winery in River Road, Havelock North, about five kilometres from Mangapapa Lodge, in 1998.

· Two freelance BBC television producers, R.J. Chambers and D. Hinnigan of the U.K. have approval to acquire 44 hectares at Nikau, West Coast, for $100,000. Most of the land is covered in native bush and scrub with only two hectares able to be grazed. The buyers

“propose to construct a homestay and a separate editing studio on the property … It is proposed to market both the homestay and editing studio both locally and overseas. It is envisaged that others in the television and film industry will utilise the editing studio. It is proposed that the Applicants, who currently return to the United Kingdom to edit their films, will use the property for several months of the year as their home base to edit their films. During their time in New Zealand they propose to operate the homestay themselves. At other times the homestay operation will be run by a live in manager/host. The proposed development of the homestay and editing studio will involve improving the existing limited access to the property, the installation of a sewerage treatment facility and a small hydroelectric turbine, the construction of the homestay followed by the construction of the editing studio which will be completed by August 2002.”

· Lauren Suter and Patricia Key of the U.S.A. have approval to acquire 141 hectares of land at Glen Lyon Road, Twizel, Canterbury, for $154,630. They propose developing a luxury tourist lodge on the property, placing “a lot of importance on attracting international tourists, having a international marketing presence, and providing a focal point for regional marketing of tourism in the area”.

· Premier Dairies Ltd, which is owned by the Clinton Family Trust of Ireland, has approval to acquire further land in Southland for dairying. This time it is 22 hectares at Browns Road, Ryall Bush, for $247,500. The Clintons have being buying up a number of farms in the same area, and this land is surrounded by farmland being run by them so “it is unlikely that another purchaser would use the property for dairy purposes”. Their previous purchase was in December 2000, when Premier Dairies bought a farm of 274 hectares at Ryall Bush for $1,029,375 which adjoined a 41 hectare property they already owned. In October 2000, the 41 hectare block was described as adjoining the 387 hectare property, approval for whose purchase was given by the OIC in June 2000.