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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - September 2012 Decisions

Vodafone Buys TelstraClear

Another busy month at the OIO, dominated by Vodafone's takeover of TelstraClear. Vodafone New Zealand Limited United Kingdom Public (42.3%), North American Public (30.4%), Various overseas persons (15.1%) and European Public (12.2%) received approval for the acquisition of rights or interests in 100% of the shares of TelstraClear Limited which owns or controls:

• a leasehold interest in 0.5 hectares of land at 43 Ihakara Street, Kapiti Coast, Wellington; and
• a freehold interest in 0.6 hectares of land at 952 Great South Road, Auckland.

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 TelstraClear Limited, the consideration of which exceeds $100m. Consideration was in fact $840,000,000. The vendor was Telstra New Zealand Limited Telstra Corporation Limited, Australia (100%). The OIO states: "Vodafone New Zealand Limited ("Vodafone NZ") proposes to acquire up to 100% of the shares in TelstraClear Limited. Given the complementary nature of the two businesses, Vodafone NZ aims through the Investment to:

(a) provide a better consumer broadband offering;
(b) increase the range of products and services it is able to provide to business customers, in particular data management, storage and security;
(c) increase its wireless spectrum allocation, and improve customer experience by delivering greater capacity; and
(d) realise cost synergies".

The deal was subject to Commerce Commission approval which was eventually received in October 2012. As reported by Tom Pullar-Strecker in Stuff.co.nz on 30/10/12: "The Commerce Commission has unconditionally approved Vodafone's purchase of TelstraClear, a decision the Green Party says will reduce options and push up prices. Co-Leader Russel Norman noted the terms of the $840m takeover included a clause that would prevent Telstra re-entering the New Zealand market for an undisclosed period. 'Make no mistake - Vodafone's move is about eliminating competition', he said. 'We've seen it in the banking sector, the insurance sector, and now it's happening in the telco sector. Vodafone's takeover of TelstraClear will inevitably lead to higher prices for end-users, businesses, and Government. It's not in the long-term interests of the New Zealand economy for our primary competition regulator to be eliminating competition in the telecommunications industry'.

"However, the Commission said it did not find any significant business overlap between Vodafone and TelstraClear in the provision of either mobile phone services or fixed line services to large businesses. Chairman Mark Berry said the merged entity would continue to face competition from Telecom, as well as Orcon, Slingshot and other smaller businesses in providing services to residential and small business customers. As a result, the Commission was satisfied that the proposed acquisition would be 'unlikely to substantially lessen competition in any of the relevant markets', he said. ...The Overseas Investment Office said in a separate announcement that it had also approved the takeover.

"Telecom's share price has gained 1.7% or four cents, to $2.42 today. Chief Executive Simon Moutter said it knew from past experience 'how potentially distracting significant operational change can be to an organisation and to their customers' and Telecom was poised to take advantage of any opportunities. 'We're keen to engage with any prospective customers who may be unsettled by the Vodafone-TelstraClear merger and want choice in their telecommunications company', he said.

"Gartner, IDC and Australian analyst Paul Budde have all speculated the sale of TelstraClear could clear the decks for parent Telstra to take a tilt at Telecom at some time in the future. However, no such move could be imminent because of the 'non-compete clause' referred to by Norman. Vodafone Chief Executive Russell Stanners said the approval from the Commerce Commission was 'still sinking in. It is an exciting day for our customers, Vodafone and the industry in general'. Stanners said he learned of the regulatory approval by text message while interviewing candidates for some senior roles.

"Vodafone would complete the purchase of the Telstra subsidiary tomorrow, he said. 'We took the opportunity to proceed in parallel with the Commission because customers were anxious and for employees - particularly TelstraClear employees. We want to provide certainty as soon as possible'. Stanners said in July (2012) that while there would be job reductions from pooling 'back office functions' such as legal services, the merger would not result in mass redundancies among Vodafone's 1,900 staff or TelstraClear's 1,300 employees.

"He today reiterated that assurance. 'We are buying TelstraClear because we value their people, experience and industry knowledge. There are duplications but we are absolutely not here to talk about job cuts. We are here to figure our how we can redeploy people - how we can grow this business'. Stanners said TelstraClear would continue to operate as a 'standalone' business for about six months 'just so we can get to understand both businesses and figure out the best way to bring them together'. The full integration of the companies - under the Vodafone brand, 'business model' and Stanners' leadership - would take about 18 months, he said.

"'What we have got now inside one business is the leader in mobile and the leader in the delivery of broadband and fibre services. We have got more high speed broadband connections in New Zealand than any other player'. That was thanks to TelstraClear's high-speed cables networks in Wellington and Christchurch, he said. Telecommunications Users Association Chief Executive Paul Brislen said the lobby group would have liked to have seen 'some kind of monitoring regime' put in place for the merger to 'ensure no cosy duopoly could emerge'. Brislen said yesterday that the lobby group had thought long and hard about the ramifications but was hopeful the takeover could lead to a more 'dynamic and interesting' market. 'On the one hand we have a reduction in competition as our top three telcos become two'. But the upside to the deal was it would finally create a competitor that could 'take on Telecom in the fixed line market', he said. The merged firm will have about a 29% share of residential broadband connections, versus Telecom's 49%, and annual revenues of $2.4 billion".

Bullying Its Customers

And it hasn't taken long for the new company to start bullying its customers. As reported by Susan Edmunds in the New Zealand Herald (3/3/13): "A retired man with a track record of taking big name Kiwis through the courts is lining up some of our biggest corporates with a service he says will get justice for ripped off customers. Graham McCready, who once took a successful private prosecution against Labour MP Trevor Mallard, is now taking on Vodafone in his first court case as Private Prosecution Ltd, claiming the telco is effectively trapping people on fixed term contracts.

"Private Prosecution Ltd is a no-cost, no-fee community prosecution service that will be self-funded from successful prosecutions. McCready filed papers in the Wellington District Court on Friday, claiming Vodafone Fixed Ltd, trading as TelstraClear, breached the Fair Trading Act by 'using harassment and coercion to collect an illegal debt for service'. Vodafone denies it has done wrong. McCready claims Kapiti woman Roslyn Paul was charged $250 in cancellation fees that had not been made clear to her. He says she was told over the phone that she was not allowed to cancel her account, or the account she had set up for a friend, until all owed charges were paid. In a separate incident, McCready says Wellingtonian Darren Kemp was not able to cancel his landline account when he moved house.

"Kemp told the Herald on Sunday: 'Even though I got the Wellington Council Housing Manager to contact them and tell them I'd moved, the dial-up and landline continued'. Ten weeks later he received a call from Baycorp, which had added collection fees. McCready says it is unfair and vulnerable, low-income families are having their credit histories ruined. 'People then can't get a bank loan, they go to loan sharks. There are ramifications down the line'. He says fixed term contracts set people up to fail. 'Vodafone, by one way or another, gets the customer to breach them. Then they will not disconnect the service and are very quick to send it to collection. The collection agency puts on a $200 collection fee to collect an illegal debt'. McCready says the charges filed are representative as many more people will be affected.

"TelstraClear wrote to Paul last month and told her it would waive the $250 fee because she was a long-term customer, and would write off the debt 'on the basis that it resolves all matters with respect to both of your accounts once and for all'. A spokesman says the early termination fees had been explained to Paul and a recording of the phone call was sent to her. He says accounts that are in arrears are dealt with on a case by case basis. If a customer has a good credit history, TelstraClear might allow it to go unpaid for a period of time before it was cut off.

"A Commerce Commission spokeswoman says it is a contract issue. 'If Vodafone has spelled out how the process works in their terms and conditions, then it's unlikely that the customer has been misled. Under the Fair Trading Act, we are looking for misleading or deceitful information provided to a customer'. McCready says it is not fair that people are being billed even after they try to cancel their accounts. 'That's coercion, getting paid for something you are not providing'. He says he hopes to receive more complaints so that they can all be taken to court. The maximum fine for the charges McCready is alleging is $200,000. As an alternative, McCready has suggested Vodafone compensate those affected and pay the Maori Women's Refuge $10,000".

See our November 2001 commentary describing the origins of TelstraClear via the takeover of Clear Communications by TelstraSaturn. At that stage Telstra Corporation Ltd of Australia owned 65% of TelstraClear. In 2003 Telstra went to 100% ownership of TelstraClear. Vodafone's entry into the New Zealand market occurred in September 1998 via its takeover of BellSouth.

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Sealord Swaps Quota For Shares

Sealord Group Limited Aotearoa Fisheries Limited 50% (New Zealand) Nippon Suisan Kaisha Limited 50% (Japan) and Westfleet Seafoods Limited Sealord Group Limited 50% and Endurance Fishing Company Limited 50% (New Zealand) received approval for the acquisition of rights or interests by Sealord Group Limited (and/or a 100% subsidiary of Sealord Group Limited) of up to 100% of the shares of Westfleet Seafoods Limited; and the acquisition by Westfleet Seafoods Limited (and/or 100% subsidiaries of Westfleet Seafoods Limited) of various quota shares and annual catch entitlement. The vendor was Sealord Group Limited Aotearoa Fisheries Limited 50% (New Zealand) and Nippon Suisan Kaisha Limited 50% (Japan) various fishing quota holders.

The OIO states: "Sealord Group Limited's ("Sealord") acquisition of shares in Westfleet Seafoods Limited ("Westfleet") provides an opportunity to market Westfleet's frozen products through Sealord's extensive international networks and is consistent with Sealord's strategy to build a "fresh" business (Sealord's business is predominately in frozen fish). Westfleet has acquired additional quota and annual catch entitlement ("ACE") and wishes to acquire further quota and ACE to enable it to grow its business further".

See Bill Rosenberg's excellent article "Sealord sale: OIC exposed, the full story behind the governments refusal to allow Brierley's to sell its Sealord stake offshore" in Watchdog 95, December 2000, online here for background on Sealord, the quota system, Government u-turns and how the OIC (now the OIO) operated back in 2000. Sealord has had a chequered history when it comes to sustainable fish management. The latest controversy was reported by Susan Nordquist of TV3's 3 News (10/3/13).

"Sealord is under fire for putting a tuna on the brink of being overfished in cans and marketing it as a premium product. ITM Fishing Show host Matt Watson is calling for compulsory labelling to show how tuna is caught and a boycott of all Sealord products. Sealord calls this its' best tasting tuna yet, but opponents say its television advertisement is irresponsible. 'I think it's incredibly arrogant or ignorant - ignorant of the state of the yellowfin tuna fishery', says Mr Watson. That's because yellowfin tuna is the on the brink of being overfished. 'Ten years ago I would go out and I'd expect to catch a yellowfin tuna over the summer months', says Mr Watson. 'Now I would be surprised to lay eyes on one'.

"But Mr Watson says Sealord has little interest in conserving yellowfin tuna because of its commercial value. 'I think they're relying on the New Zealand consumer about being ill-informed about which fish are sustainable'. The New Zealand Sports Fishing Council says yellowfin tuna stocks are half of what they were in 1990. But Sealord says stocks of yellowfin tuna in the Western Pacific are fine. It told 3 News in a statement it's trying to reduce the amount of yellowfin tuna it sells and is also working to reduce its bycatch rate to less than 1% of catch. But it also pointed out New Zealanders eat less than 0.5% of the world's canned tuna.

"Greenpeace says part of the problem is Sealord's reliance on fish aggregating devices - a type of float used to lure marlin and tuna but wipes out young tuna and other ocean life too. 'There's a much higher bycatch of other ocean life, including sharks, turtles and quite importantly juvenile tuna', says Karli Thomas of Greenpeace. 'These are more vulnerable species, like big-eye and yellowfin'. Mr Watson says it's up to consumers to drive change. 'You need to hit them in the pocket', he says. 'You need to stop buying their products and hopefully force their hand to change their ways'. That needs to happen before, Mr Watson says, yellowfin tuna disappears from New Zealand waters altogether".

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Americans Snap Up Apex Rental Cars

In another significant decision Avis HoldCo NZ United States Public (49.1%), SRS Investment Management LLC, United States of America (9.4%), Dimensional Fund Advisors, Inc., United States of America (7.4%), Par Capital Management Inc., United States of America (6.3%), Columbia Wanger Asset Management LLC, United States of America (5.9%), Vanguard Group Inc., United States of America (5.4%), BlackRock Fund Advisors, United States of America (4.6%), JANA Partners LLC, United States of America (3.7%) Keeley Asset Management Corporation, United States of America (2.9%), Braun von Wyss & Muller AG, Switzerland (2.8%) and Fidelity Management & Research, United States of America (2.5%) received approval for the acquisition of property in New Zealand used in carrying on business in New Zealand for consideration exceeding $100m, that property being the business assets of Apex Rental Cars Limited, Stephen Jones Motors Limited, Roadtrip Rentals Limited & Deer-Ace Travel Services Limited. The vendors were shareholders in Apex Rental Cars Limited, Stephen Jones Motors Limited, Roadtrip Rentals Limited and Deer-Ace Travel Services Limited Lennon Trust, New Zealand (46.4%), New Zealand Public (25.4%), Berrington/Wen Trust, New Zealand (17.4%) and Kerkhofs Trust, New Zealand (10.8%); consideration was confidential.

The OIO states: "The Applicant is acquiring assets of the Vendors to complement its existing rental vehicle businesses operating in New Zealand". Stuff.co.nz reported a summary of this deal (6/9/12): "Global car rental company Avis Budget Group has entered into an agreement to buy New Zealand firm Apex Car Rentals for $US29 million ($NZ36.4m) in cash. Avis will also pay the book value of Apex's fleet of 4,000-plus rental vehicles and potential earn-out payments based on its future performance.

"Avis' acquisition is due to be completed next month, subject to conditions. It said the purchase would expand its presence in the Australasian market, where Avis and Budget are already big brands. Patric Siniscalchi, Avis Budget's President for Latin America/Asia Pacific, said the deal would broaden its portfolio to 'meet the vehicle rental needs of all New Zealand and Australia visitors and residents'. Apex, described the country's biggest independently owned car rental company, is based in Christchurch. It was founded in 1992, aimed at value-oriented leisure travellers and now operates in both New Zealand and Australia with 140 staff".

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Tiong Family Grabs 1,331 Hectares In Waihopai Valley

Timbergrow Limited Tiong Thai King, Malaysia (70%), Tiong Family, Malaysia (15%), Tiong Hiew King, Malaysia (10%), and Tiong Ik King, Malaysia (5%) has received approval for the acquisition of a freehold interest in 1,331 hectares of land at 3803 Waihopai Valley Road, Marlborough. The vendors were Christopher Joseph Lovell and Caroline Susan Lovell New Zealand (100%); consideration was $2,100,000, or just $1,577 per hectare! The OIO simply states:" The land is being acquired for conversion to forestry".

With land this cheap, no wonder they are actively investing here. What's another 1,331 hectares when you already own over 100,000! See our commentaries for November and December 1994, September and October 1995, June, August and September 1996, February 2000, September 2004, May 2006, March 2007, February and March 2011 for details of other significant forestry purchases here by the Tiong family. As reported previously in Watchdog, the Tiong family is one of Malaysia's most powerful and wealthy families. They own controversial rainforest logger, Rimbunan Hijau, newspapers and magazines. They are better known here for other significant forestry investments via Ernslaw One Limited. Details of their transgressions resulting in their most recent appearance as a Roger Award finalist are here (Ernslaw One came third in the 2004 Roger Award).

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While Austrian Grabs 1,148 Hectares Near Napier

Tassilo Metternich-Sandor Austria (100%) received approval for the acquisition of a freehold interest in 1,148.3 hectares of land located at 1928 SH5, Te Pohue, Napier. The vendors were Roger Dickie Eland Limited New Zealand (100%); consideration was stated as $3,400,000. The OIO states: "The Applicant intends to acquire the property to develop a sustainable plantation forest for the sale of timber products and for carbon sequestration".

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And Canadian Grabs 443 Hectares Of Three Ridges Forest

Forestry Investments Limited Mary Ellen Marziale, Canada (100%) has received acquisition of a freehold interest in approximately 443 hectares being three properties located near Gisborne located at Kotare Road (Woodend), Tiniroto Road (Pine Farm 47) and Mangaoae Road (Te Karaka), collectively known as the "Three Ridges Forest". The vendor was also Roger Dickie Developments Limited New Zealand (100%); consideration was stated as $2,491,820. The OIO states: "The Applicant intends to establish and develop a long term commercial forest to generate carbon credits and timber for both domestic and international markets". Roger Dickie specialises in finding, securing and developing the best farm and forest opportunities on behalf of investors and overseas clients and has facilitated the sale of many of forestry blocks to overseas investors over the years.

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Australian-Owned Downer Sells Geothermal Driller To Oman

MB Century Holdings Pte Limited (& Associates) Mohamed Ali Al Barwani, Oman (100%) received approval for the acquisition of rights or interests in 100% of the shares of MB Century Drilling Pty Limited which indirectly owns or controls a freehold interest in 10.1 hectares of land located at 172 Karetoto Road, Wairakei.. The vendor was Downer EDI Limited Australia (100%); consideration was stated as $32,679,000. The OIO states: "The Applicant is acquiring Century Drilling Pty Limited in order to expand its presence in the wider Asia Pacific region and to enable it to provide additional oil, gas and geothermal drilling services and auxiliary energy services in South East Asia, Australia and New Zealand".

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American Plans Another Exclusive Golf Course: This Time Mangawhai Heads

Richard Alan Kayne & Suzanne Laughinghouse Kayne United States of America (100%) received approval for the acquisition of a freehold interest in up to 230.7 hectares of land located at Te Arai, Mangawhai Heads, North Auckland. The vendor was Te Arai Coastal Lands Limited New Zealand (100%); consideration was $10,000,000.The OIO states: "The Applicant is acquiring the land to develop a world class championship standard golf course, related improvements and up to 17 dwellings. The golf course will be sustainably designed to maintain the integrity of the land and accentuate Te Arai's unique natural character".

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Other September Decisions

Rosebank Forest Products Limited and Southern Cross Forest Products Limited Matthew Forrest Hagen, United States of America (60%), Neil Eric Hagen, United States of America (30%), Colin Gordon Thomas Whitefield, New Zealand (9.5%) and Mark de Lautour, New Zealand (0.5%) received approval to acquire a leasehold and freehold interest in 9.2 hectares of land at 131 Clinton Highway, Balclutha. The vendors were Wenita Lumber Limited Chinese Government, People's Republic of China (62%), GMO Forestry Fund 7 International LP, United States of America (21.6%), GMO Forestry Fund 7-B LP, United States of America (9.9%) and GMO Forestry Fund 7-A LP, United States of America (6.4%); consideration was stated $1,480,776 plus GST. The OIO states: "The Applicant sought consent for a lease to operate the existing sawmill and processing plant located on the land, and now wishes to purchase the land to continue its operations".

Premier Dairies Limited Balreask Trust, Thomas Clinton Family, Ireland (100%) received approval for the acquisition of a freehold interest in 136.8 hectares of land at 946 Mossburn - Five Rivers Road, Southland. The vendor was MAC Corp Limited New Zealand (100%); consideration was $1,700,000. The OIO states: "The land is currently used for sheep and beef farming. The Applicant intends to convert the land to dairy support and incorporate it into the Applicant's existing Southland dairy farming operation". Premier Dairies is owned by the Clinton family of Ireland and has been steadily buying-up Southland farms. From 2000 to 2002 they bought several properties near Winton, converting them to dairying. For more information, refer to OIC/OIO Decisions written up for December 2000, May/June 2001, February 2002, September 2008, March and April 2009 and March 2012.

Craggy Range Vineyards Limited Terrence Elmore Peabody, Australia (99%) and Stephen Mark Smith, New Zealand (1%) received approval to acquire a freehold interest in 1.8 hectares of land at 213 Waimarama Road, Havelock North. Consideration was $380,000; the vendor was Jeffrey John Drabble and Felicity Caroline Dobell-Brown New Zealand (100%). According to the OIO: "Craggy Range Vineyards Limited is purchasing the land to enhance its existing winery, restaurant, head office and visitor/tourist accommodation and facilities, which adjoin the land". See our commentaries for October 2000, June 2004, August 2006, July 2009, July 2010 and June 2011for details of land purchases here by Mr Peabody.

Goodman (Paihia) Limited Australian Public (77%), Chinese Government, China, People's Republic of (17.8%), APG Asset Management, United States of America (3.1%) and Abu Dhabi Investment Council, United Arab Emirates (2.1%) received approval to acquire a freehold interest in 1.7 hectares of land at 10 and 28 Corinthian Drive, 18 Oracle Drive and 1 William Laurie Place, Albany, Auckland. The vendor was NZ Property Finance Partners Goldman Sachs, United States of America (50%), Canadian Public (30.7%), United States Public (9.8%), Kuwait Public (8%), United Kingdom Public (0.5%), European Public (0.5%) and Australian Public (0.5%); consideration was confidential. The OIO states: "The Applicant is acquiring the land to develop as a commercial office and industrial estate".

Contact Energy Limited New Zealand Public (38%), Australian Public (21.6%), various overseas persons (21.2%), North American Public (8.5%), Asian Public (4.7%), United Kingdom Public (3.4%), European Public (2.5%) and Middle Eastern Public (0.1%) received approval for the acquisition of a leasehold interest in 0.7 hectares of land at Harbour City Tower, Brandon St, Wellington. The vendor was Kirkcaldie & Stains Properties Limited New Zealand Public (99.5%) and various overseas persons (0.5%); consideration was confidential. Contact is leasing premises in the Harbour City Tower to use as its national office.

Holcim (New Zealand) Limited Various overseas persons (46.9%), Thomas Schmidheiny, Switzerland (20.1%), Swiss Public (18%), Eurocement Holding AG, Switzerland (10.1%) and Capital Group Limited, United States of America (4.9%) received approval for the acquisition of a freehold interest in 196.9 hectares of land at 159 Bobbing Creek Road, Ngapara, Otago. The vendor was Hugh Alexander Dougald Matheson New Zealand (100%); consideration was $1,640,000. The OIO states: "The Applicant is acquiring the land to support coal mining operations on adjoining land also owned by the Applicant". Holcim has previously received OIO approvals for other land purchases in the area (see Decisions in December 07, January and June 08, February 2009).

Patrick Farms LLC Ronald James Patrick, United States of America (100%) received approval for the acquisition of a freehold interest in 0.3 hectares of land at 60 Sharon Road, Browns Bay, Auckland. The vendor was Anthony Lowry Robinson, Gloria Lynne Robinson and Richard George Wilson as trustees of the AL & GL Robinson Family Trust New Zealand (100%); consideration was $5,000,000. The OIO states:"Ronald James Patrick intends to reside indefinitely in New Zealand. He is acquiring the land as a residential/lifestyle dwelling for himself and his family". On a per hectares basis, that has to be one of the most expensive lifestyle blocks in New Zealand.

And finally for September Heath Dwayne Sanchez & Rebecca Grace Sanchez Australia (100%) received approval to acquire a freehold interest in 2.2 hectares of land at 281 Hill Head Road, Corstorphine, Dunedin. The vendor was Warren Hastings Batchelor, Carolyn Ruth Edwards and WF Trustees 2006 Limited as trustees of the Cawa Trust New Zealand (100%); consideration was $225,000. The Sanchez's intend to reside indefinitely in New Zealand and are acquiring the property to reside on.

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