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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - October 2013 Decisions

Bathurst Buys 240 Hectares At Waimangaroa

As part of Bathurst Resources' controversial development of a coal mine on the Denniston Plateau, Buller Coal Limited Australian Public (86%) and New Zealand Public (14%) has received approval for an overseas investment in sensitive land, being the Applicant's acquisition of a freehold interest in approximately 240 hectares of land situated at State Highway 67, Waimangaroa. The vendor was Colligan Farm Limited Bruce Alexander Colligan, New Zealand (100%): consideration was confidential.

The OIO states: "Buller Coal Limited (Buller) is an indirect 100% subsidiary of Bathurst Resources (New Zealand) Limited (Bathurst), a coal mining company listed on the New Zealand Stock Exchange. Bathurst is developing a large coal mine on the Denniston Plateau near Westport known as the Buller Project. The Buller Project includes several distinct coal blocks, one of which is the Escarpment (the flagship mine of the Buller Project). The Escarpment is to be an open cast mine targeting high grade blend hard coking coal. Buller proposes to construct a coal handling facility on the land to receive coal mined from its Escarpment mine and the wider Buller Project".

A summary of the Environment Court approval for this controversial open cast mine was reported by Marta Steeman at Stuff.co.nz (24/10/13): "Australian miner Bathurst Resources has received the final approval from the Environment Court for its controversial Escarpment coal mine project on West Coast conservation land. It follows the Environment Court saying on August 8 that it intended to grant consent to the Escarpment mine, proposed by Bathurst Resources.

"Since August Bathurst has seen off two legal challenges blocking its path. In late September the Supreme Court quashed an appeal calling for the effects of climate change to be considered when granting resource consents to Bathurst for the Escarpment mine on the Denniston Plateau. The appeal was taken by the West Coast Environment Network. Last week the Court of Appeal declined to grant leave to the Royal Forest and Bird Society to appeal to that court against a decision that State coal miner Solid Energy's mining licence for the Sullivan block should not be factored into the consideration of the Escarpment mine which was adjacent to it.

"'We are pleased to finally secure these consents to develop a mine that will deliver much needed jobs for the West Coast and generate benefits for the economy of New Zealand overall', Bathurst Managing Director Hamish Bohannan said. The consent procedure had been transparent and thorough 'and we welcome this final positive decision'. The company could now submit the management plans and applications to enable it to commence mining works. Bathurst said the Escarpment project was expected to create over 200 jobs and inject almost $1 billion into the New Zealand economy over the life of the mine. Bathurst would also make significant investment in measures to protect native flora and fauna, and biodiversity enhancement programmes".

A month later as reported by the New Zealand Herald (26/11/13), Bathurst was still bullish on soon extracting coal from this site despite a slump in world coal prices. "Coal miner Bathurst Resources expects to win first coal from its open-cast Escarpment mine on the Denniston Plateau in late March or early April 2014, says Managing Director Hamish Bohannan. Bathurst gained Environment Court backing for the heavily contested scheme late last month, more than two years after first being granted resource consents to take high-grade coking coal, prized globally for use in steelmaking, in August 2011. The consents were appealed by environmental groups, led by the Royal Forest & Bird Protection Society of New Zealand, but the court accepted Bathurst could mine, subject to conditions requiring certain parts of the licence area to be preserved.

"Bohannan told the Australian investor service BRR Media the company hoped 'to be moving rock and moving overburden early in the first quarter, and we're on track to having our first coal at the end of the first quarter, beginning of the second'. Mining plan approvals were now being given final ticks by regulatory authorities, but no further impediments were expected, said Bohannan. On the global outlook for coking coal, he said 'we are seeing the arena down at the moment and we believe we're coming out of it. I think that the Japanese steel market is stronger now than it ever has been, clearly the Chinese market has a big impact on it; we seem to be getting good signals from there. We're confident that things will improve and we'll see where we go. The big thing for it is our margins, so even in these lower costs times or lower price times we do have a healthy margin', Bohannan said.."

However just three months later, Bathurst had changed its mind, as reported by Marta Steeman again at Stuff.co.nz (26/2/14). "Westport is 'devastated' the start of mining on the Denniston plateau will be delayed indefinitely, the West Coast town's Mayor says. Bathurst announced that with the international price of coal at $US120 a tonne - the lowest in nine years - mining at Escarpment would be unprofitable. It said 29 jobs - 17 in Westport - would be cut to save about $3 million a year.

Buller District Mayor Garry Howard said it was devastating for the community and the company, and was a 'bitter pill to swallow. However, we understand the position that the company has found itself in and accept that the long-term future is better served by this delay', he said. Howard took a swipe at environmental activists whose opposition to the mine and court challenges took two years to overcome. 'It is simply criminal to see a well-intentioned regulatory process abused and manipulated by out-of-town extreme elements intent on frustrating legitimate and reasonable developments'.

"The money Bathurst had spent on court cases could have been invested in infrastructure for the mine, he said. Some local companies had been gearing up for the start of mining at Escarpment and the community was anxious about other job prospects. Howard expected many of the 17 Bathurst employees to leave the town to look for other jobs. One of the town's large retailers, Pat Bradley, of Bradley Furniture, said 400 jobs in the Stockton Mine workforce had already been lost with Solid Energy's cuts in the past two years and this additional 17 was disappointing. 'Everybody has got high hopes for Bathurst. Mining jobs are good jobs, they are well-paid jobs. Businesses like mine rely on discretional spending' he said. The town noticed the loss of the mining workforce to other regions such as Canterbury where some had gone to work in the rebuild.

"Bathurst will continue to prepare the Escarpment site for mining when the price of coal recovers but that could take several months. Bathurst Managing Director Hamish Bohannan said resuming mining was a 'no brainer' if the international coal price recovered to more than $US150, but if it was only at $US130 the company would wait for it to rise further. Market forecasters were saying the low prices would last 'a few months at least', he said. Environmental groups were concerned Bathurst wanted to push ahead with preparatory work when there was no guarantee mining would follow. 'Don't go in there and actually destroy the place if there's nothing coming from it - in that case there are no winners', Forest and Bird spokeswoman Debs Martin said. Forest and Bird had long called for the West Coast to look at sustainable industries for jobs 'not something that relies on destructive extraction', she said. Coal Action Network spokeswoman Cindy Baxter said she was concerned that preparing for mining meant getting rid of the overburden - the material above the coal seam - 'which is the whole beauty of the plateau'. She believed Bathurst was being overly optimistic about coal prices". See our October 2010 and March 2011 commentaries for details of Bathurst's original purchase of mining interests in this part of Aotearoa.

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Talley's Joint Venture Buys Additional Fish Quota

In two rare decisions under the Fisheries Act 1996, New Zealand Longline Limited Talley's Group Limited, New Zealand (50%), Te Ohu Kai Moana (TOKM), New Zealand (25%) and Nippon Suisan Kaisha Limited (Nissui), Japan (25%) has received approval to buy fishing quota from various fishing quota holders. Firstly approval was received for the acquisition and the continued holding of the following interests in fishing quota from 1 October 1999 until 24 August 2005:

a) ling, blue shark and rays bream quota shares; and

b) any amount of annual catch entitlement (ACE). Consideration was $6,000,000. The OIO states: "NZLL is a joint venture owned 50% by Sealord Group Limited and 50% by Talley's Group Limited. NZLL required consent to acquire various quota shares and ACE in order to continue its existing fishing operations".

In a second decision, New Zealand Longline received approval for the acquisition of the following interests in fishing quota under section 57B of the Fisheries Act 1996:

a) red crab, giant spider crab and king crab quota shares from 27 September 2005;

b) ling, blue shark and rays bream quota shares from 25 August 2005; and

c) any amount of annual catch entitlement ("ACE") from 25 August 2005. Consideration was $8,150,000. In addition to the above commentary, the OIO states:" ...NZLL intends to establish the viability and sustainability of a new crab fishery in New Zealand".

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Thermo Fisher Scientific Buys Life Technologies

Thermo Fisher Scientific Inc. United States of America (100%) received approval for the acquisition of rights or interests in up to 100% of the securities of Life Technologies Corporation and resulting in the Applicant indirectly wholly owning Life Technologies New Zealand Limited, with the consideration in respect of Life Technologies New Zealand Limited exceeding $100m. The vendors were existing shareholders of Life Technologies Corporation United States of America (100%). Consideration was approximately $US13.6 billion for the worldwide business of Life Technologies Corporation. The value of the New Zealand business may exceed NZ$100 million.

The OIO states: "Thermo Fisher Scientific Inc. is a global supplier of laboratory and analytical instruments, diagnostics and related products. Life Technologies Corporation is a manufacturer and global supplier of biotechnology tools for a range of life sciences applications. Thermo Fisher Scientific Inc. envisages that the acquisition will allow it to broaden its product range, enhance its geographic reach and grow its existing New Zealand presence".

The Commerce Commission subsequently gave approval for this New Zealand leg of a much larger global transaction, as reported by Scoop.co.nz (19/12/13). "The Commerce Commission has cleared Thermo Fisher Scientific Inc. (Thermo Fisher) to acquire Life Technologies Corporation (Life Technologies). The clearance is conditional on Thermo Fisher selling its foetal bovine serum (FBS) business to a third party. Thermo Fisher and Life Technologies both operate in the life sciences industry. They produce a wide range of products for scientific applications. Areas of product overlap include cell culture, transplant diagnostics, protein and molecular biology.

"The Commission is satisfied that the low aggregation of market share means that the proposed acquisition would not result in a substantial lessening of competition in markets for all products except the production of FBS. Thermo Fisher has provided an undertaking that it will sell its New Zealand assets with respect to the production of FBS. The Commission is satisfied that the divestment of the cell culture business to an independent competitor will be sufficient to remedy the competitive harm".

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Germans Buy Vehicle Testing Group From The MTA

DEKRA SE DEKRA eV Germany (100%) received approval for the acquisition of rights or interests in 100% of the shares of Vehicle Testing Group Limited which owns or controls:

• a leasehold interest in approximately 1.7 hectares of land at 31 Banks Street, Gisborne; and
• a leasehold interest in approximately 1.2 hectares of land at 10 Titahi Bay Road, Porirua; and
• a leasehold interest in approximately 0.8 hectares of land at 5A Cavendish Drive, Manukau City; and
• a leasehold interest in part of approximately 5.1 hectares of land at 451 Ti Rakau Drive, Botany, Auckland.

The vendor was MTA Group Investments Limited Motor Trade Association Incorporated, New Zealand (100%); consideration was $55,000,000 subject to adjustment in accordance with the Share Sale Agreement. The OIO states: "The Applicant intends to introduce new technology and business skills into the vehicle testing business of Vehicle Testing Group Limited". While approval was received for Dekra to buy 100%, it appears it is only buying 60% at this stage. As reported by Catherine Harris in Stuff.co.nz (20/9/13):

"The Motor Trade Association has confirmed it will sell 60% of Vehicle Testing New Zealand to German-based testing specialist DEKRA SE, in a deal that could ultimately earn it $60 million. The association made its decision at a special general meeting of its members in Wellington today and relies on Overseas Investment Office approval. MTA President David Storey said the $60m price tag depended on whether VTNZ met its targets over the next four years. It also hinged on whether MTA sold its remaining 40% stake at the end of that period. Storey said the MTA would put the proceeds in an investment portfolio to offset any risks to its income from further regulatory changes.

"The Government's decision to change the need for warrants of fitness from six months to a year was expected to hit MTA's income stream hard, as was the opening up of certification of fitness for heavy and commercial vehicles. Collectively those changes could shave $30m off MTA's income stream. 'We're worried as an association that the Government could change the rules again in the next one or two years so we think it's a good idea to spread our assets across a range of things'. Storey said partnering with DEKRA also opened up possibilities outside the automotive sector such as lift and locomotive inspections.

"VTNZ, which has 84 testing stations around the country, was attractive to DEKRA in return because MTA members could do vehicle repairs and servicing, something it did not do. DEKRA board member Clemens Klinke said VTNZ was an appropriate fit for its business model. 'I am very confident that by making best use of each other's strengths and expertise, we will quickly develop an organisation of the highest calibre', he said". DEKRA SE is one of the world's largest vehicle inspection companies. The company is based in Stuttgart, Germany and has around 28,000 employees worldwide. In 2012, DEKRA generated revenues of around €2.2 billion.

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A Further Aussie Share Shuffle Of The Trust Company

Equity Trustees Limited Australian Public (99.1%) and various overseas persons (0.9%) received approval for the acquisition of rights or interests in up to 100% of the shares in The Trust Company Limited which indirectly owns or controls various interests in land located at various locations around New Zealand. The vendors were existing shareholders of The Trust Company Limited Australia (100%); consideration was to be advised. The value of the New Zealand business is less than NZ$100 million. The OIO states: "The Applicant and the Target share a similar background and history and the combination of the two companies is designed to create a leading Australasian financial services and trust company". It appears that September's purchase of the Trust Company by Perpetual was not so perpetual after all.

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Pasta Moguls Buy Large Rakaia Dairy Farm

CO.FI.BA. SRL Guido Barilla, Italy (28%), Luca Barilla, Italy (28%), Paolo Barilla, Italy (27%) and Emanuela Barilla, Italy (17%) received approval for the acquisition of a freehold interest in approximately 413. hectares of land at 114 Griggs Road, RD 11, Dorie, Rakaia. The vendor was Brook Farms Limited Willy Leferink, New Zealand (50%) and Albertien Jeanet Leferink, New Zealand (50%); consideration was $25,100,000. The OIO states: "The Applicant intends to make additional capital investment in the dairy farm located on the property and to develop significant indigenous biodiversity on the farm". Willy Leferink is Deputy Chair of Federated Farmers and even though it appears he has received a price around 30% higher than comparable per hectare prices in the area, it's disappointing the leadership of this organisation continues to sell out Aotearoa. The Barillas are best known as founders of the world's largest pasta company.

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And English Buy Several Southland Dairy Farms

In two separate decisions, Insight Global Farmland Fund Limited United Kingdom Public (82.6%), Swedish Public (13.1%) and Middle Eastern Public (4.3%) received approval for the acquisition of a freehold interest in:

• a freehold interest in approximately 134 hectares of land at 124-144 Crampton Road, Opio; and
• a freehold interest in approximately 34 hectares of land at 1000 Wreys Bush-Mossburn Road, Otautau, and
• a freehold interest in approximately 313 hectares of land at 91 and 201 Riversdale-Waikaia Road, Riversdale, Southland.

The vendor for the first two farms was Brook Braeside Enterprises Limited New Zealand (100%). The vendor for the third farm was Fermoy Farms Limited New Zealand (100%). Consideration for both was kept confidential. The OIO states: "The Applicant intends to continue to undertake and improve the dairy farming and related business activities carried out on the land". See our August 2012 commentary for details of another Southland farm purchase by Insight Global and background information on them.

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Other October Decisions

In three separate decisions, DB Chimpland Limited Matthew Joseph Monahan, United States of America (100%) received approval for the acquisition of a freehold interest in:

• 68.1 hectares of land at 195D Whitemans Valley Road, Upper Hutt (201310076);
• 354.7 hectares of land at 88 Mangaroa Valley Road, Upper Hutt (201310075); and
• 23.3 hectares of land at 227F Whitemans Valley Road, Upper Hutt (201310074.

The vendors were WAKT Forestry Limited New Zealand (100%), Mangaroa Timber Co Limited New Zealand (100%) and David Lawrence and Mandy Dews Mandy Dews, New Zealand (50%) and David Lawrence Dews, New Zealand (50%) respectively. Consideration was $1,000,000, $1,550,000 and $350,000 respectively. The OIO states: "Mr Monahan intends to migrate to New Zealand and become a New Zealand resident under Immigration New Zealand's Entrepreneur Category. The land is being acquired to provide a controlled environment for research focused around environmental sustainability in forestry operations". See our January 2013 commentary for details of Monohan's purchase of a home in this area.

Summerset Holdings Limited New Zealand Public (44.2%), Perpetual Trustee Company Limited, Australia (40.2%) and QPE Co-investment Pty Limited, Australia (15.6%) received approval for the acquisition of a freehold interest in approximately four hectares of land at Racecourse Road, Trentham, Upper Hutt. The vendor was Agresearch Limited New Zealand Government, New Zealand (100%); consideration was confidential. The OIO states: "Summerset intends to acquire the land to enable the expansion of the existing adjoining Summerset retirement village 'Summerset by the Course'". See our May 2013 commentary for details of Summerset's original purchase at this location and the local concerns around the size of the development. Also see our May 2007, August 2009, September 2011 and May 2012 commentaries regarding Summerset's purchase of other retirement villages here.

And finally for October, William and Caroline Adams-Bennion United Kingdom (100%) received approval for the acquisition of a freehold interest in 199.4 hectares of land at 322 Finnis Road, Colyton, Feilding. The vendors were James & Marion Wilson New Zealand (100%); consideration was $3,315,000. The OIO states: "Mr and Mrs Adams-Bennion intend to move to and reside indefinitely in New Zealand. They will use the land as a residence and a working farm".

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