Resources
Foreign investment in Aotearoa/New Zealand
Overseas Investment Office - September 2016 Decisions
Alcohol Giant Constellation Brands Increases NZ Holdings
The global alcohol company Constellation Brands (US) has consent to acquire nine hectares at School House Vineyard, Bendigo Station, Wanaka and 12.3 hectares. at York St, Bendigo, Wanaka from Bendigo Station Vineyard Ltd and Bendigo Station Developments respectively, for $1,150,000. Consent was based on criteria under s.17(2)(a) of the Overseas Investment Act (OIA) 2005: jobs, increased processing of primary products and exports, greater efficiency, investment in development; and Regulations 28(e): previous investments (see our January, February, March, May and September 2014 commentaries and our December 2013 commentary for details of Constellation purchases in Marlborough).
Constellation has around a 40% share of NZ wine sales in the USA. It has about 7% of the New Zealand wine market, and 2% of New Zealand wine sold in Australia. Its largest winery is Drylands in Marlborough, where it plans to double capacity over the next few years. Constellation Brands began as a seller of bulk wines and is now the world’s largest wine producer, as well as third largest beer supplier. It has operations in the US, Canada, Mexico, New Zealand and Italy (wine 40%, spirits 5%, beer 55%), mainly supplying its most lucrative market, the US.
In 2003, it acquired BRL Hardy in Australia and Nobilo in NZ. In 2010 Constellation was one of 12 companies convicted by a French court for selling fake Pinot noir to US buyers. In 2013, it acquired major Mexican beer brands Corona and Modelo as part of global leader Anheuser Busch-InBev’s anti-trust settlement, and in three years Constellation’s stock value tripled. Its recent profitability in beer has rivalled that of AB-Inbev, and is being ploughed into more investments and acquisitions. In 2017, however, its share price is dropping due to worries about Trump’s border wall.
Back to TopHarvard Scholars Increase Otago Dairy Super-Farm
The “President and Fellows of Harvard College” (USA), through endowment funds DF1 and DF3 known as the Dairy Farms Partnership, have been given consent to increase their holdings in Central Otago with 143.4 hectares at Duffy Lane, Patearoa, to be purchased from the McSkimming Family Trust for $1,300,000. They currently lease the land to support their dairying operation on neighbouring farms.
They plan to develop a water reservoir to increase water availability on all the farms, and have offered to gift the riverbed to the Crown (OIA criteria s.17(2)(f)). Other criteria satisfied are job creation (s.17(2)(a)(i)), greater productivity (s.17(2)(a)(iv)), additional development (s.17(2)(a)(v)), and enhancing the viability of other investments (s.28(e) and (g)).
The neighbouring farms referred to are the former Big Sky and Helenslea dairy farms. Big Sky was proposed in 2001 to become New Zealand's first super dairy farm, running up to 6,000 cows on 1,800ha using supplementary feed. It went into liquidation in 2009 and in 2010 the land was bought by the Harvard fund for $34 million (September 2010), to be managed by an Auckland-based firm Franklin Rural Management using the same (Filipino) milkers. Helenlea farm is 590 hectares at Ranfurly, acquired for $5.4 million in 2008.
Harvard also has substantial interests in plantation forests in the central North Island. See our commentaries for October 2003 (Kaingaroa), March 2004, October 2004 and October 2008 (Helenslea) and September 2010 (Big Sky). As Murray Horton told the NZ Herald (7/10/10) at the time of the Big Sky purchase, this is “a further example of alienation of what is the main engine of the New Zealand economy and once it's gone, it's gone”. Though, once the water is in Harvard’s new reservoir, we may get to keep the riverbed.
Back to TopOverseas Shares In NZ Pig Breeding
PIC NZ Holdings Ltd (RCP 3 Ltd, NZ 33.33%; Sunpork Pty Ltd, Australia 66.67%) has consent to buy back 25% of PIC NZ Holdings’ shares from the Smith Family Trust for $2,787,500. PIC NZ Holdings owns 142ha at 561 Monument Road, Mangatawhiri; 31ha at 118 Frost Road, Franklin; 30ha at 715 Mitchells Road, Canterbury; and 10ha at 207 Substation Road, Canterbury.
PIC NZ Holdings is a swine genetics supplier and pork producer, owned until April 2007 by Goodman Fielder (then 35% Australian, 55% Graeme Hart, NZ). Two existing shareholders are acquiring the interest of a third exiting shareholder. The remaining shareholders intend to undertake a modernisation programme on the land.
The criteria satisfied under s.16 of the Act are greater productivity (s.17(2)(a)(iv)); additional development (s.17(2)(a)(v)), increased processing of primary products (s.17(2)(a)(vi)), and under the Regulations, undertake other significant investment (28(d)), enhance viability of previous and other investment (28(e) and (g)), economic interests (28(i)), oversight and participation by New Zealanders (28(j)). See our commentary for April 2007 (Goodman Fielder), and for October 2009 and November 2011 (Barfield Farms).
Back to TopChina Buys Half Our Biggest Meat Processor
Shanghai Maling Aquarius Co. Ltd (China) has consent to buy 50% of the fully paid ordinary shares in Silver Fern Farms Beef Ltd (to be renamed Silver Fern Farms Ltd) via its wholly owned subsidiary Shanghai Maling (Hong Kong) Ltd, for $261 million. Shanghai Maling Aquarius is a Shanghai listed company primarily engaged in processing, manufacturing, sale and distribution of food products and is one of the largest beef processors in China.
Silver Fern Farms is the biggest meat-processing company in Aotearoa/NZ, with 1,769 hectares of sensitive land which, with the exception of land leased for offices, is all connected with Silver Fern’s processing plants. Silver Fern is operationally constrained by a high level of debt, and this investment is expected to reduce its debt to nil and provide cash reserves.
This will allow Silver Fern to improve the efficiency of its plant network and advance its value-added strategy. So Silver Fern can increase its presence in China, Shanghai Maling will assist with product development, market research, Government approvals and access to relevant e-commerce sites and 2,000 retail stores over a period of three years. They are working to create a range of retail beef and lamb products specifically for China that are processed and packaged in New Zealand.
New Zealanders, through the Silver Ferns Cooperative, will continue to have significant oversight and participation in the Investment. SFF’s existing meat processing operations will remain in New Zealand. The “substantial and identifiable benefit to New Zealand” criteria were satisfied by increased export receipts (s.(2)(a)(iii) of the Act), greater efficiency (s.17(2)(a)(iv)) and increase processing of primary products (s.17(2)(a)(vi)), and under the Regulations by a key person in a key industry (28(b)), affect image/trade (28(3)), previous investments (28(e)), economic interests (28(i)) and oversight and participation by New Zealanders (28(j)).
All that substantial benefit doesn’t seem to have kicked in. Despite Silver Fern’s Board hyping the deal with Shanghai Maling on the basis of a $2.84 stock price, it never came close. The company posted a $30 million loss in January 2017, and its Fairton plant in Ashburton is likely to close (Stuff 16/5/17).
By May 2017 Silver Fern’s share price dropped 55% below its 12-month high of $1.55, and Winston Peters was asking if this half Chinese-owned company was being set up for a full takeover. In 2015 Silver Fern’s Chief Executive Officer (CEO) and Chair won business awards but, says Mr Peters: “If selling off your business to foreigners qualifies you for award contention, then it tells you all you need to know about the quality of corporate governance” (New Zealand First press release, 16/5/17).
Back to TopAustralian Forestry Funds Shuffle Shares In Kawerau Forest
UniSuper Forestry Investments Ltd (Australia), trustee for the UniSuper Forestry Trust No. 1), has consent to acquire a further 8.15% of Tiaki Plantations, which owns 20 hectares at Tamarangi Drive, Kawerau. Price withheld under s.9(2)(b)(ii) of the Official Information Act. Consent was required as the value of the New Zealand assets of Tiaki Plantations and its 25% or more subsidiaries is greater than $100 million. The vendor was Hastings Forestry Investments Ltd as trustee of the Hastings Forestry Trust No. 1 100% owned by Hastings Funds Management Ltd, Australia.
Unisuper Forestry Investments, a retirement fund servicing Australian universities, already held 33.54% of Tiaki Plantations. The investment was an internal restructuring which results in it increasing its shareholding 41.69%. In June 2014 UniSuper had 21.16% and increased its share by 12.37%. The “substantial and identifiable benefit to New Zealand” criteria were satisfied under Regulations 28(c) – affect image, trade or international relations and 28(e) previous investments (see also “Dodge City: The Transnationals’ Favourite Place To Do Business”, by Murray Horton, in Watchdog 138, April 2015, http://www.converge.org.nz/watchdog/38/01.html, re Unisuper and Luxembourg tax arrangements).
Tiaki I LLC (USA 88.84%; Canada 10.77%; Hong Kong [SAR] 0.36%; Philippines Public 0.03%) has consent to acquire a further 5.17% of Tiaki Plantations Company, a New Zealand forestry company which owns 20 hectares of land at Tamarangi Drive, Kawerau. Tiaki I LLC already held 53.14% of Tiaki Plantations, and the vendor is Hastings Forestry Investments Ltd, trustee of the Hastings Forestry Trust No. 1, a minority shareholder in Tiaki Plantations. The proposed investment is an internal restructure, which will result in the applicant increasing its shareholding in Tiaki Plantations to 58.31%.
On the same application, John Hancock Separate Investment Account Number Seventy Two, an existing shareholder of Tiaki I LLC, got consent to acquire up to 100% of the securities and sensitive land of Tiaki I LLC, which indirectly now owns up to 58.31% of the securities of Tiaki Plantations Company. These are investments in sensitive land and significant business assets, the value of which are more than $100 million. Prices withheld under s.9(2)(b)(ii) of the Official Information Act.
The overseas investment transaction has satisfied the criteria in sections 16 and 18 of the Overseas Investment Act 2005. The “substantial and identifiable benefit to New Zealand” criteria were satisfied under Regulations 28(b) key person in a key industry, 28(c) affect image, trade or international relations, and 28(e) previous investments.
Tiaki Plantations Company operates timber plantations in New Zealand. Its timber plantations cover approximately 25,107 hectares in the central North Island region. Tiaki Plantations sells and exports its products to saw log markets in New Zealand and internationally. See commentaries related to Tiaki Forests in May and October 2004, November 2007, June 2014 and October 2016.
Back to TopNZME/Fairfax Merger: Passed By OIO, Failed By Commerce Commission
A double application related to overseas investment in significant business assets, being NZME Holdings Ltd’s acquisition of 100% of the securities of Fairfax New Zealand Ltd for $371,000,000 (‘Acquisition’); and Fairfax Corporation Pty Limited’s acquisition by share subscription of up to 50% of the securities of NZME Ltd for $486,800,000. NZME ownership is Australian Public 99.29%; NZ Public 0.57%; Irish Public 0.12%; UK Public 0.02%. Fairfax ownership is Australian Public 62.19%; various Public 10.86%; USA Public 9.45%; UK Public 11.99%; European Public 2.66%; Asian Public 2.28%; New Zealand Public 0.57%.
NZME Limited is a media and entertainment business in New Zealand. Fairfax Corporation Pty Ltd is a subsidiary of Fairfax Media Limited. The Fairfax Group is one of the largest publishing and digital media businesses in Australia and New Zealand. The consents were sought to give effect to a merger of NZME and Fairfax NZ, the New Zealand arm of the Fairfax Group. The overseas investment transaction satisfied the s.18 criteria of the Overseas Investment Act and the consents were granted.
Fortunately, the merger failed to satisfy the criteria of the Commerce Commission. MZME and Fairfax argued the merger was vital to fend off the off-shore digital monsters, Facebook and Google, who were gobbling up advertising and regurgitating low quality content (Toby Manhire, The Spinoff, 3/5/17). However, in the Commission’s view:
“This merger would concentrate media ownership and influence to an unprecedented extent for a well-established modern liberal democracy…. The news audience reach that the applicants have provide the merged entity with the scope to control a large share of the news consumed by a majority of New Zealanders. This level of influence over the news and political agenda by a single media organisation creates a risk of causing harm to New Zealand’s democracy and to the New Zealand public” (Commerce Commission press release, 3/5/17).
See also media analyses by CAFCA: Wayne Hope and Merja Myllylahti, “Fairfax In Trouble”, in Watchdog 132, May 2013, and Bill Rosenberg’s “New Media Ownership In New Zealand” (CAFCA Website 2008) and “Who Owns New Zealand’s News Media?: Can We Afford To Let Them Own Our News?”, in Watchdog 103, August 2003).
Back to TopCanadian Pension Fund Buys Into Glencore Agricultural
Canada Pension Plan Investment Board and CPPIB Monroe Canada Inc. (100% Canada), a Canadian Crown corporation, received consent to own 39.99% and may own up to 50.01% of the issued share capital of Glencore Agriculture Ltd (various overseas persons 68.47%, Qatar Investment Authority 9.25%, Ivan Glasenberg, Switzerland 8.42%, US Institutional Investors 8.04%, Blackrock Inc, USA 5.82%), the value of the New Zealand assets of Glencore Agriculture Limited and its 25% or more subsidiaries being greater than $100m.
The asset value of this transaction is $135,000,000. The Canadian Pension Plan wishes to deepen its involvement in New Zealand agriculture to diversify its investment portfolio and considers Glencore, a leading integrated agribusiness, an appropriate partner. Glencore wishes to reduce debt and to enter into a strategic relationship with a well-recognised professional investor. The transaction satisfied the s.18 criteria of the Overseas Investment Act 2005.
South African-born billionaire Ivan Glasenberg is CEO of the Glencore mining group, based in Switzerland, which bought a Dutch grain trading company in 1981 and joined the agricultural big leagues when it bought Canadian grain handler Viterra for C$6.1 billion in 2012. Viterra (Canada 50.3%, USA 43.5%, various 6.2%) was a Calgary-based company formed from the merger of the Saskatchewan Wheat Pool and Agricore United. It operated mainly in Western Canada and South Australia, and was a leading producer of feed in New Zealand.
In July 2009 Viterra bought ABB Grain Limited (Australia 74.5%, USA 14.1%, various 6.3%), making it a global leader trading wheat, barley, canola and pulses. In New Zealand, ABB owned well known rural services companies, PCL Feeds and NZ Grain & Seed Ltd (TAG.). Canadian shareholders are back with this part-ownership of Glencore Agricultural. See our commentaries of August 2012 and July 2009.
Back to TopNew Forests Investment Fund Buys Up Forestlands
The Trust Company (Australia) Ltd is trustee for the New Forests Australia New Zealand Forest Operating Fund 2 (100%) which is owned by ‘certain overseas investment Funds’, and managed by New Forests Asset Management Pty Ltd. Operating as Wairarapa Estate Ltd and Southland Estate Ltd, the Fund has consent to buy:
- approx. 631 hectares being the Old Shed, Homestead, Fox, Woodslea and Tyneholm Blocks, Woodslea Downs Road, Pine Bush, Southland;
- approx. 155 hectares of land being the Driscoll Road Block, Te Wharau, Wairarapa;
- approx. 77 hectares being the Waipukurau Block, Hiranui Road, Wanstead, Hawkes Bay;
- approx. 407 hectares being the Fence Post, Morepork and Pukeko Blocks, Marainanga Road, Pongaroa, Tararua;
- approx. 215 hectares of land being the Ngahape Block, Ngahape Road, Ngahape, Wairarapa;
- approx. 717 hectares being the Pakowhai, Tinui Valley Stage 1, Tinui Valley Stage 2 and Tinui Valley Stage 3 Blocks, Pakowai Tinui Road, Wairarapa;
- approx. 172 hectares being the Riverina Block, Riverina Road, Marumaru, Hawkes Bay;
- approx. 188 hectares being the Putorino Block, State Highway 2, Putorino, Hawkes Bay.
The vendor is Forestlands NZ Limited and 18 other associated companies: the Kearns Family Trust (NZ 100%). Price withheld under s.9(2)(b)(ii) of the Official Information Act (commercial sensitivity). New Forests states it has a mandate to invest in New Zealand and Australian forest assets. Since 2014, it has made various investments in New Zealand including downstream sawmilling infrastructure. It has significant committed funds available to continue this programme and is finalising a new fund to begin in 2017.
New Forests considers Australia and New Zealand are two of the world’s most stable economies. The forestry industry is over 100 years old in each country with well-established productivity, operating history, and infrastructure. New Forests sees New Zealand as an attractive investment destination to provide exposure to the rapidly growing Asian markets, as well as the softwood lumber market in Australian which has a supply deficit.
The transaction satisfied s.16 criteria of the Overseas Investment Act, and “substantial and identifiable benefit to New Zealand” related to Increased exports s.17(2)(a)(iii), added market competition/productivity s.17(2)(a)(iv); indigenous flora/fauna and other wildlife s.7(2)(b)&(c); walking access, 17(2)(e); an offer to sell riverbed/seabed/foreshore to the Crown (tangata whenua might have a view on that!) and, under the Regulations, consequential benefits 28(a) and previous investments 28(e). See also our commentaries for February and October 2016.
Back to TopCigna Life Insurance NZ In US Merger
Anthem, Inc. (USA Public 99.94%; various 0.03%; Canada Public 0.02%) was granted consent to acquire significant business assets in New Zealand, being 100% of Cigna Life Insurance NZ through buying up to 100% of the shares of Cigna Corporation. Cigna Corporation is a US based global health services business (USA Public 99.97%; various 0.02%; Canada Public 0.01%).
The merger will combine the businesses’ complementary consumer solutions and differentiated mix of products with a view to delivering cost savings and enhanced outcomes for customers, access to a broader portfolio of products and services and meaningful shareholder value. The transaction satisfied the s.18 criteria of the Overseas Investment Act.
Anthem is a US health insurance company based in Indianapolis, founded in the 1940s and known until 2014 as Wellpoint. Through various mergers and acquisitions it is now the largest for-profit managed health care company in the Blue Cross and Blue Shield Association. Wikipedia reports Anthem had health data security breaches in 2009 and 2015, and in 2014 refused to pay for hospitalisation of a man with stage 4 cancers, although he had paid Anthem over $US100,000 in premiums. Anthem has a Public Affairs section which issues annual reports on its political donations and lobbying activities. No mention of NZ yet.
Back to TopTwo Applications Declined For Non-Residents
Hong Zhongliang, Ke Xueli, Gu Xinrong and IRL Investment Ltd (China) acquired 79.3 hectares of sensitive land at 185 Sandspit Rd, Warkworth in 2012 for $4.480,000 and applied for OIO consent retrospectively. Consent was declined as all s.16 criteria were not met.
An application by Yaping Gao and Shibo Jiang (China) for consent to purchase 2.9 hectares of land at 20 Bristol Road, Whenuapai, Auckland for $6.550,000 was declined as they were unable to confirm a current intention to reside indefinitely in New Zealand (s.16(1)(e)(i) of the Overseas Investment Act.
Back to TopTwo New Zealand Lifestyles Consented
Gerhard Viktor Sieber (Germany) has consent to purchase a 68 ha. lifestyle block as his own residence and development for guest accommodation at 404 Glenorchy-Routeburn, Glenorchy, Central Otago for $2 million.
Karl Ulrich Rudolph and Renate Hannelore Rudolph (Germany) have consent to purchase 74.5 hectares of land at 250 Oamaru-Alma Road, Oamaru, Waitaki for $1.5 million, as they intend to migrate to New Zealand and reside here indefinitely (section 16(1)(e)(i)).
Back to Top
Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.