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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - April 2017 Decisions

US Buys Chicken Breeding Farm

Cobb-Vantress New Zealand Ltd (US 82%, various overseas 11%, UK 6%, Netherlands 2%) has consent to purchase 149 hectares at 837 Rotongaro Road, Rotongaro, Huntly from Kerr Farms Ltd (NZ 100%). Price $6 million. This is the New Zealand operation of Cobb-Vantress, Inc., a major US poultry research and development company. It intends to develop a facility for the production of chicken broiler-breeder grandparent stock, primarily for export in the Asia-Pacific region.

Cobb-Vantress considers that New Zealand has a lower risk of poultry diseases (such as avian influenza) and will therefore offer a stable and disease-free supply point. The investment is likely to result in at least 70 new jobs at Rotongaro, near Huntly, as well as substantial capital investment to develop the production facility. The genetic stock to be exported are a high-value product, and the Investment is expected to increase New Zealand’s export revenue by approximately $40 million per annum.

The transaction satisfied the s.16 criteria of the Overseas Investment Act 2005, with “substantial and identifiable benefit to New Zealand” under s.17(2)(a)(i) jobs, s.17(2)(a)(iii) increased export receipts, s.17(2)(a)(v) additional investment for development purposes, and Regulation 28(i) economic interests. Cobb started breeding pedigree hens in Massachusetts in the 1910s, and began exporting in the 1960s. Cobb-Vantress was a joint venture between Tyson Foods, which had the Vantress breeding lines, and the Upjohn Company which purchased Cobb.

Cobb-Vantress now describes itself as a “global company using innovative research and technology to make protein available, healthy and affordable worldwide” and provides an online portal to portal to technical details, industry best practices, information on feed conversion, and broiler and breeder management. Its global map of distributors features Riverland Park, Tuakau, which is part of Bromley Park Hatcheries, a major supplier of Cobb and Shaver breeds throughout New Zealand, Pacific Islands, Asia and the Middle East.

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Woolworths Australia Building A FreshChoice Supermarket In Cromwell

Wholesale Distributors Ltd (Australian Public 99%, various overseas 0.8%) has consent to acquire a leasehold interest in approx. 0.4223 hectares of land at 1-3 Isles Street, Cromwell from Frost Foundation Ltd (Frost Family Investment Trust (trustees Christine Pamela Frost and Murray Warden Frost, NZ 98%; Christine Pamela Frost, NZ 1%, and Murray Warden Frost, NZ 1%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.

Wholesale Distributors Ltd is a subsidiary of Progressive Enterprises Ltd, an operating division of Woolworths Ltd. The Applicant intends to acquire a long-term leasehold interest in the land and enter a franchise agreement for the operation of a FreshChoice supermarket. The investment is likely to lead to benefits including job creation in construction and operation; added market competition in the Cromwell retail grocery sector; and investment by the lessor of the land and the franchisee in developing the supermarket, which is likely to be of consequential benefit to New Zealand.

The overseas investment transaction has satisfied the criteria in s. 16 of the Overseas Investment Act 2005, with “benefit to New Zealand” under 17(2)(a)(i) jobs, s.17(2)(a)(iv) added market competition/productivity, and Regulations 28(a) consequential benefits and 28(e) previous investments.

In 2006 Progressive won the Roger Award for Worst Transnational Corporation (see the Judges Report here). This followed its acquisition by Woolworths Australia but for its earlier reputation see Joe Hendren’s “Retrogressive Progressive: TNC Locks Out Distribution Workers, Families Without Pay For 28 Days”, in Watchdog 113, December 2006. See also commentaries of September 2004, June 2005 and October 2010 for other OIO consents involving Progressive.

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US Teachers’ Super Fund Buys Marlborough Vineyard

Global Ag Properties II New Zealand Ltd Partnership and TIAA-CREF Global Agriculture II LLC (North America 56%, Europe 38%, Asia 6%) has consent to purchase 274 hectares at 1830 Awatere Valley Rd, Awatere Valley, Marlborough known as Black Birch Vineyard. The vendor is Craggy Range Vineyards Ltd (Terrence Elmore Peabody, Australia 99%, Stephen Mark Smith, NZ 1%). Price $23 million.

These financial partnerships are part of the Teachers Insurance and Annuity Association of America (TIIA) group, which is a US not-for-profit financial institution. The primary beneficiaries of TIAA retirement plans are people who work in academic, government, medical and other non-profit fields. Villa Maria Estate Ltd currently leases part of the Black Birch vineyard until 2028, and will lease the entire vineyard by 2019.

The lease allows for the vineyard owner to purchase a certain proportion of the grapes from Villa Maria at cost, beginning in 2018. It will contract with a local custom crush facility to produce wine, and export the wine to the USA for sale as premium New Zealand wine. It intends to redevelop the vineyard at the end of the lease to Villa Maria. The transaction satisfied the s.16 criteria of the Overseas Investment Act 2005, with “substantial and identifiable benefit to New Zealand” under s.17(2)(a)(v) additional investment for development purposes, and Regulations 28(a) consequential benefits and 28(b) key person in a key industry.

See our commentary of September 2013 for Black Birch’s sale to Craggy Range Vineyards. For other OIO consents involving Craggy Range see commentaries of December 1998, June 2004, October 2005, October 2006, August and September 2006, October 2009, June 2011, September 2012, September 2013 and July 2016. See commentaries of April 1998, September 2000 and May 2007 regarding Villa Maria.

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Wallace-Modena Merge Meat Rendering

The Wallace Group Limited Partnership (James Hay Wallace, NZ 29%, Rinaldi Family, Italy 25%, Hughbert Oliver Spence, NZ 15%, Dawn Bridson, NZ 13%, Gaile Spence, NZ 9%, Mary Dawn Bridson Trust, NZ 5%, Wallace Staff Holdings Ltd, NZ 2%, JH Wallace Family Trust, NZ 1%, Matthew Spence, NZ 1%) has consent to acquire interests in approx. 18 hectares at 266 C & D Wood Road, Waitoa, Waikato and significant business assets exceeding $100 million, being the business and assets of Wallace Corporation Ltd; and Farm Brands Ltd, South Canterbury By-Products (2009) Ltd and Farm Brands Asset Management Ltd (together “Farm Brands”); and Keep It Clean Ltd.

The vendors are Keep It Clean Ltd (NZ 100%), Wallace Corporation Ltd (James Hay Wallace, NZ 58%), Dawn Bridson, NZ 25%, Mary Dawn Bridson Trust, NZ 11%, Wallace Staff Holdings Ltd, NZ 3%, JH Wallace Family Trust, NZ 3%), and Modena Investments (NZ) Ltd (Rinaldi Family, Italy 50%, Hughbert Oliver Spence, NZ 29%, Gaile Spence, NZ 18%, Matthew Spence, NZ 3%).

The Wallace Group Partnership is a joint venture between Modena Investments (NZ) Ltd and Wallace Corporation Ltd. It has been established to merge their rendering and tanning businesses and to acquire the business and assets of Keep It Clean Ltd, which operates a rendering business in Abbotsford, Dunedin. Modena Investments (NZ) Ltd, based in Auckland, is the parent company of Farm Brands.

Farm Brands and Wallace Corporation Ltd currently have rendering and tanning businesses throughout New Zealand, and Wallace Corporation Ltd operates a casualty stock collection service in the North Island. The Partnership intends to grow the combined businesses, increasing processing capacity at Farm Brands’ rendering plant at Washdyke, Timaru and establishing a collection service to collect casualty cattle from farms in the South Island, similar to the service in the North Island.

The transaction satisfied the s.16 and s.18 criteria of the Overseas Investment Act 2005, with “substantial and identifiable benefit to New Zealand” under s.17(2)(a)(i) jobs 17(2)(a)(iii) increased export receipts, s.17(2)(a)(iv) enhanced domestic services, s.17(2)(a)(v) additional investment for development purposes, s.17(2)(a)(vi) increased processing of primary products, s.17(2)(f) – offer to sell riverbed to the Crown, of the Overseas Investment Act 2005 and Regulations 28(a) consequential benefits, 28(e) previous investments, and 28(j) oversight and participation by New Zealanders.

This merger was completed in June 2017. Former Wallace CEO Graham Shortland heads the new company, with headquarters at the Waitoa site. The Farm Brands Auckland office will continue export trading activities under the Farm Brands name (NZ Farmer 13/6/17). For more on Modera, Farm Brands and meat industry consolidation, see Dennis Small, “Corporate Agriculture/Free Trade Contradictions Bite Home”, in Watchdog 124, August 2010.

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Chinese Back Off Takeover Of Blue Sky Meats, Southland

NZ Binxi (Oamaru) Foods Ltd (PR of China 100%) received consent to acquire rights or interests in 100% of the shares of Blue Sky Meats (NZ) Ltd (Blue Sky) which has a freehold interest in 228 hectares at 450 Railway Road and 626 and 729 Woodlands Morton Mains Road, Invercargill, and a leasehold interest in six hectares of land at 73 River Street, Gore. The vendors are existing shareholders of Blue Sky Meats (NZ) Ltd (NZ 86%, PR of China 13.5%, various overseas 0.2%). Price $25,357,416.

NZ Binxi is a subsidiary of Heilongjiang Binxi Cattle Industry Co Ltd, a global supplier of beef products and the leading processor of cattle in China. In December 2015, it received consent to acquire 100% of Lean Meats Oamaru Ltd, a sheep and beef processing. NZ Binxi considers that Blue Sky will provide it with increased processing capacity, supplier relationships and a well-established export brand. This is likely to result in additional capital investment, increased productivity and export receipts as a result of capital investment and integration with Lean Meats Oamaru Ltd and improved environmental conditions at Blue Sky’s Invercargill plant.

The transaction satisfied the s.16 criteria of the Overseas Investment Act 2005, with “substantial and identifiable benefit to New Zealand” under s.17(2)(a)(iii) increased export receipts, s.17(2)(a)(iv) increased efficiency/productivity, s.17(2)(a)(v) additional investment for development purposes, and regulations 28(a) consequential benefits and 28(e) previous investments.

However, by the time this consent came through, NZ Binxi had backed off this acquisition. It had received 90% shareholder approval, subject to OIO consent and no “material adverse change”. An adverse change came in the weather. A very wet season limited operation of Blue Sky’s rendering plant when it was “not prudent” to irrigate rendering effluent, affecting the company’s profitability.

In 2016 Binxi Cattle Group’s stake in Blue Sky rose to 13.5%, making it the third-largest shareholder behind Lowe Corp and HW Richardson Group. Binxi operates a vertically integrated beef business in China, as well as Lean Meats Oamaru (Gerard Hutching, NZ Farmer, 30/3/17). See our December 2015 commentary for NZ Binxi’s consent to acquire Lean Meats Oamaru.

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Sky-Vodafone Get Consent From OIO But Not Commerce Commission

Sky Network Television Ltd (NZ Public 21%, US Public 21%, Blackrock Inc. 13%, Perpetual Investment Management Ltd, Australia 14%, Australian Public 20%, various overseas 11%) has consent to acquire up to 100% of the shares of Vodafone NZ Ltd (the “Acquisition”). Vodafone Europe BV (UK Public 41%, US Public 32%, various overseas 27%) has consent to acquire rights or interests in 51% of the shares of Sky Network Television Ltd (the “Subscription”).

Vodafone Europe BV has consent to acquire a temporary increase in its interest in the shares of Sky Network Television Ltd in circumstances that comply with the Takeovers Code (Class Exemptions) Notice No 2 2001. Cost $3.44 billion. Sky Network Television Ltd is a provider of pay TV services to its subscriber base, mainly via satellite. Vodafone NZ Ltd provides broadband, mobile and fixed-line telecommunications services to both private and commercial customers.

The Applicants sought consent to give effect to a merger of Vodafone NZ and Sky for the purpose of building on the complementary capabilities of Vodafone NZ and Sky to create an integrated telecommunications and media platform in New Zealand. Vodafone Europe BV has also been granted consent to temporarily increase and decrease its shareholding in Sky Network Television Limited where:

• the increase is small;
• it is for a temporary period of time; and
• Vodafone Europe BV does not exercise any additional voting rights it obtains through its temporarily increased ownership interest. The transaction satisfied the s.18 criteria of the Overseas Investment Act 2005.

However, the Commerce Commission had already declined to grant clearance for the proposed merger, as it announced (23/2/17). This was mainly due to Sky's monopoly on premium sport content. The merger would substantially lessen competition and could impact on key third players such as 2Degrees and Vocus. On 26 June Sky and Vodafone dropped their planned appeal against this decision, deciding their best option was to deepen their partnership without becoming one firm.

For OIO decisions involving Sky TV see our commentaries of June 1996, July 1997, June 1999, May 2004 and May 2005. See also Bill Rosenberg, “News Media Ownership In New Zealand”, 2008; Peter A Thompson, “Move Along, Folks, Nothing To See Here: How National’s Broadcasting Policy Cover-Up Favours Sky”, in Watchdog 121, August 2009, and Bill Rosenberg, “Who Owns New Zealand's News Media? Can We Afford To Let Them Own Our News?””, in Watchdog 103, August 2003.

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