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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - May 2018 Decisions

Chinese To Massively Increase Bottled Water From Otakiri Springs

Creswell NZ Ltd (Shanshan Zhong, China PR 80.6%; China Public 19.5%) has consent from the Minister for Land Information and the Associate Minister of Finance to acquire 6.2719 hectares of land at Otakiri Springs property 57 Johnson Road, Otakiri, Bay of Plenty, from Donald Charles Robertson and James Lawrence Robertson (NZ 100%). Price withheld under s9(2)(a) and s9(2)(b)(ii) and 9(2)(ba) of the Official Information Act.

The OIO states that Creswell is a wholly-owned subsidiary of Nongfu Spring Co Ltd, a large bottled water supplier based in China. Creswell has been granted consent to acquire the land identified above upon which there is an existing water bottling facility and kiwifruit orchard. Creswell intends to expand the water bottling facility and, in particular:

• introduce into New Zealand approximately $42 million within four years to improve the plant and to introduce two high speed bottling lines;
• increase productivity as a result of increasing daily bottling capacity by approximately 900%
• create full-time equivalent positions on the Land, and retain existing jobs associated with the water bottling business, bringing FTE jobs to a total of 60 once the water bottling facility reaches full capacity; and
• generate more than $65 million in new export receipts

The OIO considers that these benefits are substantial and identifiable in the context of the land being acquired, being approximately six hectares of rural land, and with reference to the nature and extent of Creswell's proposed investment. As a condition of consent, Creswell may only acquire the land if relevant regional and district councils grant it the required resource consents to undertake certain necessary activities.

This was the controversial consent announced by Ministers David Clark (Finance, Labour) and Eugenie Sage (Land Information, Greens) on 12 June 2018 , because it met the legal requirements of the Overseas Investment Act despite being contrary to Green Party policy (Henry Cooke, 12/6/18, Stuff,).

See also NZ Herald, 6/2/18 and TV3 Newshub, 14/3/17.

This consent highlights the need for further changes to the Overseas Investment Act. At the time of writing, the Finance and Expenditure Committee had just reported on a Bill to amend the Act (see my article "Overseas Investment Under The New Government", in Watchdog 148, August 2018), and this was passed on 15 August (see Minister Parker's media release. ).

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Chinese Investors And New Forests Private Equity Buy Forest Land

Huimei Investment (NZ) Pty Ltd (Zhiqiang Lu, China PR 99.5%; Shandong Huimei Real Estate Co. Ltd, China PR 0.4%; China PR Public 0.05%) has consent from the Minister for Land Information and the Associate Minister of Finance to acquire approximately 206 hectares at Tumbledown Bay Road, Port Underwood, Marlborough, from New Zealand Forestland Ltd (Angus Malcom, NZ 50%, Gerard Malcolm and Wen Fang [as Trustees of the Malcolm and Fang Family Trust], NZ 50%) for $1.6 million.

The OIO states that Huimei Investment is a company formed for the purposes of undertaking forestry activities in New Zealand. The land is a block planted in pine and Huimei Investments intends to continue forestry operations. The land also contains significant historical and scenic sites including an historic whaling station. Huimei intends to implement extensive mechanisms to protect (and educate the public about) the historic nature of the land and help protect (and provide walking access to) the indigenous flora or fauna on the land. Huimei Investment was registered in NZ on 25 July 2016 with Zhiqiang Lu as sole director, located in Sydney.

Wairarapa Estate Ltd The Trust Company (Australia) Ltd as trustee for the Forests Australia New Zealand Forest Operating Fund 2 (100%) which is wholly owned by certain overseas investment funds has been given consent by the Minister for Land Information and the Associate Minister of Finance to acquire approximately 199.4129 hectares of land at 1,094 Glenross Road, Waiwhare, Hawkes Bay. The New Forests Australia New Zealand Forest Operating Fund 2 is managed by Forests Asset Management Pty Ltd. The vendor is Tenco Ltd (NZ 78.4%; Thailand 16.9%; China 4.7%). The price is $3,420,000

The OIO states that the applicant is a company created to hold forestry assets. It intends to acquire the land to harvest the current crop of pine trees between 2020 and 2022 and then replant the land with a new commercial crop of pine trees. The benefits to New Zealand include:

• increasing the volume of harvested logs available for domestic processing;
• environmental protection of indigenous vegetation; and
• sustainable forestry practices by obtaining Forest Stewardship Council certification for the forest estate.

See February, September and October 2016 for more New Forests consent to buy up NZ's privatised forestry land in Wairarapa and Marlborough, and our comment in October 2016 on their investment strategy. It is hard to see how either of the above two transactions will contribute anything "over and above" what would occur anyway under New Zealand ownership, as required by the Minister's new policy.

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Airwork's New Owner Zhejiang Rifa Restructures

Zhejiang Rifa Precision Machinery (RPM) Co Ltd (China Public 49.2%; Jie Wu, China PR 24.1%; Caitonghui Information Service Partnership, China PR 11.49%; Wu Liangding, China PR 7.07%; Hangzhou Municipal Government 4.9%; Chen Ailian, China PR 1.7%; Yu Haoming, China PR 1.4%) (percentages based on anticipated ultimate beneficial interest in RPM immediately after the First Stage Investment), and Zhejiang Rifa Holding Group (RHG) Co Ltd (Jie Wu, China PR 34.1%; China Public 24.4%; Caitonghui Information Service Partnership, China PR 21.9%; Wu Liangding, China PR 13.5%; Chen Ailian, China PR 3.3%; Yu Haoming, China PR 2.8%) have consent from the Overseas Investment Office to acquire significant business assets, being:

• the acquisition by Zhejiang Rifa Precision Machinery Co Ltd (RPM) of 100% of the shares in RIFA Jair Investment Co, Ltd via one or more transactions (the First Stage Investment); and
• the acquisition by Zhejiang Rifa Holding Group Co, Ltd (RHG) (directly, and/or indirectly through its wholly-owned subsidiary Wu Du Investment Co, Ltd) of up to 100% of the shares in RPM via one or more transactions (the Second Stage Investment).

As a result of the acquisitions, RPM will have an indirect 25% or more ownership or control interest in Airwork Holdings Ltd, and RHG may increase an existing 25% or more ownership interest in Airwork, the value of the assets of Airwork and its 25% or more subsidiaries being greater than $100m.

The vendors in relation to the First Stage Investment are: Zhejiang Rifa Holding Group Co. Ltd (Jie Wu, China PR 34.1%; China Public 24.4%; Caitonghui Information Service Partnership, China PR 21.9%); Wu Liangding, China PR 13.5%; Chen Ailian, China PR 3.3%; Yu Haoming, China PR 2.8%) and Hangzhou Jinpan Investment Partnership LP (Hangzhou Municipal Government 100%) and Hangzhou Jinqi Investment Partnership LP (Hangzhou Municipal Government (100%). The vendors in relation to the Second Stage Investment are likely to be RPM and/or RPM shareholders. The price is $280 million.

The OIO states that RHG previously applied for and was granted consent in 2017 for the acquisition up to 100% of the issued share capital in Airwork, a specialist aviation service provider based in New Zealand, by way of an initial takeover offer and subsequent transactions. The present consent decision relates to a proposed restructure of the RHG group that will occur off-shore.

The restructure will result in a change to some of the RHG group entities with indirect ownership of New Zealand assets (i.e. RPM will acquire RIFA Jair Investment Co Ltd, an RHG group subsidiary with indirect ownership of Airwork), and will adjust some of the percentages of indirect ownership. However, RHG will continue to have an indirect controlling interest in Airwork as a result of the proposed restructure.

The purpose of the proposed restructure transactions includes providing access to China's capital markets and obtaining funding to grow Airwork's business. The applicants have satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character. The applicants have also demonstrated financial commitment to the investment.

See February 2017 for Zhejiang Rifa's OIO consent to purchase Airwork, and background information on both Airwork and Zhejiang Rifa. Zhejiang Rifa says it is growing Airwork for the Asia and Latin American markets. As well as dealing in textiles machinery, computing and aviation machinery, in 2015 Zhejiang Rifa Holdings moved to acquire Australian cattle farming land.

The NZ Herald (8/11/17) reported that Zhejiang Rifa achieved a full takeover for Airwork in September 2017, offering shareholders $5.20 per share in what was a fait accompli, having signed lock-up agreements giving it more than 90%, meaning it could automatically enforce Takeovers Code mop-up provisions.

Airwork Holdings was then de-listed from the NZX on 15 November 2017 . The company will stay in New Zealand with no other changes intended, reports Scoop (27/9/17)

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Oyster And KKR Equity Funds Buy Central Park Corporate Centre, Greenlane

CP Auckland LP (North American Public 42.9%; Cayman Islands Public 31.1%; various public 15.2%; Asian/Pacific Public 7%; European Public 2.53%; African Public 1.3%) has consent from the Overseas Investment Office to acquire approximately 6.2272 hectares of non-sensitive land comprising Central Park, at 666 Great South Road, Greenlane, Auckland 1051, together with improvements thereon, with a consideration exceeding $100 million. The vendor is Goodman Nominee (NZ) Ltd (NZ Public 67.4%; Australian Public 25.6%; North American Public 5.5%; Asian Public 0.8%; European Public 0.7%). The price is $209 million.

The OIO states that CP Auckland is a New Zealand registered limited partnership formed to undertake the investment for its partners, which include Oyster Nominee Ltd (a company incorporated in New Zealand) and Ranger (NZ) Pte Ltd (a company incorporated in Singapore). Oyster Nominee Ltd is a member of the Oyster Property Group. Oyster is a leading New Zealand funds manager providing professional property expertise to retail, office and industrial property owners and investors. Ranger (NZ) Pte Ltd is an affiliate of KKR & Co LP (together with its affiliates, KKR). KKR is a leading global investment firm that manages multiple asset classes.

Units of KKR, which has previously made several investments in New Zealand, are listed on the New York Stock Exchange. The land is currently home to 60 different tenants spread across 11 office buildings and two stand-alone car park buildings. These office buildings provide a total net lettable area of approximately 43,900 square metres of office space.

Goodman Nominee is a New Zealand holding company for its parent Goodman Property Trust, which is a large investment entity listed on the New Zealand Stock Exchange, with shares widely held by overseas persons. CP Auckland has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character. CP Auckland has also demonstrated financial commitment to the investment.

Oyster Property Group (www.oystergroup.co.nz) is 50% owned by ASX listed Cromwell Property Group. Oyster's Website says it is a commercial property and funds manager with expertise in property fund structuring and equity-raising. It currently manages over 20 property funds structured for retail and wholesale investors, including partnering with institutional capital and private equity. It holds management mandates with third party property owners for development, asset management, property and facilities management, and retail leasing.

It manages retail, office and industrial assets throughout New Zealand with a value in excess of NZ$1.4 billion. Oyster states that the Central Park Corporate Centre spans a six-hectare site with more than 60 businesses and 2,100 employees in 11 buildings. Key tenants are Genesis Energy, Restaurant Brands, Youi, Mars, Toshiba, George Weston Foods, Department of Corrections and Salmat. This purchase builds on Oyster's acquisition in 2017 of Millennium Centre Business Park.

Ranger (NZ) Pte is just one of 13 pages of KKR subsidiaries listed here (as of 31/12/17). KKR & Co Inc (formerly Kohlberg Kravis Roberts & Co and KKR & Co LP) is a global investment firm that manages assets including private equity, energy, infrastructure, real estate, credit, and, through its strategic partners, hedge funds. It has more than 280 private equity investments worth approximately $US545 billion as of June 30, 2017 as well as assets under management and fee-paying assets under management worth $US153 billion and $US114 billion respectively.

With offices in 21 cities in 16 countries, it is currently headquartered in New York and listed on the NYX. See other commentaries involving KKR in October 2015, March 2013, July and August 2010, August 2007, October 1996 and July 1994; plus a mention in Bill Rosenberg's article "International Pressure To Privatise", Watchdog 117, April 2008.

The vendor Goodman is a global property group listed on the ASX, that owns, develops and manages industrial real estate in 16 countries (Stuff, Catherine Harris & Chris Hutching, 21/1/18) reports that Central Park is the last in a series of asset sales by Goodman, so that the company's $2.4 billion portfolio is now 90% tilted towards the Auckland industrial sector.

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Heritage Lifecare Buys Cargill Rest Home From BUPA

Heritage Lifecare Villages Ltd (Australia 49.8%; NZ 16%; Cayman Islands 9.5%; USA 20.9%; Germany 2.4%; UK 1.4%) has consent from the Overseas Investment Office to acquire approximately 1.3436 hectares of land at 1 Cargill St, Waikiwi, Invercargill, from Bupa Care Services NZ Ltd and Bupa Retirement Villages Ltd (British United Provident Association Ltd, UK100%). The price is $4 million.

The OIO states that Heritage Lifecare Villages has applied for consent to acquire Cargill Rest Home including approximately 1.3436 hectares of sensitive land. Heritage Lifecare and its parent entities own a large portfolio of existing aged care facilities throughout regional New Zealand. This investment is said to be likely to result in benefit to New Zealand by introducing capital into New Zealand for development purposes through upgrading the Cargill facility.

New Zealanders will participate in the investment from an ownership and control perspective given their 16% ownership stake. Heritage Lifecare's "parent entities", as of 2017, are investment funds controlled by Adamantem Capital Management. This acquisition is part its stated plans for expansion in the NZ retirement village sector; see commentaries of March and April 2018 and July 2017.

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Fletcher Placemakers Renews Wiri Lease

Fletcher Distribution Ltd (Australian Public 35%; various overseas 21%; NZ Public 19%; US Public 15%; European Public 10%) has consent from the Overseas Investment Office to acquire a leasehold interest in 2.2355 hectares of land at 53-55 McLaughlins Road, Wiri, Auckland from Fishkill Management Ltd (NZ 100%) for $500,000 plus GST per annum

The OIO states that Fletcher Distribution Ltd is the retail trading arm and wholly owned indirect subsidiary of Fletcher Building Ltd, trading under the name PlaceMakers, and traces its history in New Zealand back to 1910 as Fletcher Merchants Ltd. The land is currently occupied by Fletcher Distribution under a lease since 13 November 2000.

The transaction is a renewal and variation of the lease. Fletcher Distribution Ltd and Fletcher Building Ltd's related entities have a history of previous investments that have been of benefit to New Zealand. The transaction will enable Fletcher Distribution to continue to carry out its frames and trusses' manufacturing business without a delay or disruption of relocating to a new site. This is likely to provide greater certainty for the business, including the retention of jobs and greater efficiency and productivity. See January 2009 for Fletcher Distribution's OIO consent to lease land in Kumeu, or search CAFCA's Website for numerous consents under other Fletcher group names.

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US Pet Food To Contain More NZ Scrap Meat

Wanganui Investments Ltd (Nixon E Lauridsen, USA, US Public) has consent from the Overseas Investment Office to acquire 1.7632 hectares of land at 1-11 Gilberd Street, Castlecliff, Whanganui, from Icepak NZ Ltd (Peter David Bone, NZ 50% and Garry Henry Madill, NZ 50%) for $4,359,052. The OIO states that Wanganui Investments is a wholly owned subsidiary of the Lauridsen Group Inc which, through BHJ, operates in the pet food manufacturing industry internationally.

Nixon E Lauridsen is the majority shareholder of the Lauridsen Group Inc. Wanganui Investments intends to increase the production of pet food by collecting more animal by-products from regional suppliers, including by-products that are presently discarded or not otherwise used. This will enable them to process a larger quantity of primary products and to increase export receipts.

Wanganui Investments will also upgrade the building and facilities and acquire equipment to accommodate the new increased supply. This investment is considered likely to benefit New Zealand. Icepak NZ Ltd is a cold store and logistics company now operating five sites in the North Island and one in Christchurch. Its ultimate owner is Hall Group Ltd, a road transport service company with over 300 refrigerator trailers.

Wanganui Investments doesn't appear to be registered in NZ. The Lauridsen Group describes itself as seven independent companies producing and wholesaling health and nutrition products. Based in Ankeny, Iowa, it began selling butter, eggs and poultry and now has 50 manufacturing sites in 20 countries and sells in more than 60. Its component companies are:

BHJ (chicken and raw materials for pet food), Proliant Biological (animal derived protein), Essential Protein Solutions (food additives and flavours), Proliant Dairy Ingredients (low cost milk solids food ingredients), Boyer Valley (poultry by-products for pet food, animal feed, aquaculture, and organic fertiliser), Entrahealth (bovine by-products for chronic diarrhoea and beef-derived immunoglobulins), and APC-owned Lifeline brand (performance and nutrition products for horses, cattle and other stock). So, they make highly processed bits of animals to feed to other animals, including us - oh dear, I've just come over all vegetarian. The next two are more to my taste.

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US Yoghurt Millionaires Buy Organic Farm In Motueka

Margaret Cadoux Hirshberg and Gary Raymond Hirshberg (US 100%) have consent from the Overseas Investment Office to acquire approximately 53.9860 hectares at 35 Thorpe-Orinoco Road, Waiwhero Road; and approximately 15.3229 hectares at 75 Thorpe-Orinoco Road, Ngatimoti, from Andrew John Guy (NZ 100%), Charles Kearns and Sharon Marie Kearns (as trustees of the Kearns Family Trust), Kearns family, NZ 100%), for $4 million.

The OIO states that the Hirshbergs intend to operate a small-scale organic sheep farming and horticulture concern including running workshops for the education and training of organic farmers. They intend to enter a grazing contract to provide sheep dairy support, create a market garden and undertake a native planting programme. Gary Hirshberg is the founder and former Chief Executive Officer (CEO) of organic yoghurt company Stonyfield Farm and a key person in the organic food industry in the USA.

Much of the benefit to New Zealand that is likely to occur is associated with their continued presence in New Zealand and the sharing of their specialist knowledge, skills and overseas networks. Gary Hirshberg intends to enter into a business mentoring relationship with a New Zealand sheep cheese maker and to run "Entrepreneur Institutes" in New Zealand to support the development of New Zealand organic and natural products businesses. In addition, the stated benefits to New Zealand include:

• a small number of new jobs, including some part-time and seasonal roles;
• an increase in the processing of sheep milk to sheep cheese and potential export receipts for sheep cheese and organic sheep cheese;
• additional productivity through the creation of an organic commercial market garden on part of the land;
• some additional investment for development purposes;
• a native revegetation, fencing and trapping scheme that is likely to result in the protection and enhancement of native vegetation on the land;
• consequential benefit to New Zealand through wider education about organic growing and farming.

Wikipedia describes Gary Hirshberg as Chairman and former President and CEO of Stonyfield Farm in New Hampshire, "the world's leading organic yogurt producer". He's been a campaigner for organics and for labelling genetically engineered food. Meg Cadoux Hirshberg is a writer of entrepreneurial books and articles.

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UK Couple To Introduce Genetically-Developed Goats

The Partnership between Angus and Kathleen Wielkopolski (UK 100%) has consent from the Overseas Investment Office to acquire approximately 103.8710 hectares at 266 Manawaru Road, near Te Aroha from Corganix Ltd as trustee of the Corganix Trust (NZ 100%). The price was $16 million. Angus Wielkopolski is Britain's biggest goats' milk producer and runs two mixed arable and livestock farms in Yorkshire. See Sunday Times article about him (Bridge, 5/12/10).

The OIO states that the applicant is a new investor to New Zealand, bringing with them over 30 years' experience in the UK commercial dairy goat industry. They are acquiring a dairy goat farm, which they intend to continue operating. Enhancements to the current goat dairy business will be achieved by introducing into New Zealand the Yorkshire Dairy Goat breed, which has been genetically developed by the applicant.

The unique characteristics of this breed will help to develop a more efficient method of dairy goat farming in New Zealand. The applicant also intends to establish a goat genetics programme in New Zealand, part of which will be to export Yorkshire Dairy Goat genetics to the overseas market. The stated benefits to New Zealand include:

• introduction of new technology, by introducing a new goat breed into New Zealand;
• increased export receipts, achieved through exporting goats and goats' genetics as well as increased goat milk supply for processing into infant milk formula;
• increased jobs;
• some oversight and participation by New Zealanders; and
• increased processing and efficiency, as a result of the unique characteristics of the Yorkshire goat.

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Canadian Land Ownership In Tolaga Entrusted To New Generation

ARE Holdings Ltd and the trustees of the 2017 Clinton Family Trust (Helen Margaret Clinton, Canada 50% and Russell John Clinton, Canada 50%) have consent from the Overseas Investment Office to acquire:

• 494.0569 hectares at Glenross Station, Hokoroa Road, Tolaga, Gisborne; and
• a freehold interest in 296.1334 hectares of land at Cariboo Station, Whangara Road, Tolaga Bay, Gisborne; and
• securities in ARE Holdings after it has acquired an interest in the land. The vendors are Russell John Clinton & Helen Margaret Clinton (Canada 100%) and the price is $2,913,000.

The OIO states that Russell and Helen Clinton originally converted the land to forestry. To enable estate and succession planning, the Clintons structured ARE Holdings Ltd to hold interests in the Glenross and Cariboo Stations. The trustees of the 2017 Clinton Family Trust intend to convey ownership and control interests in ARE Holdings Ltd for future generations of the Clinton Family. The following benefits are considered likely to occur:

• Creating a set-back area around the existing nine hectares of protected indigenous vegetation located on Glenross Station and establishing possum, goat control, and wilding removal programmes;
• Developing a new wetland and small indigenous forest on Cariboo Station;
• Establishing an amount of new full-time equivalent positions for the new possum and goat control initiatives and for the planting of Manuka and native trees, weed releasing, and ongoing maintenance for the new ecological area.

These overseas people have previously invested in New Zealand, in converting the land to forestry, which has resulted in benefits to New Zealand, including investing several million in developing the forestry stations, increasing domestic processing of pruned logs and an associated increase in export receipts, new jobs, and carbon sequestration in support of a significant Government policy. ARE Holdings was registered in Gisborne as an Overseas Non-ASIC* Company on 9 May 2017. See OIO decision of August 2011 for the Clintons' acquisition of the Whanara Rd land. * ASIC = Australian Securities and Investments Commission. Ed

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Two Consents With All Information Withheld

Case 201720100

The OIO has granted consent in Case 201720100 but withheld the names of the applicant and vendor, the investment, consideration and background. The OIO states that the transaction is the subject of a dispute between the parties and the details have been withheld under section 9(2)(b)(ii) of the Official Information Act to avoid unreasonable prejudice to the commercial position of the applicant pending the resolution of that dispute.

Case 20181000

The OIO has granted consent in Case 201810007 but withheld the names of the applicant and issuer, as well as details of the investment and background under s.9(2)(a) and s.9(2)(b)(ii) of the Official Information Act, as the decision relates to a public markets transaction that has yet to be announced.

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