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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - August 2018 Decisions

Aussies Take Over Nelson Forests Ltd

OneFortyOne Plantations Holdings Pty Ltd and OneFortyOne NZ Holdings Ltd (Australia 63.5%; US 33.7%; Switzerland 1.7%; Luxembourg 1.04%) has consent to acquire sensitive land and significant business assets, being 100% of Nelson Forests Ltd which has freehold and beneficial interests in approximately 25,115 hectares at:

Awatere Forest (approximately 663 ha),
Brightwater Forest (approximately 163 ha),
Kainui Forest (approximately 2,917 ha),
Korere Forest (approximately 716 ha),
Linkwater Forest (approximately 145 ha),
Moutere Forest (approximately 686 ha)
Opouri Forest (approximately 351 ha),
Rainy River Forest (approximately 1,451 ha),
Serpentine Forest (approximately 634 ha),
Te Hepe Forest (approximately 650 ha),
Wairau Crown Forestry Licenced Land (approximately 9,454 ha),
Wairau South Forest (approximately 5,815 ha),
Wakamarina Forest (approximately 1,435 ha), and
Kaituna Sawmill (approximately 33 ha).

The vendor is Nelson Properties Ltd (US 48.8%; Australia 13.9%; Denmark 9.7%; UK 8.7%; Cayman Islands 8.3%; Sweden 3.4%; NZ 3.3%; Canada 3.3%; various overseas 0.6%). The enterprise is valued at $US815 million, subject to adjustments in accordance with the sale and purchase agreement. The Minister for Land Information and the Associate Minister of Finance state that OneFortyOne Plantations is an Australian incorporated company that owns forestry assets in South Australia and Victoria, including approximately 80,000 hectares of radiata pine and a sawmill and woodchip operation.

This will be OneFortyOne's first investment in New Zealand forestry. Nelson Forests has an extensive forestry estate in New Zealand, including approximately 25,114 hectares and the Kaituna Sawmill. It also holds around 51,000 hectares in Crown Forestry Licences or forestry rights (which are not sensitive land under the Overseas Investment Act 2005). The acquisition is expected to result in a substantial and identifiable benefit to New Zealand.

OneFortyOne intends to continue existing supply agreements with domestic processors and undertake measures to increase domestic processing, including exploration of long-term supply contracts, forecast of uncommitted harvest volume to New Zealand processors and a feasibility study into increasing domestic processing. The investment is also likely to advance the Government's strategy to plant one billion trees between 2018 and 2027.

OneFortyOne has committed to additional protection for significant areas of indigenous vegetation and to create additional public access. It also intends to implement a graduate programme and a school leavers' programme to assist young people enter careers in the forestry industry. It will also undertake measures aimed at control of wilding trees.

In January 2018, OneFortyOne purchased Carter Holt Harvey's Jubilee Highway sawmill at Mt Gambier, South Australia and woodchip operations at Portland, Victoria. It was formed in 2012 on acquiring a 105-year lease of 93,000 ha of plantation assets from the South Australian government. The name comes from the 141st meridian line at the border of South Australia and Victoria, which passes through this estate. OneFortyOne's Website says it sells high value, small to medium size sawlogs to processors in South Australia and Victoria, and exports lower quality logs in partnership with port logistics company ISO Ltd and Rayonier/Matariki Forests.

Rayonier Matariki Forests' Website says it is managed by Rayonier NZ, a subsidiary of pulp and paper company Rayonier Inc (origins in Washington State, newly headquartered in Florida) and is New Zealand's third largest forestry company with approximately 120,000 hectares of plantations on 166,000 hectare land base - see February 2016, February 2013, April and February 2014, September 2011, February 2010 and June 2006 for Matariki consolidation, and also Edward Miller, "The Financialisation Of NZ Forestry", Watchdog 136, September 2014.

Stuff (21/8/18) reports that Nelson Forests is owned by investment funds advised by US-based timberland investment management organisation Global Forest Partners LP, and has more than 60,000 hectares of plantations in the Nelson-Marlborough region as well as the Kaituna Sawmill near Blenheim. It employs 101 people fulltime and about 350 contractors, producing 1.2 million cubic metres of logs and 55,000 cubic metres of timber annually.

The new Australian owners say staff will be retained . See commentary of February 2000 for Kaituna Mill being bought by Nelson Forest Products Co (Weyerhaeuser Co, and RII New Zealand Forests I, USA), and May 2017 for Nelson Forests/global investors buying Ngâti Rârua Settlement Forest.

Buy-up Of Failed Norske Skog Includes Tasman Paper Mill, Kawerau

NS Norway Holding AS, (US Public 57%; Australian Public 15.6%; Cayman Islands Public 10.5%; various overseas persons 9.8%; Saudi Arabian Public 7.1%) has consent to acquire significant business assets, being 100% of the shares in Norske Skog AS. This includes sensitive land, being approximately 351 hectares at:

Fletcher Avenue, Kawera
2805 State Highway No 30
217, 228, 250, 255, 261, and 261A Hogg Road
118A and 188 Onepu Spring Road, Kawerau, and
a leasehold interest in approximately 48 hectares of land off Onepu Springs Road, Kawerau.

The vendor is Citibank NA, London Branch (USA 100%). The price is $29.9 million for the New Zealand assets, which is a pro rata allocation of the purchase price for the global business (subject to usual complete adjustments). The Minister for Land Information and the Associate Minister of Finance state that NSZ Norway Holding is an international newsprint and magazine paper producer that has been operating for about 50 years.

Norske Skog AS, the entity being acquired, is in financial distress and is responsible for outstanding secured and/or guaranteed obligations. As the security agent on behalf of secured creditors, City Bank London is selling all of Norske Skog AS' shares, and has selected NS Norway Holding as the successful bidder in a public auction. Norske Skog AS' New Zealand-based subsidiaries net tangible assets are collectively valued in excess of $100 million.

One of Norske Skog AS's subsidiaries, Norske Skog Tasman Ltd, owns sensitive land in New Zealand, being approximately 380 hectares of land in Kawerau comprised of commercial forests, a paper mill ( Tasman Mill), a log yard, conservation areas and some publicly accessible areas. NZ Norway Holding intends to continue to run the New Zealand business in conjunction with its international paper mills and product supply chains across Austria, Ireland, Poland, and Australia.

The OIO notes that the international paper market is experiencing aggregate oversupply issues and there is generally expected to be on-going decreasing demand for paper products over the longer term, and considers that without this acquisition, the Tasman Mill and New Zealand-based business of Norske Skog Tasman Ltd are likely to be closed down in the short term. This acquisition is likely to enable the business and Tasman Mill to continue operating while it is economically feasible to do so. The Ministers were satisfied that a number of benefits were likely to be achieved, including:

retaining more than 150 fulltime equivalent jobs on the Land and more than 10 fulltime equivalent jobs elsewhere in New Zealand which would otherwise be lost;
maintaining export receipts of more than approximately $65 million per annum;
maintaining market competition in the chip and pulp log processing industry (particularly in the central North Island);
continuing to produce approximately 140-150 kilotonnes of newsprint;
maintaining existing protections and enhancements for native flora and fauna, preserving public access and iwi cultural protections on the Land, and exploring further protections, enhancements, and access the Applicant can reasonably provide; and
retaining papermaking expertise in New Zealand which is likely to otherwise be lost without the Investment

The Ministers were satisfied that the individuals with control are of good character, that the individuals with control have relevant business experience and acumen have demonstrated a financial commitment to the investment, and are not individuals of the kind referred to in sections 15 or 16 of the Immigration Act 2009.

NS Norway Holding AS is an investment fund managed by Oceanwood Capital Management Ltd, says Norske Skog's Website. Based in London and Malta, Oceanwood describes itself as "manag(ing) capital for a diverse group of investors, including leading private and public pension funds, endowments, foundations, financial institutions, insurance companies, funds of hedge funds, and high-net-worth individuals throughout the world".

Bankruptcy

With newsprint sales falling worldwide, Norske Skog filed for bankruptcy in December 2017 and was delisted from the Oslo Børs on 2 February 2018. In New Zealand the Tasman Paper Mill, founded in 1952, makes 150,000 tonnes of newspaper and other publishing paper for New Zealand and the Pacific Islands. In January 2013 one of its paper machines was closed with a loss of 110 jobs (NZ Herald 9/1/13, ) but was running at a loss in July 2014 despite commissioning a 20.5 megawatts geothermal power plant.

It now generates about 230 Gigawatt hours of its 500 GWh annual electricity needs. See also May 2000 commentaries and Bill Rosenberg, "Death Of An Empire: Fletcher Fades With A Whimper", Watchdog 97, August 2001, for Norske Skog's purchase of Fletcher Paper, including the Tasman Mill; March 2001 for sale of the pulp mill to Carter Hold Harvey; and November 2005 for purchase of adjacent land.

Port Blakely Buys More Forest Land In Waimate

Port Blakely Ltd as trustee of the South Blakely Trust (Eddy Family, USA 100%), has consent to acquire approximately 83 hectares at 158 Kowhatu Road, RD7, Waimate, Canterbury, from Peter Wilson McRae (NZ 100%) for $185,000. The OIO states that Port Blakely is an existing forestry owner in New Zealand. The land is currently predominantly populated with weeds and wilding pine with the balance of the land used for sheep and deer grazing. Port Blakely will plant a commercial forest on the land and operate in conjunction with its commercial forest on the neighbouring land. The stated benefits to New Zealand include:

enabling the more efficient planting, managing, and harvesting of a forest on the land through the use of the Applicant's infrastructure on the adjoining land;
enhancing the viability of the Applicant's neighbouring forestry operation;
managing the forest in line with Forestry Stewardship Council certification;
extending existing public walking access arrangements to this land; and
ensuring appropriate protection of an historic site on the land.

See commentaries of January, March, June and August 1994, May 1995, April, June, September and October 1996, November 1997, February 1998, November 2000, September 2001, April 2003, January 2004, December 2005, March 2007, August 2010, July 2013, June 2014, October 2015, March 2016 and August 2017 for other forestry land purchases by Port Blakely. The Port Blakely Mill on Bainbridge Island, near Seattle, began milling timber in 1864, and has been owned by the by Eddy family since 1903. Guess they ran out of pine trees there.

Cornerstone/Cimic Subsidiaries Lease Crown Land To Extend Waikeria Prison

Cornerstone Infrastructure Group (Pacific Partnerships Pty Ltd, Australian Public 40%; Public Infrastructure Partners III LP and Public Infrastructure Partners II LP, NZ 60%) has consent to acquire a leasehold interest in up to 60 hectares of land at Settlers Road, Waikeria. The rental payment for the lease will be paid upfront. This is an investment in significant business assets in excess of $100 million. In addition, Cornerstone will cover costs of the investment in the construction, operation and maintenance of the prison facility. The lessor is the Crown(NZ 100%). The price is between $500 million and $800 million.

The OIO states that Cornerstone sought consent to lease up to 60 hectares of land at Waikeria Prison, for the purpose of extending the existing prison facility. Cornerstone advised the total land area used is likely to be 41 hectares. Cornerstone was the preferred provider through procurement for a public-private partnership (PPP) run by the Department of Corrections, which is of the view that a PPP model for the build provides efficiency and financial flexibility.

Cabinet approved a PPP model for the prison development in November 2016. In June 2018, Cabinet approved the development of 600 additional bed at the facility, 100 of which are to be for a mental health unit. Cornerstone is approximately 60% owned by New Zealanders. Other likely benefits to New Zealand include:

Creation of new jobs sooner than if the investment was not to proceed at this time (this includes both for the construction and maintenance of the prison as well as corrections jobs); and
Efficiency of Government with the applicant being able to construct the facility sooner as well as providing financial flexibility for the Government.

Cornerstone has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and has also demonstrated financial commitment to the investment. Waikeria Prison (established 1911) is on a 1,200-hectare site near Te Awamutu in the Waikato, and is for minimum to high security males. Stuff (Laura Walters, 13/6/18) reports that it is to be completed by early 2022 and expected to cost about $750 million.

The announcement of the new build, and the focus on mental health, came after the coalition Government promised to ditch the National government's plans for a 1500-cell prison. National planned a $1 billion public-private partnership on the same site to deal with the rapidly growing prison population (from 8,834 in 2015 to 10,470 in 2017. ( Stuff 13-06-18 ).

Labour opposed this in Opposition but planning had gone ahead and Corrections said it faced a $5m liability for pulling of a contract with preferred bidder Cornerstone (TV3 10/7/18, . The Cabinet paper can be read here.

Cornerstone Partners is an NZ commercial property and project management company that works with property investors. Scoop (McBeth, 14/6/18) reports that ASX-listed Cimic Group's subsidiaries CPB Contractors and Pacific Partnerships led Cornerstone Infrastructure Group's formation and will get the lion's share of the work.

It will provide equity financing for the 25 years of asset management and maintenance, while also designing and building the facility. Local investment bank and asset manager HRL Morrison & Co will provide finance and management, real estate services firm Cushman & Wakefield will act as property manager, and Honeywell will look after electronic security services.

In 2017 Australia's Decmil Group benefited from Corrections' need for rapid expansion, with a $60 million contract to build three sets of 126-bed units for lower security prisoners, two at Rolleston Prison and one at Tongariro Prison. Decmil's biggest Australian corrections project is the $A415 million Manus Island offshore processing centre , finished in 2015.

Private Equity In Two-Stage Takeover Of TSB's Fisher Funds

TA FF HoldCo Ltd , USA 69%; UK 5.1%; Kuwait 3.6%; Germany 3%; various 19.3%) has consent to acquire up to an aggregate total of 51% of the ordinary shares in Fisher Funds Management Ltd. The transactions are comprised of an initial acquisition of 34% of the ordinary shares in Fisher Funds and subsequent acquisitions that result in TA FF Holdco holding up to 51% of the ordinary shares in Fisher Funds.

The vendor in relation to the first investment is TSB Group Investments Ltd (various NZ 100%) and in relation to the subsequent investment are likely to be Fisher Funds and/or its shareholders (TSB Group Investments Ltd or TSB Group Capital Ltd). The price, which exceeds $100m, is withheld under s.9(2)(b)(ii) of the Official Information Act.

The OIO states that TA FF Hold Co. is part of the TA Associates Group, which is a global growth private equity firm which invests in various sectors, including financial services. Fisher Funds is a New Zealand funds management company and Kiwisaver Scheme provider. The investment fits within the TA Associates group's wider portfolio of global investments in the financial services sector. TA FF Holdco has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and has also demonstrated financial commitment to the investment.

The consent for the first investment was granted retrospectively pursuant to section 25(1)(f) of the Act, which comprised related transactions described in sale and purchase agreements entered into on 3 August 2017 for 24.99% and 9.01% respectively (i.e. totalling 34%). TA FF Holcdo already acquired the initial 24.99% of the shares in Fisher Funds on 25 August 2017. The related aspect of the first investment (i.e. acquisition of the additional 9.01% of shares) will occur following consent.

TA FF HoldCo Ltd was incorporated on 27 July 2017 as a private limited company registered in Hong Kong (although most of its shares are held in the US). The Fisher Funds are five managed funds: the Income Fund, the Property & Infrastructure Fund, the New Zealand Growth Fund, the Australian Growth Fund and the International Growth Fund.

Its March 2018 Annual Report describes a first stage in this double sale as occurring on 25 August 2017: "The TSB Community Trust, through its group companies, purchased 51% of the ordinary shares in Fisher Funds Management Ltd, taking its shareholding to 100%. The Group then immediately sold 24.99% of the shares to TA FF HoldCo Ltd, a holding company of TA Associates Management, LP, a global private equity firm with extensive funds management experience".

So, just below the level for OIO consent. TA Associates has been around 50 years, now operating out of Boston, Silicon Valley, London, Mumbai and Hongkong. It manages private equity funds in five industry areas: financial services, business services, brand-driven consumer/retail, healthcare and technology.

Contact Energy Sells Gas Storage Facility For $190m And Buys It For $300m?

GSNZ SPV1 Ltd (Australian Public 54%; Canadian Public 40%; Japan 5%; various overseas 1%) has consent to acquire significant business assets from Contact Energy Ltd (NZ Public 54%; Australian Public 18%; US Public 14%; UK Public 5%; various overseas persons 9%) for approximately $190 million.

The OIO states that the Ahuroa Gas Storage Facility (AGSF) was acquired and developed by Contact Energy between 2008 and 2011 as a facility for the underground storage of gas. GSNZ SPV1 Ltd is a member of the First Gas Group, which operates the North Island gas transmission and certain gas distribution networks, and the Maui gas pipeline. GSNZ SPV1 Ltd has entered an agreement to purchase the Ahuroa Gas Storage Facility and associated assets from Contact Energy.

Contact Energy will retain long term rights and interests in the facility and associated assets, for an initial term of 15 years with rights of renewal, in order to meet its future needs. GSNZ SPV1 satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and has also demonstrated financial commitment to the investment.

In a second application, Contact Energy Ltd (NZ Public 54%; Australian Public 18%; US Public 14%; UK Public 5%; various overseas 9%) has consent to acquire business assets in excess of $100m, being property in New Zealand used in carrying on business in New Zealand, from "the grantor" GSNZ SPV1 Ltd (Australian Public 54%; Canadian Public 40%; Japan 5%; various overseas 1%) for $300 million.

The OIO states that the Ahuroa Gas Storage Facility was acquired and developed by Contact Energy over the period from 2008 to 2011 as a facility used for the underground storage of gas. Contact Energy has entered an agreement to sell the AGSF and associated assets to GSNZ SPV1 (the Grantor). Contact Energy will retain long term rights and interests in the AGSF and associated assets, for an initial term of 15 years with rights of renewal, in order to meet its future needs.

Contact Energy has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and has also demonstrated financial commitment to the investment. So, it appears that, in order to retain its long-term interests in the facility it is selling, Contact Energy has in effect sold it for free plus given GSNZ an extra $110m. This seems so bizarre that CAFCA has made an Official Information Act request for the full papers.

Private Equity Buys Into Seequent Geo-Science Software

Accel-KKR Capital Partners V, LP, Accel-KKR Capital Partners V Strategic Fund, LP and Accel-KKR Members Fund, LLC (USA 100%) has consent to acquire ultimately up to 80% of the shares of Seequent Ltd (NZ Public 91.8%; Hong Kong Public 6.2%; Canada Public 1.3%; Denmark Public 0.8%). Price in excess of $100 million withheld under s.9(2)(b)(ii) of the Official Information Act.

The OIO states that Seequent Ltd is a global leader in development of visual data science software and collaborative technologies. It provides 3D geological modelling software for global mining, energy, environmental, geothermal and hydrogeological businesses. The equity funds intend to continue to invest in new products and go to market initiatives to further grow the business and enable Seequent Limited to succeed internationally. They have satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and have also demonstrated financial commitment to the investment.

Acel-KKR are global private equity investment fund managers that leverage capital, expertise and relationships in mid-market software and tech-enabled services. It has $US4 billion in committed capital across buyout and growth capital investment funds and over 15 years has invested in over 100 companies (www.accel-kkr.com). It is based in Silicon Valley, California, Atlanta, Georgia and London.

Seequent (formerly ARANZ Geo) announced its growth equity investment agreement with Acel-KK on 4 September 2018. Seequent is known for its Leapfrog 3D geological modelling solutions (www.leapfrog3d.com). First used in mining and minerals, Leapfrog® helps uncover valuable insights from geological data and enables geologists and executives to make critical time-sensitive investment and environmental decisions. Seequent has launched Leapfrog versions for civil engineering, geothermal energy and environmental industries, as well as other visualisation and collaboration technologies. It has 13 offices worldwide and its technology is used in over 90 countries.

Woolworths Gets Consent To Buy, Flick Off, Then Lease Back Its Countdown Site At Te Atatu

General Distributors Ltd (Australian Public 99.4%; NZ Public 0.4%; UK 0.05%; other overseas 0.2%) has consent to acquire approximately 0.7431 hectares situated at 253, 255 and 266 Edmonton Road, Te Atatu South, Waitakere, along with consent to acquire a leasehold interest in the same land in the event the applicant disposes of the freehold interest. The vendor is Te Atatu and Bluewater Trusts Partnership (NZ 100%). The price is withheld under s.9(2)(b)(ii) of the Official Information Act.

The OIO states that General Distributors is the property holding company for Woolworths NZ Ltd which owns and operates the Countdown chain of supermarkets. It currently leases the land and operates a Countdown supermarket which it has operated under various branding since 1967. The acquisition ensures the continued operation of a supermarket on the land and will result in job retention. It has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and has also demonstrated financial commitment to the investment.

This buy-and-lease back arrangement is consistent with an OIO-approved company restructure of the Woolworths group that shifted supermarket ownership to some subsidiaries, to be leased by other subsidiaries. General Distributors Ltd (Foodtown Supermarkets until 1997) was owned by Progressive Enterprises, a subsidiary of ASX-listed Woolworths, but on 25 June 2018 Progressive changed its name to Woolworths NZ. It has 180 Countdown supermarkets with18,500 employees, and franchises another 62 Supervalue and Freshchoice supermarkets.

Craigmore Buys Whakatane Orchard For G3 Kiwifruit

Craigmore Permanent Crop Ltd Partnership (USA 100%) (Germany 30.5%; Hong Kong [SAR] 24.5%; Switzerland 15.2%; UK 13.7%; Finland 9.1%; USA 4%; NZ 3%) has consent to acquire approximately 13 hectares at 60 and 74 Orchard Road, Edgecumbe, Whakatane, from Shaye Le Prou, Cole Shane Le Prou and Cuvier Trustees Ltd as trustees of the Cuvier Trust (NZ 100%) for $6,630,000.

The OIO states that Craigmore Permanent Crop is an established horticulture investment vehicle and part of the wider Craigmore Farming Group. The land is currently operated as a kiwifruit orchard growing a combination of G3 and Hayward kiwifruit. Craignmore Permanent Crop intends to improve orchard production and returns by planting additional G3 kiwifruit vines, converting the entire orchard to G3 organic kiwifruit production, and upgrading infrastructure. The benefits to New Zealand include:

creating additional direct and indirect jobs in relation to tending, picking, and packing kiwifruit
increasing kiwifruit production;
increasing export receipts; and
capital investment for planting additional G3 kiwifruit vines, converting the entire orchard to G3 organic kiwifruit production, and upgrading infrastructure.

For more on the Craigmore Farming Group, including its foreign funding, see commentaries of April 2018, May, August and December 2017, June, July and September 2015, March, April, May, June, July, August and November 2014, February, March, November and December 2013, and June 2012.

Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.

CAFCA

Campaign Against Foreign Control of Aotearoa (CAFCA)