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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - March 2019 Decisions

More Forestry Consolidation By Rayonier/Matariki and Oji/Pan Pac

Matariki Forests (US Public 64.9%; UK Public 12%; Luxembourg Public 10.1%; various overseas 8.6%; Swedish Public 2.5%; Dutch Public 1.8%) has consent to acquire approximately 1,122 hectares at 899 Whitecliffs Road, Malvern Hills, Canterbury (Glen Arlie Forest) from PF Olsen Tisa Pty Ltd (as trustee of the Australasian Timberland Fund II (Australian Public 85.8%; UK Public 13.2%; German Public 1%) for $10,179,000.

The OIO states that Matariki Forests applied for consent under the special test relating to forestry activities set out in the new section 16A (4) of the Act. Glen Arlie Forest has three stages of forest plantation due for rolling harvest over the next two decades. Matariki Forests intends to harvest the existing crop and replant and maintain a similar replacement crop. They are purchasing Glen Arlie Forest to secure on-going timber supply and to replace non-freehold forestry interests. They intend to hold the land indefinitely and will continue to maintain public access over the land.

Pan Pac Forest Products Ltd (Japanese Public 74.6%; US Public 11.7%; UK Public 6.4%; various overseas 6.1%; Belgium Public 1.3%) has consent to acquire approximately 260 hectares at Kakariki Farm Rd, Kotemaori (Peka Mai Forest) from Peka Mai Farm Ltd (NZ 100%) for $1.1 million. The OIO states that Pan Pac has applied under the special test relating to forestry activities in section 16A (4) of the Act. Peka Mai Forest is a mature forest of mainly pinus radiata.

It intends to harvest the existing crop and replant mostly in pinus radiata, primarily to secure timber supply for its domestic lumber and pulp business. Pan Pac intends to hold the land indefinitely. Matariki Forests is owned by US logging company Rayonier, which partners with OneFortyOne in Australia - see commentary of January 2019. Pac Pac has been fully owned by Japanese paper company Oji since 2007.

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Trade Me Takeover By UK Private Equity

Titan Acquisition Co NZ Ltd (US 24.6%; Singapore 25.6%; Canada 9.7%; China 5.9%; Guernsey 4.3%; Cayman Islands 4.1%; Hong Kong 2.5%; UAE 2.5%; Finland 2.1%; Australian 2.1%; UK 2%; various overseas with less than 2%, 14.6%) has consent to acquire significant business assets, being 100% of the ordinary paid shares in Trade Me Group Ltd Australian Public 58.9%; NZ Public 41%; various overseas 0.1%) for approximately $2,559,920,588.

The OIO states that Titan is owned by Apax IX Fund, a private equity fund advised by Apax Partners, a UK-based private equity firm. The Fund has investments in the technology and telecommunications industries, services, healthcare, and consumer sectors. On 12 December 2018, Trade Me and Titan entered into a Scheme Implementation Agreement for Titan to acquire 100% of Trade Me's shares for $6.45 each. Trade Me's directors recommended shareholders unanimously accept Titan's offer as being above the independent valuation range for Trade Me's shares.

Shareholders voted on 3 April 2019 to accept Titan's offer. The transaction remains subject to the High Court issuing final orders giving effect to the scheme. Titan believes there is an opportunity to accelerate Trade Me's growth and create long-term value through significant investment in products and people, as well as expanding solutions to address adjacent market opportunities. Titan 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 demonstrated financial commitment to the investment.

The $6.45 a share offer means that, including dividends, shareholders who invested in late 2011 when Trade Me was listed received a return of 17.8% per annum. A rival bid by US private equity firm Hellman & Friedman contributed to this high price. With High Court approval, Trade Me was to de-list from the NZX and ASX in May 2019 ( NZ Herald, 3/4/19).

Trade Me was partially listed in 2011 by Australian media giant Fairfax, who bought it in 2006 for $700m. A year after the float, Fairfax sold its remaining 51% stake for around $NZ810 million (NBR, 16/12/12). Great gambling for some, rather than the "productive" investment that the Minister says is the aim of the current review of the Overseas Investment Act.

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Australian Private Equity Funds Juggle Ownership Of NZ Private Hospitals

Pacific Healthcare BidCo Ltd is wholly owned by overseas investment funds managed and/or advised by Pacific Equity Partners Pty Ltd (PEP), an Australian incorporated private equity fund manager, and PEP's affiliates. It has consent to acquire significant business assets and sensitive land, being 100% of the units in EHPO Trust (Australian Public 60.1%; US Public 39.5%; NZ Public 0.4%). Price withheld under s.9(2)(b)(ii) of the Official Information Act

The OIO states that this newly created company has applied to acquire all of the units in the EHPO Trust. The EHPO Trust holds the beneficial interest in Evolution Healthcare (NZ) Pty Ltd. Evolution is the shareholder of two New Zealand companies. The assets of those companies and their subsidiaries include interests in the Bowen, Wakefield, Royston and Grace private hospitals; and 18 Proactive Rehab clinics across the North Island.

There are existing OIO consent conditions in place requiring Evolution to develop the Wakefield and Royston hospitals, and to introduce oncology and rehabilitation services to Wellington. Pacific Healthcare BidCo will honour these existing conditions. Pacific Healthcare will bring $NZ10 million in additional capital investment into New Zealand over the next five years, to undertake additional developments in the healthcare area and will assess where it can most productively be spent.

Pacific Equity Partners is the largest private equity fund manager in Australasia with approximately $A3.9 billion in assets. It invests in established businesses ($A200m-$A1b) in a broad array of industries, focusing on leveraged buyout and growth capital transactions (www.pep.com.au; Wikipedia). So, it's about the money, not the care. The "newly created company" Pacific Healthcare BidCo was registered in NZ on 18/7/18, as was its ultimate holding company Pacific Healthcare HoldCo Ltd.

All directors of these companies are based overseas; two are also directors of US and Australian capital investment companies while the rest are all directors of Evolution Healthcare. Search the CAFCA Website for the many and varied Pacific Equity Partners consents. See November and December 2015 and October 2014 for Evolution's consents in regard to these hospitals

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Merck/Antelliq Merger Includes NZ Ear Tags

Merck Sharp & Dohme Corp US Public 84.9%; European Public 13.1%; Asia Pacific 1.9%; Middle Eastern Public 0.1%; South American Public 0.01%) has consent to acquire 100% of the ordinary shares of Antelliq Corporation (Channel Islands Public, Channel Islands 92.17%; various overseas 7.8%) as part of a large upstream transaction. The New Zealand portion is estimated to be in excess of $100 million.

The OIO states that Merck Sharp & Dohrne is a wholly owned subsidiary of Merck & Co Inc., a global healthcare company. Both are registered in the US, with the parent company listed on the New York and Paris stock exchanges. Antelliq Corporation is a global animal intelligence business with around 70 subsidiaries. Three subsidiaries are registered in New Zealand: Allflex NZ Ltd, SureFlap (NZ) Ltd, and Putexin Investments Ltd. Allflex designs, develops, manufactures and delivers solutions for animal identification and monitoring, farm management, and traceability.

SureFlap develops, manufactures and designs a range of smart pet care products, including microchip pet doors and smart feeders. Putexin is not currently in active business. Merck intends to use Antelliq Corporation to grow the animal health sector of its business. The applicant 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 demonstrated financial commitment to the investment.

Merck & Co Inc., known as Merck Sharp & Dohme or MSD outside the US and Canada, is one of the world's largest pharmaceutical companies in the world. It was established in 1891 as the US subsidiary of the German company Merck which was expropriated by the US government during World War I. It became an independent US company in 1917.

Not to be confused with the Merck Group (Merck KGaA), the historically related but entirely separate Germany-based pharmaceutical company, founded in 1668 by the Merck family. Both have NZ subsidiaries. By "animal intelligence" Antelliq means animal tags and data systems. Allflex wholesales ear tags and applicators, Sureflap is pet doors, unclear what Putexin Investments is; all registered at a Palmerston North address.

Globally it's a big deal. Antelliq is a leader in digital animal identification, traceability and monitoring solutions, with €360 million in sales in the year to 30/9/18. Merck will pay approximately €2.1 billion for all outstanding shares of Antelliq and repay its debts of €1.15 billion. Antelliq will become a separately operated subsidiary within the Merck Animal Health Division.

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T&G's Tenth Lease For Apple Orchards

T&G Global Ltd (BayWa Aktiengesellschaft) , Germany 73.9%; China Public 11.6%; Legend Holdings Group, China 8.4%; NZ Public 5.9%; various overseas 0.1%) has consent to lease 9.5 hectares at 42 Palomino Road, Haumoana, Hawke’s Bay, from Ashley Woodward Partnership (NZ 100%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.

The OIO states that T&G Global is an established apple grower in New Zealand. The land is currently planted in pears and plums and T&G intends to develop it as an apple orchard for Jazz and Envy varieties. The stated benefits are job creation and increased export receipts. The investment will also increase productivity and royalties for Plant & Food Research, a Crown Research Institute. The OIO is satisfied that the benefits from the investment are substantial and identifiable.

This cryptic summary doesn't say how apples are more beneficial than pears and plums. This is the tenth consent for T&G Global (Apollo Apples) in the past two years, all for leasehold land (under 220 hectares). If, as Treasury is currently suggesting, the OIO consent requirement is dropped for leased land, this kind of serial overseas acquisition of agricultural assets for a single product market would drop below the radar, and no longer need to meet benefit-to-New Zealand criteria. Tegel, now Philippines-owned, is also leasing land for its operations, or selling and leasing back – and in September 2018 had their OIO consent for Kaipara land declined.

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Marine Power Expands In Tamaki

Marine Power NZ Ltd 99.9%; various 0.01%) has consent to acquire a leasehold interest in approximately 0.5237 hectares at 42 Sir Woolf Fisher Drive, East Tamaki, Auckland, from Highbrook Development Ltd (NZ Public 74.56%; various 14.74%; Australia 10.7%) for $10,329,044. The OIO states that Marine Power imports, sells and distributes marine propulsion systems and parts, including outboard and stern drive motors.

It intends to use the leasehold premises to expand its business in New Zealand, and to allow it to export to other South Pacific countries. It intends to introduce additional capital into New Zealand to fit out the warehouse premises, and will employ additional employees following expansion.

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Consent Not Needed As McMillan Shakespeare/Eclipx Merger Fails

McMillan Shakespeare Ltd (Australian Public 57.9%; US Public 16%; UK Public 9.5%; Canada Public 6.9%; various overseas 9.7%) received consent to acquire significant business assets, being 100% of Eclipx Group Ltd, the value of the assets of Eclipx Group Ltd and its 25% or more subsidiaries (Australian Public 82.4%; North American Public 5.3%; various overseas 4.4%; European Public 3.9%; Asian Public 2.5%; NZ Public 1.5%) for approximately $967,000,000.

The OIO states that McMillan Shakespeare is listed on the ASX and is widely held. It provides a variety of vehicle fleet and financial services. McMillan's acquisition of the shares in the Eclipx Group will result in a merger of the two companies. Eclipx Group also operates vehicle fleet and financial services. McMillan 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 was a proposed takeover in Australia that would have affected both groups' subsidiaries in New Zealand. But it didn't go ahead. On 20 March 2019 McMillan Shakespeare called off its $A911 million takeover of Eclipx Group following a dismal trading update and news about underperforming subsidiaries and a large drop in Eclipx's net profit (Australian AP, 20/3/19).

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