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Foreign investment in Aotearoa/New Zealand
Overseas Investment Office - April 2019 Decisions
Two Fletchers Consents Indicate Softer OIO Rules
Treasury's April 2019 consultation document on amending the Overseas Investment Act proposed several ways in which requirements to apply for OIO consent might be reduced. These included removing the consent requirement for leased land and for land adjoining sensitive land, lesser requirements for companies with more than 50% shareholding by New Zealanders, for NZ-registered companies (subsidiaries?) with "significant connections to NZ", and a "standing consent" for companies making a series of acquisitions.
The first two could increase risks to local communities, and consequently political risk. The last three suggest special treatment for "our mates". The current definition for companies required to apply for OIO consent is 25% overseas ownership - same rule for everyone. Two consents granted to Fletchers this month seem to reflect Treasury's proposals already: reference to Fletchers' New Zealandness in one consent, and a "standing consent" for up to 200 hectares of 12 purchases of not yet identified residential land. Standing consents were added to the Act in October 2018 (Schedule 4) for "persons" meeting residence requirements - and is here applied to an overseas-owned company.
Back to TopFletchers Renews PlaceMakers' Lease At Pakuranga
Fletcher Distribution Ltd (NZ Public 52.8%; Australian Public 45.8%; Philippines Public 1.05%; various 0.3%) has consent to acquire a leasehold interest in 1.6638 hectares at 481 Pakuranga Road, East Auckland, from Yun Hwa Investments Ltd (Eliza Fan, NZ 99.99%; David Fan, NZ 0.01%). Price withheld under s.9.(2) (b((ii) of the Official Information Act.The OIO states that Fletcher Distribution is the retail trading arm of Fletcher Building Ltd, trading as "PlaceMakers", and traces its history back to 1910 as Fletcher Merchants Ltd. Fletcher Distribution currently occupies the land under a lease since 1977. This is a renewal and variation of the lease. The land is sensitive land as it adjoins a reserve.
Fletcher Distribution has a history of investments that have been of benefit to New Zealand. This will allow Fletcher Distribution to continue to operate their timber and building product retail business without delay or disruption of moving to a new site, thus retaining jobs. As its parent company is listed on the NZX with New Zealanders currently holding over 50%, New Zealanders are likely to oversee or participate in this investment.
Back to TopFletchers Get "Standing Consent" For Next 12 Land Purchases
Fletcher Residential Ltd (NZ Public 52.8%; Australian Public 45.8%; various overseas persons 1.3%) has a standing consent to acquire residential ("but not otherwise sensitive") land, at locations and prices not yet determined. The OIO states that Fletchers is a residential housing developer that acquires residential land to develop into residential housing.
This standing consent has been granted in accordance with the Increased Housing and Non-Residential Use tests set out in Schedule 2 of the Act (as amended in October 2018). This standing consent, for a maximum of 12 transactions by 1 May 2022, will permit Fletchers to acquire up to 200 hectares of yet-to-be identified residential (but not otherwise sensitive) freehold land located in the Auckland, Canterbury and Waikato regions.
Back to TopDanish Seed Coop Buys PGGW Seeds From "Bad Characters" At Agria
DLF Seeds A/S S (DLF AmbA, Denmark 95.1%; DLG AmbA, Denmark 4.9%; Danish Public 0.1%) has consent to acquire 100% of the shares of PGG Wrightson Seeds Holdings Ltd (PGG Wrightson Ltd Singapore Public 50.4%; NZ Public 45%; US Public 1.5%; UK Public 1.4%; Australian Public 1.1%) which has leasehold interests in:
- 68 hectares at 388 Bennetts Road, Cust, Canterbury;
- 77 hectares at 1075 Springs Road, Christchurch, Canterbury; and
- 100 hectares at 1052 Springs Road, Christchurch, Canterbury
The OIO states that DLF Seeds is a Danish seeds and plant breeding company owned by a cooperative of approximately 3,000 Danish seed growers. It currently has a small presence in New Zealand through its subsidiary DLF Seeds Ltd. PGGW Seeds is the seeds business of New Zealand agricultural company PGG Wrightson. PGGW Seeds develops, grows and distributes proprietary and non-proprietary grass, forage and other seeds.
The stated benefit of the investment will be the introduction of genomic screening technology, which will allow grasses to be screened on the basis of their genetic potential, so grasses that are likely to have desirable traits can be selected before field trials. This may save years carrying out field trials on grasses that are unlikely to perform well.
Other stated benefits are:
- an increase of $12.5m (over five years) in export receipts;
- investment in harvesters that can accurately measure forage quality and yield;
- access to DLF Seeds A/S's Denmark-based root screening facility;
- scholarships to allow NZ farmers to work on Danish farms; and
- establishment of a new seeds' multiplication business in New Zealand.
In 2009 Chinese company Agria (New Hope) bought a 20% share in PGGW, and another 41% in 2011. This was about the undervalued potential of the seed business - think Monsanto. See our commentary of April 2011. In 2014 PGGW was a Roger Award runner-up for pesticide-tolerant swedes that killed cows they were fed to. In 2016 Agria was delisted from the New York Stock Exchange for artificially inflating its share price and giving misleading information to the subsequent NYSE investigation (Gerard Hutching, Stuff, 10/11/16).
CAFCA made a complaint to the OIO that Agria no longer met the "good character" requirement of the Act. On 13 March 2019 a court case filed by the OIO finally resulted in an admission of liability, $220,000 in penalties and an agreement with the OIO for Agria to sell its 50.2% interest in PGGW. This is the first ever enforcement of the Act's good character requirement.
Back to TopMortgage-Backed Securities For BNZ To Meet Reserve Bank Requirements
Bank of New Zealand and National Australia Managers Ltd as trust manager of the BNZ RMBS Trust Series 2008-1 (Australian Public 95.7%; UK Public 2.1%; NZ Public 1.5%; various overseas 0.7%) has consent to acquire significant business assets, being property in New Zealand used as part of a securitisation programme, from the NZ Guardian Trust Co Ltd as trustee of the BNZ RMBS Trust Series 2008-1 securitisation structure (NZ 100%), for $2.5 billion.
The OIO states that the applicants are parties in a residential mortgage backed securitisation programme established in 2008. As part of this, the BNZ RMBS Trust Series 2008-1 will acquire mortgage assets from BNZ and Bank of New Zealand will reacquire the mortgage assets from the BNZ RMBS Trust Series 2008-1. The securitisation programme allows BNZ to obtain funding from the Reserve Bank to assist with bank liquidity requirements. 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, and have demonstrated financial commitment to the investment
Back to TopAnother Private Equity Takeover Of MYOB
ETA Australia Holdings III Pty Ltd (Cayman Islands 11.06%; China 8.8%; Malaysia 5.3%; Singapore 11.5%; USA 17.9%; various 45.5%) has consent to acquire 100% of MYOB Group Ltd from existing shareholders (Australia 32.6%; Singapore 20%; USA 15.6%; Canada 9.4%; Cayman Islands 7.6%; various 14.9%), valued at approximately $131 million.
The OIO states that ETA Australia Holdings is a special purpose vehicle that is majority controlled by affiliates of the global investment firm Kohlberg Kravis Roberts & Co LP. MYOB Group provides business management software for accounting practices in Australia and New Zealand. The acquisition will be governed by a Scheme of Arrangement. ETA Australia Holdings 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 ETA has demonstrated financial commitment to the investment.
A scheme of arrangement is an increasingly used "takeover" procedure under the Australian Corporations Act that allows a company to reconstruct its capital, assets or liabilities with the approval of its shareholders and the Court.
Started in Auckland in 1992, MYOB (Mind Your Own Business) provides user-friendly software packages and support for accounting, payroll, payments, retail point of sale, customer relations management, taxes, company Websites, etc. Its Website states that around 60% of NZ businesses that use accounting software use MYOB; it helps around 1.2 million businesses and over 40,000 accountants and other professionals across NZ and Australia.
Wikipedia describes Kohlberg Kravis Roberts & Co (aka KKR & Co LP) as a global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, credit, and, through its strategic partners, hedge funds. As of 30/9/17, it had $US267 billion worth of assets under various forms of capital management. See our September 2011 commentary for details of the MYOB buy-up by US-based Bain Capital Abacus Acquisition Pty Ltd; and May 2013 commentary for MYOB Finance NZ Ltd acquiring control of the BankLink Group, including NZ's Media Transfer Services Ltd .
Back to TopEquity Funds Fight Over Healthscope's Australian Hospitals And NZ Pathology Labs
Brookfield Capital Partners V GP LLC, on behalf of BCP VIG Holdings LP and ANZ Hospitals Pty Ltd Ltd (Canada Public 60.4%; US Public 16.6%; Japanese Public 5.8%; Kuwait Public 4.2%; Israel Public 3.7%; Qatar Public 3.5%; Germany Public 1.9%; UAE Public 1.4%; French Public 1.3%; Malaysian Public 0.7%; Hong Kong Public 0.3%; Finland Public 0.1%; Switzerland Public 0.1%) has consent to acquire 100% of the shares of both Healthscope Ltd and ANZ Hospitals Topco Ltd primarily via either a scheme of arrangement or a full off-market takeover from the existing shareholders of Healthscope Ltd (Australian Public 60%; various overseas 15%; North American Public 10%; UK Public 7%; Asian Public 6%; European Public 2%). Asset value: $600 million.
The OIO states that the applicant is the general partner of several limited partnerships which are collectively described as an investment vehicle of pooled funds managed by affiliates of Brookfield Asset Management Inc, a global alternative asset manager incorporated in Canada, with investments focusing in renewable energy, property, infrastructure and private equity.
Registered and listed in Australia, Healthscope Ltd is the second largest private hospital operator in Australia, and a leading pathology service provider in NZ. Brookfield Capital 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.
Healthscope is Australia's second largest healthcare operator. It is also one of NZ largest pathology providers, including veterinary pathology services, with annual revenues of around $120 million. In 2018 there were competing offers from Canadian investment firm Brookfield and from BGH-AustralianSuper, with the Brookfield offer recommended by the Healthscope board in February 2019 (Colin Kruger, Sydney Morning Herald, 1/2/19).
The $A2.40-$A2.50 per share offer was to be funded by the sale-and-leaseback of 22 of Healthscope's 42 private hospitals to real estate investment property trusts, Medical Properties Trust and Northwest Healthcare Properties, for about $A2.5 billion. NZ's Vital Healthcare Property Trust turned down an opportunity to participate in the Brookfield deal (Adrian Murdoch, 13/5/19).
On 9 May 2019, NorthWest Healthcare Properties Real Estate Investment Trust, Canada's leading global diversified healthcare real estate investment trust, announced its intention to participate, acquiring 11 Australian hospitals from Healthscope for $US1.2 billion (Marketwatch). See our commentary of July and August 2010 for OIO consents for takeover bids for Healthscope by Kohlberg Kravis Roberts, then (successfully) by Carlyle Group and TPG Capital.
Back to TopCDL Land's Next Development Is In Havelock North
CDL Land New Zealand Ltd (Singapore 53.3%; NZ 40%; US 3.3%; UK 0.7%; various 3.8%) has consent to acquire 8.4299 hectares at Arataki Rd, Havelock North, from Christine Margaret Hawley, James Christopher Hawley and Carolyn Elizabeth Wallis (NZ 100%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.
The OIO states that CDL is an NZ incorporated company which has been acquiring and developing undeveloped land in New Zealand for more than two decades. CDL plans to develop a subdivision of approximately 120 residential sections of various sizes for sale on the open market. The stated benefits are creation of jobs, introducing additional investment into New Zealand, oversight of and participation by New Zealanders, added efficiency due to CDL's plans to develop the land in the short to medium term, previous investments of benefit to New Zealand, and advancing the National Policy Statement on Urban Development Capacity by creating sections for additional residential housing.
CAFCA has documented a series of OIO consents for CDL for various land developments and hotel investment; most recently, a Hamilton residential development in December 2018. CDL Land NZ is a subsidiary of CDL Investments NZ. CDL is a majority-owned subsidiary of NZX-listed Millennium & Copthorne Hotels NZ Ltd. See commentary of December 2017 for increased ownership of Millennium & Copthorne by City Development Ltd which is 48% owned by the Hong Leong Group, Singapore. .
Back to TopInvesco Private Equity Buys Another Bit Of Auckland CBD
NZ Federal Ltd (US Public 80.3%; various overseas 9.6%; UK Public 3.1%; Canada Public 2.4%; Switzerland Public 2.1%; Japanese Public 0.8%; French Public 0.6%; Norway Public 0.6%; German Public 0.5%) has consent to acquire Chorus House, at 66 Wyndham Street, Auckland, from 66 Wyndham Ltd (NZ Public and various, NZ 100%) for $144,500,000.
The OIO states that NZ Federal is a special purpose vehicle of the Invesco Real Estate Asia Fund III, which invests in real estate and related assets in the Asia-Pacific region. Chorus House is a commercial property which intends to continue leasing to tenants as a commercial and retail space. NZ Federal 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 NZ Federal has demonstrated financial commitment to the investment.
Chorus House is a 22-storey office and retail block completed in 2000. Invesco Real Estate (established 1983) manages global investments in direct real estate, real estate securities including equity and debt, infrastructure securities and master limited partnerships. Headquartered in Atlanta, Georgia, it has $US975.2 billion in assets under management worldwide (31/4/19, www.invesco.com). See commentary of September 2018 for Invesco taking a half share in the ANZ Centre from Precinct Properties for $181 million; and July 2018 for another of its special purpose vehicles, NZRE Corgi, buying a commercial high-rise at 125 Queen Street.
Back to TopAustrian To Plant New Forest In Masterton
Veronika Leeb-Goess-Saurau (Austria 100%) has consent to acquire 1,729 hectares at 1940-1941 Te Ore Ore Bideford Road & 73 Stoddarts Road, Masterton from Lone Star Farms Ltd (NZ 100%) for $13,420,000. The OIO states that Leeb-Goess-Saurau has applied for consent under the special test relating to forestry activities set out in section 16A (4) of the Act. She will subdivide and sell Riverbend Homestead, Hadleigh Homestead, Hadleigh Cottage, and other flat land (and remove Mt Clyde homestead from the land) within three years of OIO consent.
The remaining 1,280 ha (to be known as "Bernadette Forest") will be planted as a new commercial forest commencing in 2019, due for harvesting in the years 2045 to 2047. The land includes special land, being part of the bed of the Tauweru River, which land has been offered to the Crown as required under the Regulations.
Stuff reports that Leeb-Goess-Saurau is a countess whose family can be traced back to the 1600s. In Austria it owns forest estates, castles and Mayr-Melnhof Karton AG, the world's largest producer of recycled cardboard cartons (Gerard Hutching, Stuff , 5/6/19).
In February 2017 she got OIO consent to buy 382 ha in Tutira, Hawke's Bay, to establish another commercial forest, for $2.2 million (Gerard Hutching, Stuff, 1/2/17).
Back to TopDutch Expand Invercargill Tulip Growing
Horizon Flowers NZ Ltd (Netherlands 100%) has consent to acquire approximately 162 hectares at 86 Forbes Road, Mabel Bush, Southland, from Far South Farms Ltd (NZ 100%) for $7,839,000. The OIO states that Horizon Flowers is a family owned business specialising in planting and processing tulip bulbs. The beneficial owners are Dutch citizens. Horizon has been operating in Southland since 2014, where it operates a tulip bulb business including a processing facility.
It is acquiring this land near its tulip bulb processing facility, currently being used for dairy farming. Soil in which tulip bulbs are planted requires a regeneration period of at least six years after harvest. Horizon will plant 27-hectare plots of the 162 hectares on a six-year rotational basis. The remainder will be leased back to Far South Farms to continue dairy farming. The acquisition is stated to be likely to result in additional investment to plant the tulip bulbs, new jobs (permanent and seasonal) to plant and harvest the tulip bulbs, and increased export receipts.
Horizon's previous overseas investments provided investment in building the tulip bulb processing facility and job creation for planting, harvesting and processing. This investment is likely to enhance the on-going viability of that previous investment. Horizon Flowers NZ was registered in June 2013; Tussenholding Horizon Flowers BV, of Zwaagdijk, Netherlands, is the ultimate holding company. See consents of May 2015 for Horizon's acquisition of land in Woodlands, Southland.
Back to TopUS Neighbours Lease A Bit Of Craigieburn Station, Arthurs Pass
Flock Hill Holdings (Robert Lambert Zorich, USA 48.1%; US Public 17.2%; Gary Richard Petersen, USA 14.5%; Michael Gerard McCaffery, USA 10.5%; John Logan Wallace, USA 9.7%) has consent for a leasehold interest in 135.5 hectares at 1203 Craigieburn Road, Arthurs Pass, from Robin Peter Jamison (NZ 100%) and Philippa Margery Jamison (NZ 100%) for $400,000.
The OIO states that Flock Hill Holdings seeks this leasehold interest in approximately 135 hectares of adjacent land through a boundary adjustment. Flock Hill Holdings has an existing leasehold interest in approximately 14,000 hectares on Flock Hill Station. The adjacent land is part of Craigieburn Station, another high country station. Flock Hill Holdings intends to use the land to extend its stock grazing and to improve the ecological value of the land which will also provide aesthetic benefits for visitors to the property. See consents of February 2010 and April 2016 for US acquisition of Flock Hill Station.
Back to TopDanone Increases Share Of Milk Powder Producer Yashili To 65%
Danone Asia Pacific Holdings Pte Ltd US Public 44%; French Public 20%; European Public 16%; various overseas 7%; UK Public 7%; Swiss Public 6%) has consent to acquire 49% of the shares in Yashili NZ Dairy Co Ltd , from Yashili International Group Ltd (Hong Kong Public 35%; various overseas 19.7%; US Public 13.2%; China National Cereals, Oils & Foodstuff Corporation, China PR 8.3%; Zhang Family, China PR 6.4%; French Public 6%; European Public 4.8%; Arla Foods Ltd, Denmark 2.7%; UK Public 2.1%; Swiss Public 1.8032%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.
The OIO states that Danone Asia Pacific is a wholly owned indirect subsidiary of global food and beverage company Danone SA, which is a French-listed company retailing a wide range of food and beverage brands, including dairy and plant-based products, medical nutrition products and waters. Yashili NZ operates a production facility in Pokeno, Waikato. Its land is not considered sensitive under the provisions of the Overseas Investment Act 2005.
Danone SA currently has an indirect shareholding in Yashili NZ of around 30%. This transaction will bring its indirect shareholding in Yashili NZ up to 65%. Danone Asia Pacific 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.
Established in 1983, Yashili is a top producer of infant milk formula in China, listing on the Stock Exchange in 2010. In August 2013, it was acquired by the Mengniu Group, China’s largest producer of liquid milk products. Yashili NZ’s $220 million production facility in Pokeno has an annual production capacity of 52,000 tonnes of infant formula (https://yashili.co.nz). Danone has owned 25% of Yashili since 2014, gradually increasing its holding, and has had a major milk powder supply agreement with Yashili since 2016.
Danone's NZ subsidiary, Danone Nutricia, ended its supply contract with Fonterra after the August 2013 botulism scare, sourcing product from Synlait Milk and other manufacturers and in 2015 bought the Sutton Group and Gardians dairy processing companies (NZ Herald, 23/8/16). For consents involving Danone and Yashili, see also commentaries of October 1997, June 1998, August 2002, January 2009, March 2013 (Yashili; background on industry), July 2014 (Sutton and Gardians), February 2015 (Yashili), and September 2018.
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