This month reports the largest number of OIC decisions since we started analysing them in December 1989: 63, including eight deletions. However, 17 of these relate to one forestry operation hawking off small blocks of land to Taiwanese residents. The majority relate to land sales.
The controversial combined cycle gas turbine power station proposed for Stratford, Taranaki features this month. National Power Plc, a U.K. public listed company which "currently operates four similar plants in England and state they will provide leading edge technology and experience to the project" gained approval to "carry on business in New Zealand on its own account in partnership with Todd Petroleum Mining Company Ltd." The consideration was "approximately $300 million".
National Power and Todd were selected on 16 June as sole preferred bidder for the 350 megawatt power station by the Electricity Corporation of New Zealand Ltd. However the good intentions disintegrated only two months later when Electricorp announced that the partnership had withdrawn and it was putting the station up for tender again. National Power blamed "unexpected technical problems" that transmission SOE, Trans Power, had raised regarding the suitability and reliability of National Powers proposed design. The plant might automatically disconnect at times of system stress said Trans Power (Press, "Power station back to tender after problems", 21/8/95, p.35). Presumably National Powers claims to the OIC of leading edge technology were not to be taken too seriously.
Just a month later Electricorp announced that a consortium comprising Fletcher Challenge, TransAlta Energy of Canada, and Auckland distribution company Mercury Energy would build it. Each of the three companies would provide a third of the equity for the station, which was expected to cost $400 million. Electricorp said the sale of the project to the consortium was a "major step in the creation of a competitive electricity generation market". In other words it will be the first significant privatised power station in Aotearoa. The sale included a 12.6 hectare site near Stratford and a supply of 230 petajoules of gas. The station should be commissioned in 1998. (Press, "Consortium wins power project", 15/9/95, p.18.)
Whether the station provides real competition is a moot point: all three partners in the consortium are significant owners of electricity supply companies and will want to maximise the benefits of the Stratford plant to their own operations. Added to that is Fletchers 33% shareholding in the Natural Gas Corporation. And then there is the original reason for the plant being controversial: its carbon dioxide emissions.
Transmark of Hong Kong approved to buy U-Bix
Transmark Corporation Ltd, which is listed but 66.6% owned by Shriro Pacific Ltd of Hong Kong, has gained approval to buy 100% of U-Bix Business Machines Ltd, another public company, then owned 35% by Global Asset Management Inc of the U.S.A. The price is said to be"$15,000,000 for 40%". Both companies import and distribute electronic products: U-bix photocopiers and telephone equipment; Transmark consumer products such as toasters, TVs, home security systems, watches and cameras. Of the remaining shareholding in U-Bix, 29% is owned by Maori interests (Independent, 8/4/93, "The Renaissance of Maori Commerce?", Rebecca MacFie). In August 1995 it was announced in the news media that Transmark had bought GAMs shares and with an existing holding of 3% and 2% bought at the same time, had 40% of U-Bix. It paid $9.135 million for these shares (at 105 cents a share), so its total cost will have been well below what it told the OIC. This is probably explained by U-Bixs plummeting share price which ranged from a high of 360 cents to a low of 85 cents during the period between November 1993 and August 1995. Shriro, which is owned by Mark Shriro who lives in Monaco, owns its stake in Transmark through subsidiary Siegen Investments. Transmarks chairman, David Wilson, lives in Hong Kong. (Press, 3/6/95, "Transmark stake", p.28, Press, 15/8/95, "Transmark takes control of U-Bix", p.32.)
City Life Holdings (Wellington) Ltd, ultimately owned by the New Zealand Land Trust of Singapore and George Horsburgh of Aotearoa, has approval to acquire "the properties, fixtures, fittings and equipment and business known as City Life Apartments on The Terrace, Wellington" for $10,014,369. They were owned by The Habitat Group Ltd, which is part of the Pacific group of property companies, of which City Life Holdings is also part. This acquisition is to bail out Habitat which would otherwise have to liquidate (see June 1995 decisions). The property is leased serviced apartments and "will be operated in conjunction with a similar operation in the old TAB Building in Lambton Quay, Wellington. The beneficiaries of the New Zealand Land Trust are Stanley Tan Poh Leng (otherwise known as Stanley Tan), Trustees in the Dynasty Trust, Pang Yoke Min, David Tan, and Johnny O Sy all of Singapore, and are "associated with" Messrs Tang, Subsidiary, Tang and Pong of Singapore according to this decision.
The sale of Pepin Island, Nelson, which is "not in fact an island because it is a peninsula connected by an isthmus to the South Island", has been approved to a Netherlands resident, Dr V. Hallman, for $2 million. The property is 521 hectares and is being bought by the purchasers company Pepin Island Sheep Station and Resort Ltd for development "into a farm stay resort with low impact chalets which will provide high class accommodation. The resort will be combined with the existing farming activities and the development will be managed by an operator experienced in managing resorts of this nature." In October 1995, Tasman MP Nick Smith expressed concern that the Island was to be sold to a "German businesswoman with significant investments in the steel industry". He was worried that access to the beach would be lost under new ownership.
A syndicate of mainly Japanese companies called Janz Investments Ltd which in June was given approval to acquire the 57.08% of Huttons Kiwi owned by Brierley Investments Ltd, now has approval to buy out the remaining 42.92% for "up to $6,525,190". According to this decision, Huttons Kiwi has assets in Taranaki, Manawatu and Marlborough, though the June decision listed Manawatu, Waikato and Canterbury. The acquisition of the shares is at little cost to Janz because the share purchase "will be achieved through a capital reduction which will result in the distribution to shareholders of the equivalent of 50 cents for every share and an offer to acquire the shares at 19.4 cents per share (cum div) or 17.4 cents per share (ex div). The Commission is further advised that the proposal will increase overseas investment in the under capitalised New Zealand meat industry. It will also create increased efficiencies through synergies with Asian New Zealand Meat Company Ltd." Janz is owned by Itoham Foods Incorporated of Japan, Nippon Suisan Kaisha Ltd of Japan, Romney No, 19 Ltd of Aotearoa and various employees of Asian New Zealand Meat Company Ltd of Aotearoa. For further details, see our commentary on the June 1995 decisions.
Kingsgate International Corporation Ltd, 50.35% owned by CDL Hotels New Zealand Ltd and 31.79% by Tai Tak Securities Pte Ltd and Tai Tak Holdings Ltd of Singapore, has approval to issue up to 131,060,443 shares at 10 cents a share to CDL Hotels New Zealand Ltd and/or Tai Tak Securities Pte Ltd to raise more capital. CDL Hotels New Zealand Ltd is 68% owned by CDL Hotels International Ltd, itself 52.8% owned by City Developments Ltd of Singapore, 37.8% by "offshore institutional investors" and 9.4% by Hong Leong parties of Singapore. Tai Tak Securities Pte Ltd is owned by Messrs Ho Whye Chung and Ho Sim Guan of Singapore. CDL acquired its shares from the Hos companies in 1994 (see April 1994 decisions).
CDL Hotels New Zealand Ltd has also been given approval to acquire the whole of Kingsgate International Corporation Ltd. However this is strictly "on appro": "The applicants state that currently there are no firm arrangements in place to acquire further shares but that they wish to be in a position to do so should the opportunity arise." They already had had approval from the OIC in April 1994 to acquire 85.34% of the shares. Kingsgates major assets are two tourist related property investments in Australia. They are both in Sydney: the 400-room Hyatt Kingsgate Hotel and shopping centre, and the Birkenhead Point waterfront warehouse and marina.
A Singapore/Malaysia consortium has approval to buy the James Cook Hotel and associated car park and commercial and retail properties in Wellington for $37,500,000. The property is currently owned by the JR McKenzie Trust through James Cook Hotel Ltd and Rangatira Credits and Investments Ltd which it controls. The Malaysian partner is in the final analysis, the Government of the State of Johor Malaysia through its investment arm, the State Economic Corporation, which in turn owns Johor Land Berhand. The Singaporean partner is Hotel Grand Central Ltd which "is a publicly listed Singapore company with expertise acquired through its hotel and property investment activities in south east Asia. It owns a number of hotel investments." In 1993, Grand Central acquired Plimmer City Centre on the corner of Gilmer Terrace and Boulcott Street and on Plimmer Steps, Wellington for $15.75 million, the Central Tower and Cashel Street Car Parking Buildings, Christchurch for "approximately $10 million", to convert into a hotel, and the DB Tower, Auckland for $7.1 million. It also owns the Grand Central Building in Manners Mall, Wellington.
New Zealand Properties (No. 1) Inc of the U.S.A. has approval to buy Aurora House and Chambers on The Terrace, Wellington for $36,450,000. The owner of New Zealand Properties is "Trust interests" associated with five U.S. residents, who "state that they have embarked on an investment strategy whereby available funds are spread internationally in commercial property." This property (owned by Mayfair Ltd [in liquidation]) has been in receivership and liquidation since 1989.
Hind Hotels International Ltd, a Singaporean public company controlled by the Jhunjhnuwala family of Singapore has approval to acquire Florencia Properties Ltd, a wholly owned subsidiary of the Skellerup Group Ltd for $15,100,000. Florencia owns one property in Auckland and one in Christchurch from which Skellerups undertake manufacturing operations, which they will lease back. "Hind Hotels views the acquisition as a natural extension to its investment property portfolio in New Zealand." According to the Press ("Offices planned", 25/1/96, p.20), Hind owns "more than $90 million in property in New Zealand". In May 1992 we reported:
Permanent Trustee Australia Ltd of Australia is setting up a company, Big Bonds (NZ) Ltd "to carry on business purchasing financial assets and issuing debt securities."
Benchmark Building Supplies Ltd, owned by Howard Smith Ltd of Australia, is taking a 30 year lease on 2.62 hectares of land in Ti Rakau and Burswood Drives, East Tamaki, Auckland to establish a retail outlet. Rental rates are yet to be determined but initial monthly rent instalments were $50,467 + GST. The land is owned by Burswood Developments Ltd.
Swift Energy International Inc of the U.S.A. has approval to undertake "petroleum prospecting and the exploitation of any petroleum resources located in any licence area as may be approved " "Swift is engaged in the exploration development and operation of oil and gas properties in the United States of America." When first released the money put in was suppressed. It was released on appeal to the OIC and is nil.
Further "regularisation" (read "retrospective approval") of the position of Apple Fields Ltd is approved in a number of decisions after it, "unknown to Apple Fields", became an overseas company in March 1994. One decision gives retrospective consent to acquire "interests in orchard partnerships and land owning companies (approximately 23 hectares)" for "approximately" $199,925. A second decision, in identical terms, applies to 20 hectares priced at $440,008. A third decision gives retrospective consent to "entering into transactions with Rural Super Bonds Superannuation Scheme (approximately 1,163 hectares)" priced at "approximately $11,400,050". This super scheme was the subject of significant criticism by the Securities Commission (see commentary on the January 1995 decisions).
The fourth decision gives retrospective consent to the joint venture set up with the former owners and founders of Killinchy Gold ice cream manufacturers to form the dairy processor Killinchy Gold Dairy Foods Ltd, for "approximately $1,200,000". Since we last reviewed this particular venture (see January 1995) it has found itself in a spot of trouble. The structure of the joint venture is that 21% of the shares are held by Killinchy Gold founders, Brent and Faye Thornton. The other 79% are held by Dairy Brands New Zealand Ltd, which is half owned by Apple Fields and the other half was to be sold to "processors and investors", interest coming from "overseas as well as New Zealand". Dairy Brands owns the dairy assets of Apple Fields, including 31 dairy farms in Canterbury, Otago and Southland. Its directors are a line-up of the Politically Correct of the New Right: Ruth Richardson, Murray Valentine (Apple Fields chairman), Rob Campbell and David Bainbridge, a Tauranga businessman. The float was principally a means to reduce the debt of the parent company: its rationale was said by Tom Kain to be to realise the assets of the ill-fated Rural Super Bonds scheme which owned most of the farms. It was preceded by Dairy Brands (projected profits to September 30, $2.91 million) paying a $27.05 million dividend to Apple Fields, leaving the company with a non-interest bearing debt to Apple Fields of $20 million, the bulk of which would be made up by the share issue. Loans of $2.55 million to Apple Fields by a company controlled by two executive directors of Apple Fields, brothers Tom and Charles Kain, would also be repaid and used partly for them to buy Dairy Brands shares. (Press, "Dairy Brands to add value - chairman", 6/9/95, p.26.)
The float of those shares to existing Apple Fields shareholders ran into considerable trouble. Questions were asked as to why the Kain brothers were not taking up their entitlements to shares, although they did underwrite the issue by about $2 million. They, along with other underwriters, were paid fees of $94,395. Another major Apple Fields shareholder, Societé Generale, also declined to take up its shares. Apple Fields confrontational stance against the Apple and Pear Marketing Board then returned to haunt it when a minor (320 share) shareholder from Nelson, accountant Barry Thompson, hired a public relations firm and an Auckland accountant to query the float. He alleged that the float would leave Apple Fields with the risk of minimal earnings, that forecasts in the Dairy Brands prospectus were optimistic, and questioned why shareholders should pay for dairy assets that they already own, particularly when Apple Fields was paying only 32.8 cents for shares where other shareholders were paying 90 cents. Tom Kain said "it would be unreasonable for Apple Fields to pay for something that it already owned." (Press, "Dairy Brands share float stirs controversy", 19/9/95, p.32; "Further details sought on Dairy Brands float", 22/9/95, p.16; "Controversy surrounds Dairy Brands float", 23/9/95, p.22.)
While this was going on, supermarket owner Progressive Enterprises claimed that letters of support in the Dairy Brands prospectus from four of its supermarket chains were printed without approval. Trevor Herd, Progressives Chief Executive, said he "nearly died" when he saw the letters in the prospectus. Trading managers in the Countdown, 3 Guys, Foodtown and SuperValue supermarkets had been approached in March with a request to comment on marketing strategies for Killinchy Golds products, but no approach had been made to Progressives management for permission to print the letters, and no approval had been given. The letters were not to be taken as endorsing the prospectus offer of Dairy Brands shares, and he disassociated the supermarkets from the document. However it appears that Apple Fields did have the various supermarket managers approval to print the letters, but those managers hadnt checked company policy with the Progressive hierarchy. (Press, "Progressive lashes A Fields prospectus", 20/9/95, p.25.)
According to the OIC, Apple Fields is now 28% owned by T/A Pacific Select Investments, and 13.21% by "various other overseas persons".
For some years, a company at Broadwood, Far North District, has been selling off small blocks of land to overseas residents as a way of raising funds for forestry development. Such transactions continue (see below). A similar scheme is now underway in the Wanganui district. It is related to the Broadwood scheme because the contact for both is Ms Deborah Miller, Brookfields, Auckland. "The New Zealand Forestry Group Ltd, a New Zealand company, has acquired a substantial area of poor quality farm land in the Wanganui area which it is converting into a commercial forestry operation To date there has been little interest from New Zealand investors." So it is selling 19 blocks of land totalling 497 hectares at Paparangi, Wanganui, to residents of Taiwan (different in each case), and in one case (Spruce Forest Company Ltd), Hong Kong. New Zealand Forestry will manage the whole development and in each case a holding company is being set up as follows:
Another unusual scheme surfaces in Northland this month. Seven Hong Kong residents are acquiring "approximately" 45% of Bridgethorne Holdings Ltd for $1,500,000. The rest of the company is apparently held by local shareholders. It owns 103 hectares of land in Kerikeri, Far North District. "The land will be subdivided into 12 orchards, 12 lifestyle blocks, a main farmhouse and a small strip for a new golf course." The blocks will be allocated by ballot to the shareholders, but the orchard blocks, which will be adjacent to each other, will be planted and managed as if they were one entity by New Zealand appointed managers.
Evergreen Forest Ltd, which is approximately 62% owned by Xylem Funds 1 L.P. of the U.S.A. is buying 3,996 hectares of land from the 11,000 hectare Waipaoa Station near Gisborne for $7,700,000. "Evergreen proposes to convert the land, much of which is mudstone based soil and susceptible to erosion, into a commercial forestry operation. Such utilisation of the land in the area has been actively encouraged by the Gisborne District Council. It is intended that 1,300 hectares will be planted by the end of July 1995 with the balance being planted by the end of June 1996." Pretty good going to plant 1,300 hectares in less than a month!
On 6/2/95, in a report headlined "Waipaoa Station for international tender", Straight Furrow reported (p.21):
We are not sure how to reconcile the contradictions between this report and what the OIC tells us. First there is the discrepancy in size (11,000 versus 7,966 hectares), and secondly the OIC reports: "Mr Clark claims that the sale of the land will provide him with the funds which are required to fully develop the potential of the remainder of Waipaoa Station." Presumably the tender fell through.
For details of who Evergreen and Xylem are, see the commentary on the December 1994 OIC decisions.
A joint venture between two major U.S. entrants to the forestry industry in Aotearoa is being formed. Rayonier New Zealand Ltd (a subsidiary of Rayonier Inc of the U.S.A.) and RII, which has various subsidiaries in Aotearoa, but is "ultimately predominantly owned by pension funds, non-profitable, charitable and educational institutions from the U.S.A." are forming a joint venture to run their combined forestry holdings in the Wanganui area. It is identified by the OIC as the RII Madaket Ltd/Rayonier CNI Ltd joint venture, in which RII has 75% and Rayonier (which will apparently do the management of the forests) 25%. From RII Marlborough the joint venture receives approximately 1,957 hectares of land near Hunterville for NZ$2,254,125. From Rayonier New Zealand Ltd it receives approximately 12,785 hectares for US$46,428,000 (approximately $71 million). These consist of the Crown Forestry Licences and assets of the Pirongia Forest, the Tawarau Forest, the Pureora North Forest, the Pureora South (Tihoi) Forest, the Mangaokewa Forest, the Waituhi Forest, the TeWera Forest, the Erua Forest, and the Taurewa Forest.
Milburn New Zealand Ltd is restructuring some of its associated companies. McDonalds Lime Ltd, 52% owned by Milburn, is acquiring "all the property rights, powers, privileges, liabilities and obligations" belonging to its wholly owned subsidiary, McDonalds Coal Ltd, in Taranaki. Milburn is approximately 72.5% owned by Holderbank Financiers Glaris Ltd of Switzerland.