January 1996 decisions

New law comes into effect

Note that the new regulations under the Overseas Investment Amendment Act 1995 came into effect on 15 January 1996. Hence some of the decisions below were under the new regulations and some were not. There is little sign that the new regulations and criteria have had any effect on the Commission’s approvals.

Hansol of Korea forms East Cape joint venture with Ngati Porou

Hansol Forem Company Ltd, part of the Hansol Group founded in 1991 by the Samsung "Multinational Group of Companies" in Korea, is forming a joint venture with Ngati Porou Iwi/hapu interests to develop Ngati Porou lands on the East Coast of the North Island. Hansol’s joint venture is with Ngati Porou Whanui Forests Ltd, which will "develop, manage and harvest … a forestry estate of 10,000 hectares more or less on Ngati Porou lands on the East Coast-East Cape region." Development expenditure of "approximately $80 million" is expected. Legal ownership of the land will remain with Ngati Porou "but forestry rights for one full crop rotation will be made available to the joint venture". The joint venture will be managed by a management company representing both parties. "Hansol has significant forestry expertise and plantation forestry both in Korea and Western Australia… Hansol can provide the capital to enable the Ngati Porou people to efficiently develop land identified as suitable for forestry while retaining the legal ownership and Tino Rangitiratanga over the land."

So far, so good. The land is between Tokomaru Bay and Hicks Bay. Ngati Porou leaders see the arrangement as providing employment and income to people "so poor that many cannot even afford to pay rates" and many of whom "are now into their third generation of unemployment". The public launch of the scheme (in February, well before this decision was suppressed by the OIC from the March release of its other January decisions) was a full ceremony including Forestry Minister, John Falloon and members of the Korea/New Zealand Business Council, took place at Rahui marae in Tikitiki, 150 km north of Gisborne. Gifts were exchanged between Ngati Porou and Hansol President Nah. Hansol is also pushing similar programs in Vietnam and Chile. (Press, 19/2/96, "East coast iwi, Korean group join in forest deal", p.32.)

However the project has aroused heated exchanges with the conservation movement. The Royal Forest and Bird Protection Society says that some of the "scrub" that will be replaced with pine trees is actually kanuka forest. There is an extreme risk of restarting erosion. The scheme also uses a foreign company to circumvent the New Zealand Forest Accord under which local forest companies have agreed not to log native forests. Further, the government’s East Coast forestry project subsidises the cutting of the kanuka.

Ngati Porou reject these claims, seeing kanuka as simply another form of manuka and "just a transition crop". The income would not only provide a living for their people, but also allow them to enhance their extensive forest reserves. (Listener, 20/4/96, "The kanuka cut", p.24.)

The deal is said to have been organised by Michael Park, son of a former South Korean ambassador to Aotearoa who now is based in Wellington. He was said to be looking at putting together a Korean consortium, possibly including Hansol, to bid for the controversial privatisation of Forestry Corporation (Press, 11/5/96, "Koreans look at Forestry Corp", p.28).

This decision was only released after appeal to the OIC, in July 1996.

Bank of Scotland’s Countrywide Bank, bids for Housing Corp mortgages

Nationwide Home Loans Ltd, a wholly owned subsidiary of Countrywide Banking Corporation Ltd, which in turn is owned by the Bank of Scotland, has approval to acquire "a portfolio of residential mortgages from Housing Corporation of New Zealand" for "approximately $200 million".

In line with the new Overseas Investment criteria for non-land sales, all the OIC states in approving the application is:

" The application has been approved as it met the criteria. The applicant has business experience and acumen, is demonstrating financial commitment to the proposal and no one individual has a 25% or more beneficial interest in the investment."

This reflects the minimal three criteria for non-land sales to overseas interests: the overseas purchaser must have business experience and acumen, must demonstrate financial commitment to the proposal, and any individual having a 25% or more interest in the investment must be of good character. The OIC need not consider whether selling the mortgages of some of Aotearoa’s most disadvantaged house owners to this bank will be good for them or Aotearoa. Even the "good character" provision is shown to be empty, as an individual having a 25% interest will be relatively rare in any large company.

Auckland Regent Hotel sold to Singapore company

The Regent Hotel in Auckland has been sold to the Hai Sun Hup Group Ltd, a Singaporean public company, for $80 million. The Regent was owned by the "Togen group" which is ultimately owned by Eastern Prime Line Ltd (a shipping company owned by the Liu family) of Hong Kong. They say they have been actively seeking to sell the hotel for some time. The price was "approximately $80 million".

"From a small lighter business in 1935, the Hai Sun Hup Group has grown to become one of Singapore's leading shipping companies today... The Group is now an integrated maritime transportation organisation, and in addition to owning ships, provides services such as: Shipping Agency; ship owning, chartering and management; sea transportation of conventional cargo, bunker oil supply; warehouse and distribution; port terminal operation and marine supplies."

It has American Depositary Receipts listed in the U.S. and has 700 employees (ref: World Wide Web, http://www.money.com/corps/322948.HTM). In February it bought the six-storey building housing Mietta's Hotel Restaurant, in Alfred Place, Melbourne, for $2,020,000 from Squitchy Lane Holdings. It "plans to retain the upstairs dining room and convert conference facilities as an expansion of the neighbouring Stamford Plaza Hotel". (Ref: Australian PropertyWeb, http://www.propertyweb.com.au/MarketPlace/SoldVic/3474409651.html.)

It is one of 70 Corporate Associates of the Institute of Policy Studies (IPS), a public policy think-tank in Singapore. IPS boasts that "for an annual membership fee of S$10,000, a Corporate Associate can enjoy the full range of corporate benefits offered, including invitations to special briefings, members-only dinners, luncheons and executive roundtables with Ministers, senior government officials and eminent foreign visitors." IPS serves as the Secretariat of the APEC Pacific Business Forum, "a grouping comprising two business persons, appointed by their respective Leaders, from each APEC economy" (ref: http://odin.pacific.net.sg/ipsone).

In November 1995, the OIC gave approval to Cogent Investments Ltd, a subsidiary of Perfect Match Investments Ltd of Hong Kong, to buy the hotel from the Togen group. They then said that the hotel "urgently" required further development and maintenance. The price was suppressed. At the same time, press reports were naming Hai Sun Hup Group as the buyer.

The hotel was built in 1985 for about $60 million. It has 332 rooms and is rated five-star. (Press, "Singaporean group buys Regent Hotel", 24/1/96, p.45.)

Togen are 45% shareholders of Wenita Holdings (NZ) Ltd, a major buyer of Crown forest licences and land for forestry particularly in Otago and Southland. Another 45% of Wenita is owned by a Chinese Government Corporation, China National Foreign Trade Transportation Corporation. 10% is held by Chen Wen Dong of Hong Kong.

U.S. investment fund T/A Pacific, buys 35% of Dairy Brands

U.S.A. owned but Cayman Islands registered investment company, T/A Pacific Select Investments LP, is shifting its ownership of Apple Fields Ltd to its listed subsidiary, Dairy Brands New Zealand Ltd. It is acquiring a 35.3% interest for a sum "to be advised". Dairy Brands was set up by Apple Fields to buy out its dairy farms, including 31 farms totalling 4,381 hectares in Canterbury, Otago and Southland, with the main objective being to reduce Apple Fields’ debt (see our commentary on the July 1995 OIC decisions). The OIC says that "in July 1995, consent in principle was granted to overseas persons holding up to 50% of the shares in Dairy Brands as part of that company’s float".

"At the time of the float it was the intention of Dairy Brands that it should be and be seen as a separate entity from its former parent company Apple Fields Ltd. The Commission is advised that there is still a market perception that Dairy Brands is dominated by Apple Fields and that this perception has made Dairy Brands less of an attractive investment to institutional investors. The Commission is further advised that in an endeavour to dispel this perception T/A Pacific have agreed to sell 20.1% of their shareholding in Apple Fields to other Apple Fields shareholders in exchange for their interests in Dairy Brands. The Commission is advised T/A Pacific propose to be a passive investor in Dairy Brands as it was in Apple Fields and will not seek board representation or involvement in the day to day operations of the company."

This leaves a total of approximately 21% of Apple Fields overseas owned: 8% T/A Pacific and 13% other overseas shareholders (see the July 1995 decisions).

The "market perception" would not have been dispelled by the manoeuvring preceding the float: Dairy Brands (projected profits to September 30, $2.91 million) paid 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.)

Gulf USA Corporation takes full control of Gulf Resources Pacific Ltd

Gulf USA Corporation, which according to the OIC previously owned 96.5% of Gulf Resources Pacific Ltd, has approval to acquire 100% of it through another subsidiary, Gulf Holdings Ltd, for $0. Aside from being a major property investor in Aotearoa and Europe, Gulf Resources, through its subsidiaries was (at least in 1993) also engaged in open cast mining of bituminous coal. It also had a 26% equity interest in a Texas based oil and gas company (ref: World Wide Web, http://www.marketguide.com). It originally divested from the U.S.A. because of a major environmental disaster which it wanted to avoid paying up for. It bought City Realties in a series of controversial transactions (see for example our commentary in the OIC’s October 1991 decisions) and later renamed it Gulf Resources once it had majority control. Gulf Resources owns landmark properties at Lands End, Cornwall, England and John O’Groats, Scotland which it is desperately trying to sell. It also owns a "troublesome" property in Paris, France which it is also selling (Press, 9/1/96, "Gulf Resources lifts efforts to quit British landmarks", p.23). In Aotearoa it owns seven properties in Christchurch including the Triangle Centre, 33 properties in Auckland, and six elsewhere. Gulf USA was released from U.S. bankruptcy protection in June 1995 after two new shareholders, the Karfunkel brothers, injected new capital. (Press, 23/12/95, "Gulf Res stake extended", p.42.)

While the OIC says Gulf USA previously had 96.5% of Gulf Resources, in fact until December 1995 it had 91%, when it bought 5.14% from Tower Corporation for $19.2 million. There was trouble looming from the remaining shareholders. An Auckland broker, Phil Briggs said the offer of 28 cents a share should be closer to the asset backing of 32 to 34 cents. He threatened to test section 208 of the Companies Act 1955 relating to minority shareholders (Press, 20/1/96, "Gulf group to fight takeover", p.28). However two Gulf Resources independent directors recommended the offer saying estimates of asset backing were between 27 cents and 32.3 cents a share and its chief executive said the Karfunkel brothers refused to budge on the price (Press, 1/2/96, "Gulf shareholders urged to accept bid", p.23; 3/2/96, "Higher Gulf offer unlikely", p.31). The sale had not been completed by March 1996 when Gulf Resources was suspended from trading on the Stock Exchange for failing to issue a 12-month preliminary report in the required time. Gulf Resources said the delay was due to "its protracted sale of the Paris-based Rond Point 93 property". By then Gulf USA owned all but about 1.5% of the company (Press, 20/3/96, "Gulf Resources off list for missing deadline", p.27).

Mitsui leaves Greymouth Coal Ltd, sells shares to Kanematsu

Two Mitsui companies which together own 22.99% of Greymouth Coal Ltd are withdrawing from the company, not being willing to proceed into Stage II of the Rapahoe mine development project. Their holdings are being sold to the other shareholders who are buying them in proportion to their current holdings. Greymouth Coal was owned 33.66% by Coal Corporation of Aotearoa, 24.99% by Kanematsu Corporation of Japan, 20.44% by Mitsui Mining Company Ltd of Japan, 2.55% by Mitsui Matsushima Company Ltd of Japan, and 18.36% by Todd Corporation of Aotearoa. This decision approves Kanematsu Corporation acquiring a further 7.46% for $788,665. As well as various exploration and mining licences, Greymouth Coal owns 21 hectares of land near Greymouth, Westland.

525 hectares in Bay of Islands to Canadian for tourism and forestry

Turinter NV, ultimately owned by Mr M. de Nora of Canada has approval to buy the remaining 76% of Robinia Investments Ltd that it does not already own, for a price "yet to be finalised". Robinia owns "approximately 525 hectares" of land in the Bay of Islands, Northland. The property was acquired in March 1994, although we have no record of it being approved by the OIC, presumably because the overseas interest was less than 25%. It was bought

"for the purpose of developing a tourist based fishing lodge, a forestry operation and upgrading the farming activity on the property. The applicants state that there is a need for significant further capital investment to ensure that the proposed development is completed. It is claimed that under the existing ownership structure such capital is not available. However, Turinter who has already provided $4 million to the development is prepared to make available further long term capital if it assumes 100% ownership. The Commission is advised that the acquisition will ensure the continued development of the fishing lodge venture coupled with additional conservation steps for existing wild-life habitats."

Land for forestry

  • Mangakahia Forest Ltd, owned 50/50 by Shell Forestry Ltd of the U.K. and Carter Holt Harvey Ltd of the U.S.A. is buying a further 310 hectares of land west of Kaihu in Northland, for $585,000. This is an echo of a similar sale in December 1995. Mangakahia was given approval in principle to acquire 45,000 hectares in 1983, and has a target of 26,000 hectares in and around Dargaville. In December it acquired a further two blocks of 291 hectares and 134 hectares west of Kaihu for $480,000 and $280,400 respectively. In each case, the company claims that the land is uneconomic for sheep or beef farming.
  • The industrious Deborah Miller of Brookfields, Auckland has arranged another sale of land at Paparangi, Wanganui to two Taiwan residents for forestry development. This time it is 18.3 hectares for $71,390 through holding company Vista Screen Ltd. See December 1995 for the last such sale.
  • Forestry developer, Roger Dickie (NZ) Ltd is selling 342 hectares of land known as Grand Vue and Pine Park Forests in Gisborne to Old Mill Forest Partners, a U.S. limited partnership which is owned by the Paulus family of the U.S.A. The price is $739,390 and the land will be used "by converting pasture and scrub land into a genetically superior managed radiata pine forest". The land will be developed as part of "the larger 900 hectares Craills Brothers Forestry development".

Other rural land sales

  • Deborah Miller has organised a more conventional sale this month. A block of four hectares of "arable land" at Glenbrook Road, Glenbrook, Auckland is being sold to Chen Hua Huang of Taiwan and James Lin Ching Ling of Aotearoa for $170,000. They are acquiring the property "which is primarily vacant at present, to plant it with Macadamia trees and spring onions and to operate it in conjunction with an adjoining property which is owned by Mr Ling’s wife."
  • A U.S.A. couple has approval to buy Thunder River Farms Ltd which owns approximately 154 hectares of land at Murchison, Nelson for $257,000. They "propose to extend the existing pasture land on the property and also to embark on an extensive afforestation scheme on the steeper parts of the property." The new owners have "entered into a management agreement with the farmer of an adjacent property" but it is also their "intention in the longer term to take up New Zealand permanent residency." A case of absentee ownership.
  • A German emigrant to Australia has approval to buy 24 hectares of land near Blenheim, Marlborough, for $250,000 to establish a vineyard. It is currently used for grazing dry stock. "In the longer term the Hengstlers propose to take up New Zealand permanent residency to manage the operation" but in the meantime "extensive connections" in Germany "will be utilised to developed the New Zealand white wine export market". The land is being bought through the holding company Sagittarius Ltd.
  • Club Flying Kiwi Ltd, which is owned by Mr Yasuda of Australia and Ms Kuramoto of Japan has approval to buy three hectares of land at Arthurs Point, Queenstown for $615,000. "It is intended to erect a homestay/lodge accommodating 10 to 20 people on the property."
  • Another U.S.A. couple are acquiring a further 381 hectare farm at Milton Road, Akatore, Taieri Mouth, Otago, for $1,050,000. It is "next door" to a property they received approval to acquire in October 1994 which was a 154 hectare farm purchased for $500,000. It in turn was adjacent to a 184 hectare farm they bought for approximately $502,500 in December 1993 (see January 1994 decisions). "The applicants state that they wish to acquire this property next door to complete their holding as an economic unit. The applicant states that a farm manager, a labourer, one consultant and casual labour will be employed." Even though in 1994 they were reported by the OIC to be taking up permanent residence, it appears the farm will still be in absentee ownership.

Internal restructuring: CDL and Te Maori Lodges

Approval is given for two companies, identically structured, to acquire QINZ Holding New Zealand Ltd and the QINZ Property Companies for "approximately $40 million" each. All the companies, which are presumably the holding companies for the Quality Hotels chain in Aotearoa, are owned 70% by CDL Hotels New Zealand Ltd (which is 68% owned in Singapore), and 30% owned by Te Maori Lodges Ltd.