November 1997 decisions Rabobank buys Wrightson Farmers Finance Cooperatieve Centrale Ralffeisen Boerenleenbank BA, aka Rabobank, "a major banking cooperative based in the Netherlands" has approval to acquire Wrightson Farmers Finance Ltd, a subsidiary of Wrightson Ltd. The price was originally suppressed, but was released on appeal in April 1998: "approximately $97,000,000". NZPA had reported a price of "about $100 million" (Press, 4/2/98, "Wrightson warning", p.27). "The Commission is further advised the approval of the transaction will result in a competitive financial service to the farming sector of New Zealand." Rabobank is said to be the world’s largest agricultural bank with assets of $300 billion, although only $200 million (about 3% of the market) in Aotearoa. Wrightson Finance is actually bigger than Rabobank in Aotearoa: it had assets of over $544 million at the end of June 1997 (Press, 19/11/97, "Delay in Wrightson Rabobank alliance", p.28). It will be called Rabo Wrightson Finance. It was the most profitable part of Wrightson, but Wrightson hoped to benefit by retaining the client relationship (charging referral and commission fees for introducing clients to Rabo), and using the proceeds of the sale in a special dividend and to buy back up to $50 million shares (Press, 19/11/97, "Delay in Wrightson Rabobank alliance", p.28; 29/11/97, "Rabobank deal ‘could put Wrightson at risk’", p.30; 23/12/97, "$50m buy-back for Wrightson", p.20). Approval for Utilicorp and Mercury to take more of Power NZ and WEL Energy In an approval that is being challenged in court, a joint venture (identified just as "Holdco") between Utilicorp NZ Inc and Mercury Energy Ltd has approval to acquire up to 100% of Auckland electricity company Power New Zealand Ltd (PNZ), and up to 51.18% of Waikato electricity supplier, WEL Energy Group Ltd. In the case of PNZ, the price is $93,238,554 for 63.8%, and 138 hectares of land is included. Mercury and PNZ are "the two major suppliers of electricity to the greater Auckland region". The companies tell the OIC
In the case of WEL, the payment is by way of Holdco shares since the WEL shares are coming from Mercury and Utilicorp themselves. Utilicorp and Mercury together own 41.42% of WEL’s shares. If Holdco takes over PNZ as approved, it will also acquire the 9.76% of WEL that PNZ owns. The total 51.18% would be held either by Holdco or by PNZ. No valuation of the acquisition is given. No land is subject to the OIC’s approval. The proposed deals have a number of people in Auckland and Waikato incensed. As we reported in the context of the July 1997 decisions, the Utilicorp/Mercury takeover of PNZ was bitterly fought by minority shareholders and the directors ousted by the new owners. They were described as "Australian crocodiles and American alligators." The takeover was also vehemently opposed by the WEL Energy Trust, a community trust which owns 43% of WEL Energy. They are threatening two court actions. First, they are challenging the OIC’s approval of the present two decisions. Second, they are challenging the right of Holdco to own PNZ. The basis for this challenge is that Utilicorp made a "cornerstone shareholding" agreement with PNZ in 1994. This agreement allows the directors of PNZ to veto any sale of Utilicorp’s 30% shareholding in PNZ. The Holdco proposal would sell the 30% to Holdco and hence breach the agreement. PNZ’s two independent directors must decide whether the deal can go ahead, but WEL Energy Trust has in the meantime asked for a court ruling on whether Utilicorp has the right to put its PNZ shares into Holdco. The Trust’s interest is that Mercury and Utilicorp would control WEL Energy through their 51.18% shareholding if the Holdco transactions are allowed to proceed. They have made it clear they want to build a large electricity distribution company for the whole central North Island, based on WEL. The Trust wants to keep their company under local control, and have put their money where their mouth is, to the extent of offering PNZ $30 million for its 9.76% stake in WEL Energy. That is more than 50% over current market value ($17.50 per share against $12.80). They reckon the value is justified by what they can do if they have full control, including selling the company’s 8% stake in PNZ. That puts further pressure on the PNZ independent directors to reject the Holdco deal. New Zealand Herald business journalist, Mark Reynolds, suggested that "maybe the only way to break the circuit is for Utilicorp to cash in its chips". Meanwhile the OIC issues approvals regardless. (New Zealand Herald, 3/2/98, "Legal hitch may cut Power NZ free of Holdco", and "WEL Trust adopts powerful stance", by Mark Reynolds, p.D1.) Murdoch buys TVNZ’s acclaimed Natural History Unit Fox Television Studios Inc (commonly known as Twentieth Century Fox), ultimately owned by Rupert Murdoch’s The News Corporation Ltd (via Fox Inc) of Australia, has approval to acquire the internationally recognised natural history division of Television New Zealand Ltd. The company was formed into a company, Natural History Ltd for privatisation. It was sold for "initially approximately $12,000,000 for 80%".
In other words, it will be a valuable source of footage for Murdoch’s huge television empire. According to Fox’s international television president, Mark Kaner, "the Natural History team had been lauded and admired around the world for its commitment to excellence. Natural History is the third largest producer of natural history programmes in the world." TVNZ is retaining the remaining 20% with guaranteed access to the unit’s productions in the future (Press, 4/12/97, "TVNZ Natural History sold to Fox", p.9). BellSouth buys TACS-B from Telstra In a decision originally almost completely suppressed and released only on appeal in April 1998, BellSouth New Zealand Ltd has approval to acquire the "radiospectrum management rights relating to the TACS-B radiocommunications spectrum held by Telstra New Zealand" for $14,000,000. TACS-B is one of the relatively small number of cell-phone channels available and will allow BellSouth to compete more strongly with Telecom using its own cell-phone network. BellSouth New Zealand is owned 65% by BellSouth Corporation Inc of Atlanta, U.S.A., and 35% by Singapore Technologies Pte Ltd of Singapore. Telstra New Zealand Ltd is owned by Telstra Corporation Ltd of Australia. Bridgestone takes remaining 17% of Firestone NZ for $11 million Bridgestone/Firestone Inc, itself owned by Bridgestone Corporation of Japan has approval to take over the remaining 16.67% of Firestone NZ Ltd that it does not already own, for $11,243,735. Firestone is one of only two remaining tyre manufacturers in Aotearoa. The other is run by Pacific Dunlop in conjunction with Goodyear. Firestone’s factory is on 12 hectares of land in Langdons Road, Papanui, Christchurch, and was noted in the OIC decision because of the land area. However its headquarters are in Auckland. Firestone employs 730 staff in the country, and is fighting hard to remain viable against imported tyres, the high New Zealand dollar, and the slow death of car assembly in Aotearoa. The factory employs only 150 – down from a peak of 450 in the 1980s and early 1990s. It was established in 1948 for strategic reasons, after shortages during WWII. It continued under the protection of import licensing. Firestone was then U.S. owned, but taken over by Bridgestone of Japan in 1988. Long industrial disputes took place in the 1970s and 80s over pay, working conditions, and new work practices being imposed. A new managing director was brought in from a Bridgestone/Firestone Florida subsidiary, Webco Tire and Wheel Company, in 1996. The Christchurch factory went to 24 hour seven-day shifts in 1997. Firestone management won the new shifts after using the threat of competition from overseas plants and closure of the factory (it closed a small retreading plant in Nelson in February 1997 with the loss of five jobs). Workers were forced to take substantial pay cuts, longer working days (12-hour shifts) and weekend shifts. Workers not willing to take the package were offered a "resignation benefit"; about 50 staff took this. Firestone subsequently recruited a further 80 staff. The company saved 20% of its annual labour costs (Press, 20/6/96, "Firestone strong – Millar", p.38; 5/2/97, "Retreading plant closes in Nelson", p.4; 29/3/97, "Union fears effects of Firestone plan", p.4; 14/5/97, "Firestone to go non-stop", p.31). Although the OIC states that the "transaction has been brought about by the three largest institutional shareholders wishing to divest their existing shareholding", it was in fact due to the parent company making an offer of 475 cents per share for the minority shares. The three institutional shareholders mentioned were National Mutual Funds Management NZ, Guinness Peat Group New Zealand, and New Zealand Funds Management. Ron Brierley’s Guinness Peat had bought its shares only a few weeks before the offer, and reportedly had nudged Firestone into proposing it, acknowledging a "reasonable return" on the deal. The buyout price compared to 400 cents just before the sale, and a valuation of 364 to 420 cents by transnational accounting firm Arthur Anderson (Press, 10/10/97, "Firestone in minority bid", p.17; 11/10/97, "Firestone independent valuation below bid", p.43). Murray International takes controlling interest in Pacific Retail Murray International Holdings (NZ) Ltd, owned in the U.K., has approval to take a further 22.95% of the Pacific Retail Group Ltd for $10,996,142. It previously had 37.05% so the new purchase gives it control of the Group. Murray International Holdings (NZ) Ltd is a subsidiary of Murray Group Management Ltd, which in turn is a subsidiary of Murray International Holdings Ltd, incorporated in Scotland. Of the 22.95%, 21.03% came from a subsidiary of Lion City Holdings of Singapore, Rosebury Holdings Ltd. It is not clear where the remaining 1.92% came from. Pacific Retail was formed from the amalgamation of Noel Leeming Ltd and Bond and Bond Ltd in 1996. We reported in June that year that
The Jumabhoy’s became disillusioned with their investment and tried to sell out a number of times. The sale price, at 116 cents a share, represents a considerable loss on the 150 cents they paid for their Noel Leeming shares. Murray International also owns steel interests, the Glasgow Rangers Football Club, Carnegie Sports International NZ, and property in the U.K. (Press, 2/12/97, "Murray International takes control of Pacific Retail", p.29). NFO Worldwide of the U.S.A. buys rest of CM Research Group for $16 million NFO Worldwide Inc of Delaware, U.S.A., has approval to acquire the shares in the CM Research group it doesn’t already hold, for $16,124,000. The group consists of three companies:
NFO Worldwide Inc was until September 1997 NFO Research Inc. It changed to "Worldwide" to "reflect its broadened global reach and the scope of its expanding service offerings". It first made a public share offering in 1993, since when it has grown to a marketing information business with 4,400 employees in 21 countries, and almost four times the revenue. Almost 30% of NFO’s revenues come from international operations. Its modest self-description reads:
(Ref: press release, http://www.nfor.com/newsdoc/pr/pr091897a.html, "NFO Research, Inc. announces new name, new management structure and 3-for-2 stock split", 18/9/97.) According to Forbes magazine in 1997, (http://www.forbes.com/tool/toolbox/200best/1997/1878.htm), NFO had a market value of US$384 million, and net income of US$9.9 million and sales of US$124 million in the latest year. New TV operator, Prime Television of Australia, starts up Prime Television New Zealand Ltd, owned by Prime Television Ltd of Australia, has approval to start up in Aotearoa, with set-up costs "likely to exceed $10,000,000". The amount invested was originally suppressed, but was released in April 1998 as being "in excess of $20 million". The OIC also states that Prime has "invested $4,100,000 to date for the purchase of UHF licences required under the Radiocommunications Act 1989".
Prime is developing a new Auckland facility for about $A10 million ($11.23 million) and has bought 34 UHF licences covering about 89% of Aotearoa for $4.19 million. It aims to broadcast into "five of the largest markets in New Zealand". It has also agreed to buy the assets of the Argentinian television network, Channel Nine, though will run it as a joint venture or sell some of the assets (Press, 26/11/97, "Prime TV to air from 1998", p.29). Kiwi Income buys central Auckland property for $17.5m for $144m development Kiwi Development Trust, established to acquire the shares in Fort Street Properties Ltd, has approval to acquire the company from Kiwi Income Property Trust (KIPT) for $17,500,000 According to the OIC, Fort Street Properties owns
Kiwi Development Trust is being established by a trust deed between KDT Management Ltd (as manager) and The New Zealand Guardian Trust Management Ltd (as trustee). The OIC has approved units in it being sold to "persons who may be ‘overseas persons’" for $144,000,000. Apparently without knowing who these "persons" are, it states (as with every approval) that "the persons who exercise control over the Trust are of good character and not the kind of persons referred to in section 7(1) of the Immigration Act 1987." According to OIC in an August 1997 decision, Kiwi Income Property Ltd is 50% owned by FCMI, a public company of Canada, and 50% owned by residents of Aotearoa. Kiwi Income Property Trust is a "New Zealand listed unit trust" which is "approximately 70 to 75% owned by New Zealand residents". A 38-level, 170 metre tower (the tallest in Auckland other than the Sky Tower), to be called the Royal SunAlliance centre, will be built on the property, completion due in 2001. Law firm Russell McVeagh McKenzie Bartleet and Co would also be tenants. Of the $144 million, $57 million was originally reserved for institutional investors, KIPT unit holders would be offered rights, and Kiwi Income Property Trust was to have been given 5% in exchange for the land. Debt of $51 million would finance the remainder of the cost of the tower. In the event, KIPT raised its holding to 17.3% because the offer of the units was undersubscribed by 23.8%, possibly affected by the Asian economic crisis. However the undersubscription was mainly because unit-holders in KIPT did not take up their full entitlements. Kiwi Development Trust was created by KIPT because the development was considered higher risk than projects KIPT normally targets. However it has an option to buy the new Trust after the building is finished. (Press, 4/10/97, "Kiwi Income in tower float", p.31; 5/11/97, "Kiwi Income Property revives $144m float", p.29; 12/11/97, "Kiwi Income has tower option", p.37; 22/1/98, "Kiwi Income ups stake", p.31.) Trans Tasman floats 65% of its CBD properties in NZ Growth Property Trust In a decision originally almost completely suppressed and released only on appeal in April 1998, "persons who may be ‘overseas persons’" have approval to acquire up to 65% of New Zealand Growth Property Trust for "approximately $290,000,000". It is a public float, being sold by Trinidad Holdings Ltd, a subsidiary of Trans Tasman Properties Ltd. "TTP state it has separated its capital CBD office portfolio from its other investments and placed the CBD with the trust. It is proposed that 65% of the units of the trust will be offered to the public by way of a public float." Trinidad Holdings is presumably the temporary vehicle for this. Given that this was largely a public process, and widely reported, it is not clear how the suppression of the entire decision was justified. Trans Tasman will own the remaining 35%. In fact the float was delayed because of market conditions. Datex ("New Zealand Investment Yearbook 1998", p.132) puts the value of the properties sold to the Trust at $650 million. Trans Tasman is 46.37% owned by SEABIL (NZ) Holdings Ltd. The "ultimate owner" of SEABIL is SEA Holdings Ltd, listed on the Hong Kong stock exchange but registered in Bermuda. In 1995, SEABIL (NZ) Holdings was owned 70% by SEA Holdings Ltd and 30% by Brierley Investments Ltd (see our commentary on the OIC’s February 1995 decisions). Other substantial shareholders then were Grantham Mayo Van Otterloo and Company (GMO) of Boston, U.S.A. (22%), and Franklin Resources Ltd (5.6%) also of the U.S.A.
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