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TransAlta (Canada) buys 49% of Capital Power from Wellington City Council As with last month, the overseas control of local electricity supply companies features. This month, TransAlta Utilities Corporation of Canada gains approval to buy 49% of Wellington City Council’s electricity company, Capital Power Ltd for $120 million. It didn’t actually pay that much as “capital restructuring” paid $32 million back to TransAlta and $33 million to the WCC on the date of settlement (20/1/95) (Press, “TransAlta Sweetener”, 9/12/94, p.20). The OIC decision lists the total valuation as $244,897,960. Although the 49% shareholding has the appearance of leaving control with the WCC, Councillor Hazel Armstrong, who was also a director of Capital Power before resigning just before the decision to sell to TransAlta, said that TransAlta was in fact getting control. “Material in the secret shareholder documentation showed TransAlta would have the right to appoint the managing director or chief executive, would have a right of veto on Capital Power’s business plan, valuation, line charge, and statement of corporate intent.” Other bidders were EnergyDirect (itself 20% owned by TransAlta), Taranaki Energy, and Northern Electric (U.K.), all of which were “understood” to be at least $20 million below TransAlta’s. (Press, “Canadians buy Capital Power”, 7/12/94, p.51.) TransAlta is based in Calgary and has assets of over $NZ5 billion world-wide. As well as its interest in EnergyDirect, it is seeking the right to build a gas-fired power station at Stratford, Taranaki, with Fletcher Challenge, and has plans to build a 110MW gas-fired power station at the former Southdown freezing works in south Auckland with Mercury Energy (Press, “TransAlta clears first fence in power play”, 5/12/94, p.37; “Canadian utility eyes Wellington”, 20/11/94, p.41). The Capital Power sale was structured through the sale of its WCC-owned owner, Capital Holdings Ltd to Capital Energy Ltd which is owned 51% by the WCC and 49% by TransAlta subsidiary TransNewZealand Energy Ltd. TransNewZealand’s shareholding is through 29.4 million ordinary shares and 90.6 million convertible notes. Guinness Peat (U.K.) buys Turner family out of Turners and Growers Guinness Peat Group Plc of the U.K., controlled by Ron Brierley, is buying out the 25% shareholding of the Turner family in Turners and Growers Ltd for a sum that was initially suppressed by the OIC but was reported to be “just over $8 million”. In May 1995, the OIC released the price, revealing the consent to be $11,854,180 for 40%, which works out at $7.4 million for 25%. Turners and Growers are the dominant produce market, and more recently have got into vehicle auctions. GPG has bought further shares to bring its holding to 28% (Press, “GPG takes family stake in Turners”, 8/12/94, p. 35). The shareholding was purchased through GPG subsidiary Ithaca Investments Ltd. Guinness Peat sells Medic Aid to company jointly owned with Aetna (U.S.A.) Guinness Peat Group is also selling its subsidiary First Medical Corporation Ltd to a company, Aetna Health (NZ) Ltd, owned 50/50 by U.S. company Aetna Life and Casualty Company and Brierley Investments Ltd, for a suppressed amount. First Medical is the owner of Medic Aid, the second largest health insurer in Aotearoa; Aetna Health was the third largest. According to NZPA, the price paid was $11 million, which on appeal was in May 1995 confirmed by the OIC. (Why was it suppressed for almost five months if the price was already public?) The new company, to be called Aetna, will cover about 200,000 people with 23% to 24% of the market, compared with the largest, Southern Cross which has 65%. No jobs were lost immediately, but some may be lost later according to Aetna’s chief executive, Trevor Lynds. GPG said it would make a “handsome” profit from the sale – put at $4 million by Brierley himself in March 1995 – having paid $4.3 million for Medic Aid and injecting an unknown amount of additional funds. It acquired Medic Aid after a wild west skirmish reminiscent of the Roger Douglas years of the mid 1980’s – see the April 1994 decisions. (Press, “Guinness Peat sells Medic Aid for $11m”, 19/1/95, p.34; “GPG profit down; cash, bonus issues”, 13/3/95, p.42) A result of the takeover was soon seen in another way however. A Christchurch war veteran, Jack Hindin, complained in February 1995 that Aetna had raised his medical premiums 71%. He claimed the move was an attempt to get rid of older Medic Aid clients. He joined the scheme in August 1992 after the company advertised a special deal in RSA Review which gave them a waiver of their normal three months delay before claims are accepted. A “cruel twist” was that many of the elderly people could no longer get alternative cover from another insurer because of their age. Lynds explained it as trying to recoup from a mistake made by Medic Aid trying to gain market share. (Press, “Premium riles war veteran”, 25/2/95, p.5.) Sealed Air of the U.S.A. buys Trigon Industries The giant U.S. packaging manufacturer, Sealed Air Corporation, is buying out Aotearoa manufacturer Trigon Industries Ltd for an initially undisclosed sum through its subsidiary Sealed Air Holdings (NZ) Ltd. The sum was only disclosed in October 1996: “approximately $68 million“. Sealed Air invented bubble packaging and is the largest producer of the material in the world. Trigon was founded by its majority shareholders, chairman Bill Foreman and chief executive Diane Foreman, 25 years ago in Hamilton. It is one of the biggest suppliers of plastic packaging in Aotearoa. It manufactures plastic packaging and employs 730 people in Aotearoa, Australia, the U.S.A. and Europe. The Foremans will be employed as consultants for Trigon for the next five years. (Press, “US plastics giant buys Trigon packaging group”, 17/12/94, p.28.) This appears to be a clear case of takeover of a successful firm, rather than investment. Farmers Deka (Australia) buys 36 ha. in East Tamaki for distribution centre Farmers Deka Ltd, owned by Foodland Associated Ltd of Australia is buying 35.6310 hectares of land at 40 Ormiston Road, East Tamaki, Auckland, for a new 600,000 square foot distribution centre. The vendors will be sold back 14 hectares after subdivision. PepsiCo, owner of Pizza Hut, buys out Aotearoa franchise holders PepsiCo Inc, the owner of the Pizza Hut franchise, is buying out its Aotearoa franchise holders’ ownership of the local Pizza Hut chain, Pizza Restaurants (NZ) Ltd, for $17,075,000. Pizza Hut (NZ) Ltd, owned by PepsiCo, is now the owner. Pizza Hut NZ is “considering expanding the chain’s operations in New Zealand with home delivery and smaller outlets.” Fulton Hogan (U.K.) buys Husband Construction Fulton Hogan Holdings Ltd, 37.5% owned by Shell New Zealand Holdings Company Ltd is buying up Husband Construction Ltd, including 1.2 hectares of land. “The business of Husband being principally building bridges and stop banks is complementary to the road building business undertaken by Fulton.” Richina of China and the U.S.A. buys Mainzeal Group A U.S.A./China consortium gained approval this month to take control of construction and property development company Mainzeal Group Ltd for $24,492,368. The consortium consisted of Richina New Zealand Ltd, owned by Richina Equity Trust I of China, Anaconda Partners, L.P., owned by Junction Advisors Inc of the U.S.A., Chemical Asian Equity Associates, L.P., a limited partnership of which Chemical Banking Corporation of the U.S.A. is a partner, Tudor Global Trading Inc of the U.S.A., C.L. Heatley of Aotearoa, and Tappenden International Ltd of Aotearoa. The Consortium would have gained a 52% interest in Mainzeal, of which 32% came from General Accident insurance, and 13.6% from Menzies family interests. The Chemical Banking Corporation is a subsidiary of the Chemical Bank, the third largest bank in the U.S.. Junction Advisors owns shares in the Skellerup Group. (Press, “Agreement on Mainzeal Group sale lapses.”, 24/12/94, p.35.) Mainzeal is 50.2% owner of Mair Astley Holdings, a leather and venison company (Press, “Sir Allan to head Mair board again”, 9/05/95, p.41). The deal initially fell through, but was resurrected in March 1995, Richina entering into an agreement to purchase 50.95% of Mainzeal Group from two major shareholders, Sentry Investments and Hamana Enterprises, for 28 cents a share. The original deal was at 35 cents a share. (Press, “Conditional sale of 50.9% of Mainzeal”, 29/3/95, p.30.) The resurrection was a matter of some controversy. The Stock Exchange’s market surveillance panel came under fire for allowing it. An investment consultant, Brian Gaynor, said that the due diligence process under which Richina inspected Mainzeal’s books in 1994 prevented Richina from dealing in Mainzeal shares for at least a year. (This is to keep confidential information that could otherwise affect the share price. If such conditions were not enforced then companies could inspect other companies’ books on the pretence of a takeover, but then use the information to their advantage.) However the surveillance panel’s secretary, Philippe Leloir said they granted a waiver after seeing Mainzeal’s confidentiality agreements with Richina. One of the conditions would “prohibit dealing in the securities of the disclosing issuer, other than a sale agreed by the contract, for at least one year or until the information disclosed ceases to be relevant information, whichever is the later.” Another condition required the panel’s approval should Richina change the offer price. The Securities Commission is “seeking information” on the matter. (Press, “Mainzeal deal under fire”, 11/04/95, p.33.) OIC approval was given for the deal in April 1995 (see decisions of that month). SEA Group of Hong Kong given permission to take over Tasman Properties The sale of a controlling interest in Tasman Properties Ltd to the SEA group of companies (see November 1994) has some new twists this month. The November consents allowed SEA up to 49% of Tasman. SEA Holdings Ltd of Hong Kong now may acquire all of Tasman. “SEA wish to provide further support to Tasman as a stable shareholder by being able to acquire further shares if the need arises.” A holding company, Trans Tasman Properties Ltd has been set up, which has OIC approval to issue up to 94.65% of its shares to SEA Holdings Ltd and up to 40% to SEABIL (NZ) Ltd or any subsidiary of these companies. SEABIL (NZ) Ltd is owned 40% by the public and 60% by SEABIL (NZ) Holdings Ltd, which in turn is 70% owned by SEA Holdings Ltd and 30% by Brierley Investments Ltd. The structure is intended to give the minority shareholders in the SEABIL group the opportunity to invest in Tasman. In fact Trans Tasman has apparently ended up owned 40% by SEABIL and 60% by SEA Holdings (which is registered in Bermuda, though Hong Kong owned) (Press, “Seabil votes for Tas Prop deal”, 11/2/95, p.30). Trans Tasman now owns 35% of Tasman but a majority on its Board through a deal with 20.4% shareholder Grantham Mayo Van Otterloo (GMO). The remaining 44.6% of Tasman shares are held by the public. Tasman raised $115.8m from the issue of shares, of which $42.2m came from the SEA/SEABIL group, and the remainder from Tasman shareholders. McConnell Dowell Corporation immediately claimed $30.4m to settle their long running dispute over the Auckland Coopers and Lybrand tower. Meanwhile, the lines of ownership of the SEABIL group are changing. SEABIL (NZ) was 40% owned by the public and 60% by SEABIL Pacific, a joint venture between SEA Holdings (70%) and BIL (30%). BIL has raised that 30% shareholding to 48.9% in exchange for SEA getting the direct control of SEABIL (NZ) that SEABIL Pacific had. The attraction to Brierleys is that it increases its interest in SEABIL Pacific’s property developments in China, worth $60.92 million, and SEABIL Pacific’s $61.3 million in cash. SEA still has the option to buy SEABIL Pacific shares from BIL or subscribe to more shares. (Press, “Tasman Props recapitalisation completed”, 1/3/95, p.30; “Majority stake in Seabil (NZ) goes to SEA”, 2/3/95, p.36; “Seabil (NZ) looking for Tas Props growth”, 4/3/95, p.28.) Landcorp sells 220 ha. at Taupo to Singapore Government company for resort A land sale that created a national furore is reported this month. It is the sale by Landcorp Farming Ltd of 220 hectares of land at Taupo to Taupo Resort Investment Ltd, a subsidiary of Pidemco Land Ltd, owned by the Singapore Government for “approximately $4,500,000“. “It is Pidemco’s intention that the land will be developed into an integrated resort which will consist of an international standard hotel of 200-300 rooms, and 18 hotel golf course, villas, condominium units, a club house and other facilities.” The land is at Warewaka Point and Tauhara Station, and $30 million is said to be Pidemco’s budget for the project. The deal was signed in the most public way possible: between Jim Bolger and the Prime Minister of Singapore, Goh Chok Tong when he was visiting in November. It was predictably hailed by local Waikaremoana MP Roger McClay as “a tremendous boost for the local economy”. But his constituents were by no means unanimous in agreeing with him. The sale provoked a furious correspondence in the Taupo Times, and Ngati Tuwharetoa representatives objected strongly, saying they had lodged a claim on the land in October and should have had adequate opportunity to contest the sale. They called for compensation, perhaps by jobs at the hotel. The Prime Minister was invited to a hui called to discuss their claims to the land. The sale was strongly criticised by Alliance lands spokesperson, Frank Grover, saying it should remain part of the country’s conservation estate. (Taupo Times, “Hotel land deal raises concern”, 29/11/94; “Hui to discuss Wharewaka land sale”, 18/1/95, p.2). The land sold is described in the news media in different terms to the OIC consent. It is described in the above items as 241 hectares and 250 hectares respectively. Only 100-150 rooms are mentioned for the hotel. Perhaps most telling is the timing of this decision. The deal between the two Prime Ministers was signed in November – weeks before the OIC gave its consent on 15/12/94. Even the Prime Minister now treats the Commission with contempt. Erewhon Station sold to New Zealander and Australian The sale of the historic Canterbury high country station, Erewhon Station, is reported, for $1,700,000. It is 13,573 hectares of pastoral lease, and is owned through the company Stronecrubie Ltd. The new owners are a New Zealander and an Australian both of whom “have extensive experience in pastoral farming and related activities.” They will reside on the property and propose to develop it further as a “pastoral farming unit and at a later date consider the possibility of developing tourist activities on the property.” Kerikeri 1,605 ha. block with conservation values sold to U.S. resident In another land sale with clear conservation values, a 1,605 hectare block of rural land near Kerikeri is being sold to J.H. Robertson of the U.S.A. for an undisclosed sum. The farm was owned by Tepene Tablelands Ltd, which was owned by members of the Williams family for the E.O. Williams Trust.
All very touching and patronising, but not a word of explanation why it is necessary to sell the land into overseas ownership. Naturally the OIC does not question the apparent tension between conservation and bringing “marginal farmland to full production”. Neither will it check that any of these grand schemes will ever eventuate. CBS Forests and Evergreen Forest (U.S.A.) merge The messy takeover/merger of the interests of CBS Forests Ltd, Evergreen Forest Ltd, and various U.S. interests features this month. CBS (originally Carr Business Services) jumped into forestry in the middle of the boom in log prices, buying Westland forest from Tasman Forestry when Tasman was divesting itself of unwanted South Island forests. In July 1993, it sold perpetual cutting and replanting rights over its 2,300 hectare Westland pinus radiata forests to Carr for $8.1 million. At that time, Carr was 74.8% owned by South Pacific Forest Holdings, a private company two thirds owned by Sampersand, an Auckland investment company associated with John Carr, CBS’s managing director, and the Turner family of the Sleepyhead bedding group, and one third by Rural Equity Ltd, an Auckland-based forest investment manager controlled by Auckland merchant banker, DF Mainland (40%) and the Rendle family (40%). The three forestry blocks (Aratika and Ruatapu near Greymouth, and Hokitika) made Carr the second biggest Westland plantation forest owner behind Timberlands. Carr announced it would start felling mature trees immediately (Press, “Carr buys cutting rights”, 3/7/93). Announcement of the purchase caused Carr’s rarely-traded shares to rocket from 30c to a high of 280c, which caused concern to the Stock Exchange’s market surveillance panel, because the sale was conditional on finance and various approvals (Press, “Carr price concerns exchange”, 8/7/93). Carr announced that the cutting rights it had bought for $8.1 million were valued at $15.5 million and that it expected to make a $1.6 million profit in 1993 (Press, 3/8/93). In fact, its bottom line profit for the year ended December 1993 was $320,000, and its forests were valued at $20.3 million (Press, “CBS profit reflects change to forestry”, 31/3/94). Auckland sharebroker, Hendry Hay McIntosh, listed its disadvantages being a high debt level and distance from export ports (Press, “Forestry shares below analyst’s valuations”, 26/1/94). However CBS also saw itself as having a long term problem in not having a good mix of tree ages in its holdings. Its first attempt to remedy these problems was a takeover bid for the Opio Forestry Fund, which was described by one analyst as “cheeky”, undervaluing Opio (Press, “Carr Business launches bid for Opio Forestry Fund”, 27/10/93). Having failed to take over Opio, CBS announced that it was looking to acquire other forests (Press, “CBS abandons Opio takeover bid”, 22/4/94). Instead it led to a U.S. takeover and a controversial merger. By October 1994, the ownership of CBS was South Pacific Forest Holdings (Turner family) 52.26%, Rural Equity 16.03%, John Carr family interests 15.08% and French investment group Societe Generale (through SoGEN Funds Inc) 9.76% (Press, “CBS plans to spread shares”, 8/10/94, p.25). It had in its sights the acquisition of the 5,738 hectare Pouto Forest on North Kaipara Head, north of Auckland for $36 million which is approved in this month’s decisions. Owned by the Bombay Burmah Trading Corporation of India, through companies Forest Farm Holdings Ltd and Pouto Forest Farm Ltd, it was put on the market by its “longterm owners” in October 1993 and marketed by Bancorp. Only 2,300 hectares of its area is planted in radiata pine, due for harvest beginning in a year’s time (Press, “Forest owners ask for boom prices”, 29/1/94). To finance the acquisition, CBS organised a $50 million share issue to a U.S. firm, Xylem Investments, followed by a merger with Evergreen Forest Ltd. Xylem would end up with 62% of the merged company. (Press, “American fund to put $50m into CBS”, 1/12/94, p.38.) Xylem, according to information supplied by Evergreen, was a “Boston, US-based company whose sole business was equity investment in publicly-traded forest products companies.… Xylem’s involvement in the merged Evergreen/CBS company is in partnership with the Ohio Public Employees’ Retirement System.” (Press, “Evergreen rejects claims”, 16/12/94, p.24). Evergreen was also a child of the forestry boom. Floated in August 1993, its problem was that the forests it bought would not be ready for cutting until 2004. They were the 351 hectare Putawa Forest, Waingaro, 50km west of Hamilton; the 313 hectare Endean Road Forest, 15km west of Rotorua; and the 502 hectare West Ho Forest, 87km north of Gisborne (Press, “New forest company to float”, 7/8/93). It was therefore looking for some mature forests to pay its over-enthusiastic shareholders some dividends in the meantime: its share price had dropped from 100 cents at issue to 71 cents by November 1993 (Press, “Evergreen responds to price sag”, 24/11/93). It declared a loss of more than $900,000 for its first six months of operation, ending December 1993 (Press, 4/3/94). Evergreen’s shareholders were diverse, the main ones being the La Grouw family of Rotorua (owners of the Lockwood home group), which steadily raised its holding to 26% by December to ensure its own timber supplies (Press, “Evergreen cautious as La Grouw stake grows”, 8/12/94, p.38; “Last ditch meeting may resolve wrangle over Evergreen merger”, 20/12/94, p.39); and Noble Partners of Boston, 9.8% (Press, “US interest in Evergreen”, 5/2/94). A smaller overseas shareholding in Evergreen was held by a Missouri resident, Lionel Hastings, who objected strongly to the merger saying CBS Forests were “wheeler-dealers”, though he clearly had a similar opinion of Evergreen management as he advocated their replacement because of the company’s high overhead costs and the lack of investment by the directors in their own company (Press, “American acts to stop forest merger”, 29/11/94, p.25). Joe La Grouw moved in to support him saying, “In a nutshell, the proposal involves a $22 million company becoming a $90 million company with a controlling interest being American based. This is a reverse takeover which shareholders are being asked to approve on faith.” He asked for the support of other Evergreen shareholders in opposing the merger. (Press, “La Grouw calls for forest proxies”, 15/12/94, p.39.) The chief executive of Xylem, Stephen Hurley upped the stakes by declaring, prior to a meeting of CBS shareholders called to decide the issue, that “Evergreen Forests has the potential to become a $1 billion company owning up to 60,000 hectares of plantation forestry, based in New Zealand but listed in the United States.” (He apparently didn’t add “and controlled in the United States.”) “Xylem was looking at forest investments in New Zealand, Australia, South America, China and Russia. It saw in CBS and Evergreen an opportunity to build a middle-sized forest company based on New Zealand’s attractive plantation forests.” (Press, “Xylem chief outlines prospects for Evergreen”, 19/12/94, p.37.) As the noise level rose, Hurley proposed a stock bonus program to ensure early income to impatient shareholders, but La Grouw remained dubious, saying he remained to be convinced the merger was value for money. (Press, “Last ditch meeting may resolve wrangle over Evergreen merger”, 20/12/94, p.39.) In the end the merger was approved by the shareholders of both CBS (convincingly) and Evergreen (narrowly: 53.8% to 46.1%), with Hurley on the board of the new company (Press, “Evergreen shareholders approve CBS takeover”, 23/12/94, p.28). This leaves the company 65.03% owned by Xylem and the Public Employees Retirement System of Ohio, through the company XII/Ohio Pers Timber Equity Fund, with minor shareholdings by La Grouw, South Pacific Forest Holdings, Societe Generale Asset Management and SocGen Overseas Fund (France), and Noble Partners (U.S.A.). The formal approvals given by the OIC were for Evergreen Forest Ltd of the U.S.A. to issue 60,344,827 ordinary 50 cent shares to XII/Ohio Pers Timber Equity Fund in exchange for 34,482,758 ordinary 25 cent shares in CBS Forests Ltd. The latter shares had OIC approval to be issued by CBS Forests to XII for $50,000,000 (a premium of $1.20 per share). Finally the now 62% US-owned CBS Forests was given approval to buy the holding companies of the 5,738 hectare Pouto Forest on the North Kaipara Head, namely Forest Farm Holdings Ltd, and Pouto Forest Farm Ltd formerly owned by Bombay Burmah Trading Corporation of India for $36,000,000. Juken Nissho (Japan) buys 1,078 ha. Timatanga Station and land at Matawhero Juken Nissho Ltd, 85% owned by Juken Sangyo Co Ltd and 15% by Nissho Iwai Corporation, both of Japan, is buying the 1078 hectare Timatanga Station owned by Eastham Farms Ltd for afforestation purposes. It is also purchasing 29 hectares of “rural/industrial land” at Matawhero, Gisborne owned by “the Proprietors of Whangarei B5 and R.D.Rice“. The land is near to Juken’s mill site at Matawhero and has been bought to enable the mill to be expanded. In both cases the price was suppressed but were revealed in May 1995 after appeal to the OIC to be $1,300,000 in each case.
Internal restructuring: Bernard Matthews, Pacific Group, Serco, Tectoria
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