December 1995 decisions

December 1995 decisions

National Australia Bank takes control of BNZ Finance

Having bought the Bank of New Zealand, the biggest bank in Aotearoa, in 1992, the National Australia Bank Ltd is tidying up the BNZ’s most important subsidiary, BNZ Finance, which was 78.4% owned. NAB, through its subsidiary National Australia (1995) Ltd, is acquiring all of the remaining shares, which were listed on the stock exchange, for $314,220,000. In October, Ron Brierley’s Guinness Peat Group bought a 2.8% interest in BNZ Finance, probably at about 160 cents a share. It doubtless had an eye on the company’s unusually high cash reserves, from which it then asked for a cash handout of 70 to 80 cents a share. However it welcomed the NAB buyout at 197 cents, which became unconditional in January 1996. (Ref: NZ Herald, 21/10/95, “GPG snatches key stake in BNZ Finance: Bid to force capital repayment”; Press, 15/11/95, “GPG lauds review of capital”, p.30; Press, 14/12/95, “BNZ Finance bid approved”, p.34; Press, 12/1/96, “NAB bid final”, p.16.)

Helicopter Line buys Tourist Hotel Corporation hotels from U.S. owners

Three hotels owned by the U.S.-owned former state-owned Tourist Hotel Corporation of New Zealand Ltd (THC) are being sold to majority New Zealand ownership – but to a company which is still legally an overseas one. However, they will continue to be managed by the vendor, the South Pacific Hotel Corporation “group” which is owned by the Pritzker family of Chicago. The new owners are The Helicopter Line Ltd (THL) and its 50% owned associate, Tourism Milford Ltd (TML). The other half of TML is owned by Trojan Holdings Ltd. The OIC describes THL as being “a New Zealand public listed company with slightly in excess of 25% of its shares held by various overseas persons“, and TML only as being “of New Zealand”. Although the price was suppressed by the OIC, THL chairman Murray Valentine was more forthcoming when the deal was publicly announced three months before the OIC approval. He said the transaction would involve $40-45 million including working capital. It would be funded by debt and would be settled on 1 October: two months before it received OIC approval.

The current transaction was structured by South Pacific forming a subsidiary, Tourist Hotels Ltd which owns the three hotels. A 50/50 joint venture of THL and TML, Tourist Hotels Finance Ltd, then purchased Tourist Hotels Ltd.

After appeal to OIC, the official price was released in July 1996. $43,267,855 was paid by Tourist Hotels Ltd. Then Tourist Hotels Finance Ltd paid $13,283,928 for Tourist Hotels Ltd.

The deal involves three hotels:

• the Mount Cook hotel complex, which will be owned by TML;
• the Rotorua hotel, to be owned 50/50 by THL and TML;
• and the Waitomo hotel and caves operation to be owned by THL.

(Ref: Press, 2/9/95, “Helicopter Line buys into hotels”, p.24.)

The Tourist Hotel Corporation, which owned key hotels in strategic tourist venues throughout Aotearoa was sold to South Pacific Hotel Corporation in June 1990 for $73.85 million. Some of the THC’s hotels were sold shortly after purchase by Southern Pacific to other concerns. Of some controversy was the sale of their Wairakei golf course to Tokyo-based Japan Golf Systems. This exposed a genuinely racist strain of opposition to overseas ownership given it had already been sold overseas to the Pritzkers. Apparently approving of this reason for opposing its resale, the then Minister of Lands, Mr Tapsell, vetoed the sale in a desperate pre-election move. The veto was then overturned by the incoming National government on condition that it still be open to locals. As we commented in 1990:

“The whole episode neatly shows the hypocrisy of both parties on issues of foreign control:

1. The golf course had already been sold into foreign hands by the government, by the sale of its owner, the State Owned Enterprise, the Tourist Hotel Corporation, to a foreign (U.S.) buyer. That made clear the government’s objections to the sale were substantially racist rather than principled.
2. The government (and news media) made this stand on a relatively minor piece of property after selling billions of dollars of essential services and strategic industries into foreign ownership and control.
3. After making vaguely concerned noises about the increasing sales of rural land to foreign owners while in opposition, the National Party has acted hastily to make clear what its practical position is: slightly worse than the previous government.”

South Pacific say that the sale “represents a continuation of its policy to manage rather than own hotels in New Zealand”. Which raises a question about the original privatisation: if all that is being gained (assuming it is a gain) is better management, why wasn’t South Pacific simply contracted to manage the SOE’s hotels in the first place?

U.S. company takes over two vehicle suspension spring manufacturers

A subsidiary of Tenneco Automotive Corporation of the U.S.A., Monroe Springs (New Zealand) Ltd, is taking over two Aotearoa-based automotive suspension spring manufacturers. Motor Radiators (New Zealand) Ltd was part of the National Consolidated “Group” of Australia, and Federal Springs Holdings Ltd was part of the Skellerup “Group”. The price was initially suppressed but was released in July 1996 after appeal to the OIC: $12,201,182.

“The acquisition is part of a deal also involving a similar deal in Australia and is part of a strategy by Tenneco to expand into the Australasian market. Tenneco believes that the business being acquired will benefit from its global market synergies which will improve efficiency and access to international markets.”

And, we can predict, will eventually end manufacture of these products in Aotearoa.

Wilson and Horton and Australian Consolidated Press magazine joint venture

Two decisions originally suppressed show Wilson and Horton Ltd (“approximately 45% owned by interests associated with Independent Press Plc) and Australian Consolidated Press Ltd (a wholly owned subsidiary of Kerry Packer’s Publications and Broadcasting Ltd of Australia) setting up a 20/80 joint venture, New Zealand Consolidated Magazines Ltd, for a still suppressed amount. The intention was for the new company to own and run a number of the magazines published by the two parent companies: Metro, North and South, Women’s Day New Zealand, More, Australian Women’s Weekly, Fashion Quarterly, Next, New Zealand Home and Building, Your Home, Cleo, and Pacific Way, from ACP, and New Zealand Women’s Weekly and The Listener from Wilson and Horton. In December ACP received Commerce Commission clearance for the purchase of the two Wilson and Horton magazines on the grounds that the two “make up no more than 8% of the advertising market and advertisers would have options available to them if ACP refused them access or increased its prices”. It would “lead to considerable aggregation in the weekly women’s magazine market segment and some of the lifestyle magazine segment, but would not lead to ACP acquiring or strengthening a dominant position” (Press, 23/12/95, “Commission clears ACP magazine buy”, p.45). However, neither the outright purchase nor the joint venture appear to have proceeded. The decision was released in July 1996 only after appeal to the OIC.

Direct Capital Partners Ltd to issue further shares; gets retrospective consent

Direct Capital Partners Ltd, “a New Zealand public company which is approximately 40% owned by overseas institutional investors” (the OIC identifies it as being predominantly owned in Australia) has approval to issue up to a further 30,004,000 ordinary shares as part of a rights issue. Some of the purchasers may be overseas. The total price of the shares is $15,002,000. Direct Capital “undertakes the business of investing in non-listed New Zealand companies” and its first full year of business ended on 30 June. It is a budding Brierleys whose commodity is unlisted companies. During the six months to 31/12/95 it bought and sold shares in Sky City (Auckland Casino operator) at a net profit of $1.1 million, and in Blue Star Group (office products and equipment) at a profit of $2.2 million, contributing to a total profit of $3.446 million from an operational cash inflow of only $33,000 (Press, 8/3/96, “Direct Capital hopes for maiden div”, p.16). Direct Capital sold its 20% share of Blue Star to U.S. Office Products, giving the billion-dollar U.S. company 51% ownership (Press, 9/3/96, “US Office Products expanding”, p.31).

Applying for this consent obviously woke the OIC up to past misdemeanours. “In September 1994 Direct Capital made a public share offering which was subscribed for by various New Zealand and overseas parties primarily institutional investors. Consent was overlooked at the time of the public offering.” Consent has been given retrospectively.

Australian fund floated to invest in technology securities in the U.S.A.

Super Nova Techno Fund Ltd of Australia has approval to issue up to 80 million $1 redeemable ordinary shares for $80 million to persons “who may be overseas persons” and to carry on business in Aotearoa. “The shares are to be offered … to investors in New Zealand and Australia. The company is being established to invest in technology securities with the main focus being on the West Coast of the United States of America.”

Retrospective approvals to New Zealand Oil and Gas going back to 1981

Explorer New Zealand Oil and Gas Ltd, which is New Zealand listed but “approximately 30% owned by overseas persons primarily from Australia“, has been given retrospective consent for a number of previous share issues, going back as far as June 1981:

• to issue 500,000 ordinary 50 cent shares at a premium of 30 cents to “various Australian residents” for $400,000. NZOG states that “shares were issued in order to comply with the listing requirements of the Australian Stock Exchange.” The date of the issue is not given.
• to issue 12,500,000 ordinary 50 cent shares at a premium of 30 cents per share to institutional investors for $10,000,000 in order to “raise further working capital for NZOG’s exploration activities”. The date of the issue is not given.
• to issue 2,930,254 ordinary 50 cent shares to Otter Exploration NL and Otminex Pty Ltd for $1,465,127. These shares were issued “as partial consideration for shares acquired in Pan Pacific Petroleum NL of Australia. The date of the issue is not given.
• to set up subsidiary Petroleum Resources Ltd for $100. This occurred in December 1988 (!) “as part of a restructuring of NZOG’s New Zealand activities”.
• to set up subsidiary NZOG Nominees Ltd for $100. This occurred in June 1981 (!!) “as part of a restructuring of NZOG’s New Zealand activities”. (Note: this decision as initially released referred in part to Petroleum Resources and in part to NZOG Nominees Ltd and hence clearly had typographical errors. On querying the matter with the OIC, this was corrected to refer to NZOG Nominees Ltd throughout.)

(NZOG shares were selling at 38 cents in February 1996.)

In each case, “the consent of the Commission was overlooked at the time the shares were issued.” God-like, the OIC is infinitely forgiving!

Lease of Southdown land for TransAlta/Mercury Energy power station

Mercury Energy Ltd, the aggressive Auckland electricity supply company, has approval to lease two hectares of land at Southdown, Auckland to a joint venture between it and TransAlta Energy Corporation of Canada for $500,000 per year. The OIC says that

“In November 1992 consent was granted for the joint venture to build, own and operate a power station in Southdown, Auckland. Following feasibility studies a suitable property has been identified on which to construct the power station.”

That OIC decision was not released at the time, but two November 1992 decisions relevant to the matter were released in April 1996 after pointing out to the OIC that the whole business was public knowledge some time ago. The 1992 decisions allow TransAlta Energy Corporation, a wholly owned subsidiary of TransAlta Utilities Corporation of Canada to carry on business in Aotearoa, and to investigate, build and operate a gas-fired combined cycle power station in a 50/50 joint venture with the then Auckland Electric Power Board. The news media reported in 1994 that TransAlta had plans to build a 110MW gas-fired power station at the former Southdown freezing works in south Auckland with Mercury Energy (e.g. Press, 5/12/94, “TransAlta clears first fence in power play”, p.37; 20/11/94, “Canadian utility eyes Wellington”, p.41).

TransAlta is based in Calgary and has over $NZ5 billion in assets world-wide. It has controlling interests in both Wellington electricity companies, Capital Power and EnergyDirect. It is also seeking the right to build a gas-fired power station at Stratford, Taranaki, with Fletcher Challenge.

Gulf Resources in joint venture to subdivide 135 hectares on Waiheke Island

In two decisions initially almost completely suppressed, Gulf Resources Pacific Ltd has been given approval to set up a joint venture with an Aotearoa property developer, Mr Burmester, to acquire and then subdivide 135 hectares of land on Waiheke Island into “a minimum of 38 rural/residential lots”. The land, which was bought for $5 million, is “currently largely unimproved bare land” and the development “will result in improved utilisation” of it. It is being bought from Matiatia Estate Ltd and Owhanake Estate Ltd. Mr Burmester “has undertaken a number of similar developments on the Coromandel and in the Tasman Bay.” Gulf Resources at the time of the decision was 91% owned by Gulf United States of America Corporation of the U.S.A. The decision was released in July 1996 only after appeal to the OIC.

Carter Holt Harvey buys more land, some in joint ventures, including Shell

Carter Holt Harvey Ltd, 51% owned by International Paper Products of the U.S.A., has approval to buy further land and forestry rights for forestry development. Some are in significant joint ventures:

• Carter Holt Harvey Forests Ltd, 51% owned by International Paper Products and Te Ahuroa Investments Ltd (ownership unspecified) is acquiring long term forestry rights over land in the King Country (South Auckland): an “approximate” 33 year right over 54 hectares of land at Oruanui near Taupo at $4,078 per year from Te Ahuroa Investments, and an “approximate” 34 year right over 556 hectares of land near Taumarunui at $72,000 per year from The properties of Te Uranga B2 Block. The latter has “difficult access and scrub infestation” and is part of a 2,381 hectare farm.
• Mangakahia Forest Ltd, which is 50% owned by Shell Forestry Ltd (U.K.) and 50% (ultimately) by Carter Holt Harvey Ltd, already has 22,436 hectares for afforestation in the Dargaville area in Northland. It was given approval in principle to acquire 45,000 hectares in 1983, and has a target of 26,000 hectares in and around Dargaville. It is acquiring a further two blocks of 291 hectares and 134 hectares west of Kaihu for $480,000 and $280,400 respectively. The land is currently used for arable farming but “conditions prevailing in the sheep and beef industry make the property uneconomic” for this purpose.
• Carter Holt Harvey is also buying two blocks of land in the King Country in its own right. One is “approximately” 748 hectares, for $1,660,000; the other is “approximately” 489 hectares for $1,107,500.

Telecom acquires four more cell sites

Telecom Corporation New Zealand Ltd (U.S.A.) is adding to the many small pieces of land it owns, leases or has easements over around the country for cellphone transmitter sites to improve its coverage. This month it is

• leasing 80 square metres of land at Cheviot, Canterbury;
• buying approximately 1,225 square metres of land with various easements at Waverley, Wellington;
• acquiring an easement over an unstated area of land at Wanaka, Otago;
• and buying approximately 50 square metres of land with various easements at Murchison, Nelson.

In all cases the amount paid was suppressed. Most are acquired through subsidiary Telecom Mobile Communications Ltd.

In February 1998 the price for two was released, although a “premium” was still suppressed:

• $12,000 plus premium for the one at Waverley; and
• $5,000 plus premium for the easement at Wanaka.

Other rural land sales

In other rural land sales:

• Gourmet Paprika Ltd, a company owned 25% each by two residents of the Netherlands, 33.4% by a New Zealander, and 16.6% by a New Zealander resident in the U.S.A., has approval to buy six hectares of market gardening land at Woodhill, Helensville, Auckland for an initially suppressed amount. After appeal to the OIC, in July 1996 the amount was revealed as $400,000. The land is owned by the largest shareholder in the company, P. Martin, who wants to put the money back into the company. The company “proposes to erect a three hectare greenhouse and packing shed” on the land. The OIC says that in “June 1994 Gourmet Paprika Ltd received consent to establish a pepper production business in New Zealand utilising lease land”. The company then had 1,000 shares owned by Paul Martin of Aotearoa (334), and Adri Botman and Ton Zwetsloof of the Netherlands (333 each).
• Inghams Enterprises New Zealand Pty Ltd of Australia has approval to acquire 59 hectares of land for manufacturing at Waitoa, Waikato. The price was released in July 1996 after appeal to the OIC ($2,300,000) and the reason for the purchase: “Inghams wish to extend their present processing plant at Waitoa. Inghams view the expansion as a necessary part of its investment in the poultry industry in New Zealand in which they have expertise. Inghams estimate that the expansion of the plant will provide for employment of a further 30 people.”
• Two large properties near Taumarunui, King Country, South Auckland are being merged into Hong Kong ownership. Maraekowhai Station, which is on approximately 2,031 hectares of land, is owned 89% by Maraekowhai Australian Unit Trust which is not Australian, but controlled by Mr W. Peters, a New Zealand citizen resident in Hong Kong, 10% by Mr G. Webster of Aotearoa, and 0.5% each by two other New Zealanders. Webster also owns Koiro Farms (1980) Ltd which owns the nearby 1,250 hectare property and is selling it to Maraekowhai Station Ltd for $2,423,000. This will result in “economies of scale” and “it is intended to upstock the property considerably and to introduce a more comprehensive fertiliser programme which will result in a more productive use of the property.”
• The busy Deborah Miller of Brookfields has organised two more land sales at Paparangi, Wanganui to residents of Taiwan (though they have New Zealand permanent resident status). The first is of 20 hectares for $78,000 to Gold Tree Company Ltd and the second is of 32 hectares for $123,240 to Verdancy Ltd. Each of the companies is owned in Taiwan. As usual, the land will be used for forestry, but all expertise supplied by local managers. See last month for the previous such sales.
• Two U.K. residents who “have been granted New Zealand permanent residency and intend to reside on the property on a permanent basis” have approval to buy six hectares of land at Maraekakaho, Hastings, Hawkes Bay for $200,000.
• Two citizens of South Africa who have been granted permanent residence in Aotearoa and “are in the process of moving” here are buying half of a company, SRS Dairy Developments Company Ltd, which owns “approximately” 282 hectares of land near Napier, for $1,225,000. The other half is owned by two New Zealanders. “The conversion of the property from its present dry stock operation to that of dairying will result in a better utilisation of the property.”
• Sang-Ryoung Yoon of Korea has approval to buy four hectares of land at Arthurs Point, Queenstown for $410,000 “to develop a hotel or condominium style tourist accommodation on part of the property”. Relates the OIC:

“It is envisaged that the development would include 30 to 40 units probably to be utilised on a time-share style basis. Mr Yoon’s intention is to target the marketing of the units to Korean people and claims that the development will enhance the rapidly growing number of Korean visitors to New Zealand. The Commission is further advised that it is proposed to develop the remainder of the land into a residential subdivision.”

• The Southland Plantation Forest Company of New Zealand Ltd which is owned by new Oji Paper Company Ltd and Itochu Ltd both of Japan is buying two blocks of land in Southland. One, 259 hectares in the Otautau District, is being purchased for $550,000, the other, 422 hectares at Tokanui is for $765,000. Both are for forestry development, which will be carried out by South Wood Export Ltd. South Wood is the manager of a large number of forestry developments for Southland Plantation Forest Company, but also owns other forestry developments in its own right. It is owned 66.6% by MK Hunt Foundation Ltd of Aotearoa and 33.3% by C Itoh and Company of Japan.

Internal restructurings

• Woodlot Farm Ltd, which is a Singapore/Indonesia owned company involved in a golf course and housing development near Queenstown, Otago, is being taken over by one of its shareholders, Shotover Golf Estate Ltd for $5,624,046. Woodlot was owned 28% by P. Fong of Singapore, 28% by D. Salman of Indonesia, 20% by Shotover, 12% by D. and E. Broomfield of Aotearoa, and 12% by B. Washer of Aotearoa. Shotover is owned 35%, 35%, 15%, 15% by the same parties. It owns “approximately” 81 hectares of land near Queenstown.

The shareholding has changed since we last reported on the company in September 1993: Peter Fong of Singapore (28 per cent), Walter Jared Frost and David Salman of Indonesia (28 per cent), Loka Manya Prawiro of Indonesia (20 per cent), David Benjamin and E.H. Broomfield of Aotearoa (12 per cent), B. E. Washer of Aotearoa (12 per cent).

In August 1992 we reported that the company had plans to acquire various pieces of land near Queenstown to develop a 9 hole “golf leisure park and village” having abandoned plans for an 18 hole golf course. “It is planned to build 160 villas within the park which will be sold locally and overseas.”

• Munich Reinsurance Group of Germany is shuffling the business of Munich Reinsurance Company: it will now be owned by Munich Reinsurance Company of Australia Ltd. The Australia-based subsidiary will “acquire the net life assets” and commence business. The valuation was initially suppressed but was released in July 1996 after appeal to the OIC: $2,372,390.

• Dynasty Pacific Corporation Ltd, ultimately owned by the Tan Family Development Trust, the Dynasty Trust, and Pang Yoke Min, of Singapore, has approval to take over City Life Holdings (Wellington) Ltd for $10,014,369. City Life is ultimately owned by the New Zealand Land Trust, the beneficiaries of which are associated with Messrs Tang (sic: probably a misprint for Tan), Sy, Tang and Pong of Singapore, and George Horsburgh of Aotearoa. It is part of a maze of related property companies which is in some trouble (see for example our commentary on the June, July and September 1995 decisions). In September, the beneficiaries of the New Zealand Land Trust were identified as 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.