May 2000 decisions
This is an exceptional month for the size and importance of many of the decisions. It includes the proposed Brierley sale of its Sealords interest with a unique insight into how the OIC works and the foreign investment policies of the new government; the $5 billion sale of Fletcher Paper, one of the biggest overseas sales ever, and a forerunner of sales of the remainder of Fletcher Challenge; a major expansion of Canadian CanWest’s radio interests, with some political undertones; the buyout of the remainder of one of the largest wine producers and distributors in Aotearoa, Nobilo Wines; and the entry of Belgian/Canadian transnational Imerys (again carrying large political baggage) as a result of the dismantling of Ceramco. In addition there are transnational educators and organic farmers, the sale of farms near Manapouri, and more examples of the increasing entry of agribusiness into dairying.
No less than six applications were refused this month. In all cases, most of the details of the applications were suppressed. However, all were with regard to the activity of “Marine Fishing”, and all were refused on the grounds that “it was not considered to be in the national interest”. Three would have raised the overseas ownership from 30% to 50%; another three would have raised the overseas ownership from 60% to 100%. Only in the latter three cases was the applicant “demonstrating financial commitment towards the investment”. One other small piece of information was permitted to seep out: one of the last three applicants was from Japan.
These turn out to be the applications of three unidentified companies seeking approval to buy the half of the Sealord Group owned by Brierley Investments Ltd (BIL). Sealord is the largest fishing company in Aotearoa, one of the world’s ten largest seafood companies, and has subsidiaries, joint ventures or alliances in 16 countries. It fishes in “the waters of South America, the African continent, Indian and Pacific Ocean, the Antarctic, Australia, as well as New Zealand” (Press, 7/09/00, “Size places Sealord in top league”, p.14). In Aotearoa it owns 149,037 tonnes, or 23%, of the total fish quota in various species. The main species is Hoki, but it also owns quota for the slow-growing and highly valued Orange Roughy.
The latter three applications presumably refer to their purchase of BIL’s share (it owns its 50% through a shelf company called Basuto Investments Ltd), and the first three to the overseas ownership that would then exist in Sealords itself. The other half of Sealord is owned by the Treaty of Waitangi Fisheries Commission, through its company Te Waka Unua Ltd. (In fact the ownership of Sealord is more convoluted even than that: Basuto and Te Waka Unua each own half of another company, Te Ika Paewai Limited; Te Ika Paewai owns all but one share of Sealord; that share is owned by Basuto. Some smart corporate lawyer would be able to explain why.)
The refusals were the end result of a little publicised change in the fisheries law in 1999 by the previous, National led government, with the support of Labour; a devious piece of last minute work by the outgoing government; a significant change in attitude by the new Labour/Alliance government; and intense lobbying by fishing and other interests to retain the fishing quota owned by Sealords in New Zealand hands. Because of the importance of the events – both to the fishing industry, and to the way in which OIC applications will be treated under the new Government – CAFCA wrote to the OIC, Ministry of Fisheries and Treasurer asking for the full files on these sales. The material below draws on these files, which consist of several hundred pages, although considerable information continues to be suppressed from them. Information suppressed includes most legal advice, and all identification of the applicant companies and some of the objectors to the sale.
While the identities of the applicant companies have not been revealed officially, news reports name Irvin and Johnson, the largest frozen food company in South Africa, and Nissui (Nippon Suisan Kaisha), Japan’s largest fishing company (e.g. Press, 20/6/00, “Commission may bid for Sealord”, p.13). A number of local consortia also made bids, as will be seen below, and the Treaty of Waitangi Fisheries Commission also had pre-emptive right over the shares.
The Fisheries Act 1996 disallows more than 24.9% of a quota-owning company being overseas owned unless exempted by the relevant Ministers. The criteria for exemption are very similar to those for sales of land to foreign owners. It puts the administration of applications in the hands of the OIC.
The 1996 Act was originally tighter in that such an exemption could not be given for a company more than 40% overseas owned, but was never put into force. In 1999 the National coalition government amended the Act in the Fisheries Act 1996 Amendment Bill, which was passed in September 1999, not long before Parliament broke up for the election. In an astounding display of either ignorance or wanton negligence, almost the entire Parliament voted in favour of the Bill, the only exception being the Alliance. The tone of the debate on the overseas ownership provision was self-congratulatory: none other than Labour spokesperson, Jim Sutton, had proposed it. Even Green Party co-leader, Jeannette Fitzsimons (then still part of the Alliance), seemed not to oppose the change in principle, though she rightly opposed it on the grounds that the OIC would fatally undermine it. As she said in the Third Reading debate, reported in Hansard (2/9/99):
I commend Jim Sutton for his member’s Bill to implement, finally, the clauses of the 1996 Bill to restrict foreign ownership of fishing quota. We worked through the issues involved with that quite well in the select committee, and came to some reasonably good conclusions. But it may yet be a rather hollow achievement because the Overseas Investment Commission is to oversee the implementation of this part of the Bill on the same basis that it does for land – another scarce and important natural resource. Therefore we have put in special conditions relating to ownership of fish quota that do not apply to, for example, just investing in a business. Nevertheless, the Overseas Investment Commission has turned down only one application in the last 6-month period, while approving 150 sales of land, and it is pretty well known that it is not difficult to get permission from the Overseas Investment Commission to invest in New Zealand, to buy land and to buy businesses in New Zealand.
The new legislation took effect on 1 October 1999 and the government delegated the OIC authority to approve overseas sales of fishing quota on 19 November 1999, just days before the government was voted out of office. The instructions to the OIC specified that all applications meeting the criteria “should be approved unless good reason exists to refuse them”. In March 2000, the responsible Minister, John Luxton (by then a mere opposition MP) claimed in Parliament that the instructions “were set in place to cover the interregnum period of the election” (Hansard, 30/3/00). However, both the OIC itself and the new Treasurer, Michael Cullen strongly disputed that interpretation, the OIC Secretary in a tone of some anxiety: “I was concerned to hear in Parliament today … I am at a loss to know the basis for Mr Luxton’s comment.” (letter from the OIC to the Treasurer, Minister for Land Information and Minister of Fisheries, 30/3/00; and Hansard 30/3/00).
It is important to appreciate that the present applications were judged by the OIC twice: first under the Overseas Investment Act, and second under the Fisheries Act. What is not clear from the present applications is that the OIC had apparently already approved them under the Overseas Investment Act. It was the evaluation of the applications under Fisheries Act that led to their refusal.
A further technicality that played an important part in the considerations is that the crucial “national interest” criteria under the Fisheries Act apply only to the ownership of fishing quota, not to what the company owning them might do. The criteria encompass whether the change of ownership of the quota would result in job creation, new technology or business skills, new export markets, added market competition, greater efficiency or productivity, additional investment for significant development, or increased processing in New Zealand of seafood. It does not matter that the company’s business plans would or would not result in those desiderata unless it was as a result of acquiring the quota. More of this below.
BIL announced in February that it was looking for a buyer for its half share of Sealord, and that interest was being sought from overseas as well as from within Aotearoa (Press, 5/2/00, “Brierley seeks buyer for 50% stake in Sealord Group”, p.21). Deutsche Bank was given the job of organising the sale.
A number of local bidders lined up. One was a joint venture formed for the purpose, New Zealand Seafood Investments Ltd, equally owned by Sanford and Amaltal Corporation. Amaltal is in turn equally owned by Amalgamated Marketing, a subsidiary of Amalgamated Dairies and Talley’s Fisheries (Press, 11/3/00, “Sealord application”, p.28). The Treaty Tribes Coalition also tried to make a bid, its chairman, Harry Mikaere, expressing concern at it being sold overseas.
The Treaty of Waitangi Fisheries Commission also had a pre-emptive right to buy BIL’s stake, but indicated it preferred to have a partner, possibly from overseas. As matters slowly progressed, that right expired. However, Sir Graham Latimer, on behalf of the New Zealand Maori Council, wrote to the Ministers of Fisheries and Maori Affairs and the Attorney-General asking that the Treaty of Waitangi Fisheries Commission be required to purchase BIL’s share in Sealords and hold it in trust for all Maori until eventual allocation of the Commission’s assets. Minister of Fisheries, Pete Hodgson, reflecting his ministry’s advice, commented “Sir Graham draws a long raku” (letter to Minister of Fisheries from Chief Executive, Ministry of Fisheries, 18/2/00).
As it became apparent that a number of the interested buyers were from overseas – BIL indicated it had “about five buyers, local and overseas” – intensive lobbying broke out both within government circles and by New Zealand fishing interests. Seafood Consortium Ltd, not a bidder itself, put full-page advertisements in daily newspapers around the country, calling for the government to prevent the BIL-owned half being sold overseas. “If a New Zealand company wants to export fish to Japan they have to pay huge duty, often over 50%. If a New Zealand company wants to export to South Africa we face duties of up to 25%. The South Africans are currently proposing a total ban on foreign ownership. Why then should we allow foreigners to own quota when they prevent fish caught by New Zealanders being freely sold on their domestic markets? This creates an anomaly that could force other New Zealand companies to sell their quota to foreign interests in order to remain competitive.” (Press, 29/4/00, “An Open Letter to New Zealanders”, p.32.) Seafood Consortium Ltd was formed in 1995 and controls some 25% of New Zealand fish quota. It includes Independent Fisheries Ltd, United Fisheries Ltd, Ngai Tahu Fisheries Ltd, Deep Cove Fisheries Ltd, and Tainui-owned Raukura Moana Fisheries Ltd (Press, 2/5/00, “Call to buy Sealord stake”, p.4; letter to OIC, 27/4/00).
BIL’s announcement set in train heated lobbying of the government by New Zealand fishing interests, Maori, other MPs, lobbyists, and concerned citizens. The OIC resented this. In a letter to the Treasurer on 28/2/00, the OIC secretary Stephen Dawe took the unusual step of warning him not to listen. In response to one unnamed objector who questioned the OIC’s legal right to make decisions on the case, and who complained that the delegation of authority from the Minister to the OIC “removed his ability to directly lobby MPs prior to the exercise of ministerial powers under the Fisheries Act”, Dawe wrote:
“As noted in our post-election briefing paper there are significant risks to Ministers if MPs are lobbied. There is a strong risk that considerations other than the statutory ones will be taken into account in making decisions. This would then make such decisions open to judicial review. This risk is particularly so when the lobbyist has a pecuniary interest in the outcome of the decision. The more traditional role for Ministers is to decide frameworks and set policy – not to be involved in individual application decisions. The framework for allowing foreign ownership of fishing quota is set in the legislation.”
In other words, his view was that such decisions have become purely bureaucratic ones, outside the influence of normal political processes. But as will be seen, the lobbying continued unabated.
In the same letter, Dawe revealed that he had told BIL in January that permission for “another foreigner” (BIL is “around 70% foreign owned”) to buy their share, “in principle” could be granted, so long as the criteria in the legislation were met. The government was, deliberately or not, set up for maximum damage if the applications were not approved.
What has not become publicly apparent in the fuss over the refusal of the transfer of fishing quota was that in March, the Treasurer (Michael Cullen) and Minister of Land Information (Paul Swain) agreed to the sale to any of three overseas companies, under the Overseas Investment Act. It included seven hectares of freehold land in Pelorus Sound, Marlborough adjoining the Sounds Foreshore Reserve. As noted above, the sale of the quota required a separate approval under the Fisheries Act. In a letter dated 23 March 2000, the two Ministers took the OIC’s advice in overriding objections that the sale was, for various reasons, not in the national interest.
The objections came from a number of parties. The OIC was not swayed: it informed the Ministers that “our conclusion is that the issues raised do not materially alter our view about whether the applications … are in the national interest and that we still recommend that the applications should be approved.” It is instructive to see what the OIC regards as valid arguments regarding what is the national interest.
The OIC reports four substantive issues that were raised by objectors at this stage. (We have no way of knowing whether these are a fair summary of the objections raised.)
1. The New Zealand fishing resource is a taonga or treasure. As the OIC comments, this “raises more generally obligations in relation to the Treaty of Waitangi”. But, it points out, the Overseas Investment Act and its regulations lay down no requirements regarding the Treaty or Maori. While it recognises a special status for wahi tapu areas, their protection and that of Maori land are the responsibility of other legislation, not the OIC. As far as fisheries are concerned, the “nurturing of the fishing resources occurs via the operation of the quota management system, and, in particular the determination of total allowable catch rather than in relation to who owns the quota”. In other words, the OIC doesn’t think that who owns the resource makes any difference to its conservation: at that point it is simply “a private property right”. The total allowable catch system solves all such problems. Obligations to Maori have been addressed “in the context of the Treaty of Waitangi (Fisheries Claims) Act 1992. Among other things that Act explicitly acknowledges the existence of the Sealord joint-venture between Maori and BIL. It also indicates in section 5(b) of that Act that Parliament was supportive of foreign interests taking a 50% share in the joint-venture.”
This highlights the necessity to consider whether Treaty of Waitangi obligations should be part of national interest criteria for both investment and fishing quota.
2. The company buying the assets should come “from a country that has a similar tariff regime to ours for the importation of our products.” The point being made is that some countries have substantial tariffs on seafood imports, where Aotearoa does not. That means that an overseas owner from such countries gets both preferential (low tariff) entry to their home market, and uncontrolled access to the New Zealand market in competition with the local fishing industry, undermining the local industry on both counts – using its own fish. The OIC replies that is not necessarily so, because the overseas owner is not necessarily selling to their home market. Anyway, while “the development of new export markets or increased export market access for New Zealand exports” is a criterion, the tariff regime of their home country is not. Further, “the concept of taking into account reciprocal tariff arrangements in the host country of the applicant … has not been articulated as a policy platform of the Government”, at least in instructions to the OIC.
At this point, rather desperately, the OIC pulls out the wild card of the WTO and other trade agreements: “It is also possible that favouring applicants from one country over another would breach New Zealand’s international obligations to the OECD, under the General Agreement on Trade in Services, within APEC and under bi-lateral Investment Promotion and Protection Agreements, to the concept of ‘Most Favoured Nation’ treatment. That concept requires New Zealand to treat investors from any country in the same way as it treats investors from any other country.” Never mind that neither the OECD nor APEC are binding, that the General Agreement on Trade in Services (part of the WTO) does not apply to fishing, and that it is not stated that any bilateral agreement actually applies to any of the cases at issue.
This reveals how the OIC bureaucracy is – in this case quite improperly – using international trade and investment agreements to resist change to the investment regime.
But it also shows a crucial weakness in the “development of new export markets” criterion. Given the highly protected nature of some overseas markets, if an overseas company selling to its home market has privileged access avoiding that protection, it can guarantee “export” development of its home market and will romp home on this criterion. So this criterion encourages economic powers to maintain high tariffs and use foreign investment to take over the resources of other countries such as Aotearoa.
3. Sealord should remain in New Zealand ownership. The OIC rightly points out that since BIL is an overseas company, selling its share to another overseas company will make no difference to Sealord’s 50/50 Aotearoa/overseas ownership status. However, it sees no problem with the current 50/50 arrangement, nor even with the Treaty of Waitangi Fisheries Commission selling its share on top of that: that is up to the Fisheries Commission, or to Sealord itself in its constitution. So, the OIC says, this issue is not relevant to the current case.
4. An overseas company should form part of a New Zealand led consortium. The OIC notes that Sealord is already run as a joint venture. That misses the point that BIL should be replaced by a consortium. However, the OIC says, there is no government policy that requires joint venture arrangements, and it is not among the criteria. Hence it is not relevant to the decision.
Having approved the applications under the Overseas Investment regulations, the next hurdle was the Fisheries Act criteria. By 1 May, the OIC considered it had finished processing the applications and sent them to the Ministry of Fisheries for comment.
The reply from the Ministry of Fisheries was remarkable. Though almost all of the material has been suppressed by the OIC in its release to CAFCA, the heart of it was to “question the good character of the persons controlling” at least some of the companies (file notes by Stephen Dawe, 4/5/00). For any overseas investment, individuals controlling the investor must be of “good character”.
In one case the Ministry of Fisheries provided evidence that
“subsidiaries in New Zealand have committed a number of fisheries related offences in New Zealand. Although most of the offences were technical nature [sic] there was one substantive case where [suppressed] pleaded guilty and received a conviction with discharge and the vessel was forfeit.”
Dawe’s response was to put the matters to the fishing company’s lawyers. He accepted their response that they were mainly minor matters or very old. With regard to the forfeited vessel, he read the court’s judgement and noted that there was no intention to commit the offences: they “arose out of inadvertence or inattention etc that has now been remedied”. He also noted that some of the directors had changed since the offence. The lawyers also contained “a statement attributed to [suppressed] at the Ministry of Fisheries commenting about [suppressed] good compliance record and stating that directors and senior management are beyond reproach in terms of Fisheries Act compliance.” He noted that the Ministry agreed that the company should have its exemption approved to acquire the share of Sealord. Accordingly, he did not change his mind that this company’s applications should be approved. One wonders how seriously the Ministry of Fisheries takes its own fisheries laws, and what it would take for the OIC to judge an investor to be not of good character.
In another case, the Ministry of Fisheries
“came into possession of a video tape and a number of documents that showed that during the [line suppressed] operating in the New Zealand exclusive economic zone (EEZ). The papers showed that this [words suppressed] was carried out at the express orders of [suppressed]… The Ministry of Fisheries [words suppressed] and senior officials of the Ministry of Fisheries presented evidence. [words suppressed] officially warned [suppressed] and banned [suppressed] from operating in New Zealand waters
The Ministry of Fisheries sees [words suppressed] as the most serious threat to the integrity of the New Zealand EEZ and the quota management system due to the huge quantities involved. This incident raises questions about the desirability of having this company operating in New Zealand.
Again, Dawe’s response was to meet with lawyers and representatives of the company, including the President, Chief Financial Officer, and Global Marketing Manager. They acknowledged the incident occurred, but said the OIC needed to know how the company operated: subsidiaries have operational independence from the parent company. The fishing vessel in question was not actually owned, but chartered. The company’s spokesman had given “a personal undertaking that [suppressed] would act with complete integrity in their New Zealand fishing operations”. The spokesman said they were a “good company with a good reputation”, and “[suppressed] was one of the finest, ethical, trustworthy [suppressed] individuals he had ever come across”.
Dawe was impressed by (and reproduced) one of the company’s philosophies (but insufficiently impressed to release it to allow us to read it). After some legal discussion he “remained satisfied that … the individuals controlling [suppressed] of good character and that the applications involving [suppressed] should be approved.”
While much of the legal argument leading to this conclusion was suppressed, it may have been at least partly based on the loophole that “good character” applies only to “natural persons” (real people as opposed to “legal persons” such as companies). A company can break the law repeatedly and still not be caught by the “good character” provision.
Meanwhile, other objections had been flowing – and continued to flow – into both the Ministers and the OIC’s offices, and the OIC was methodically rejecting them. For example:
· Former New Zealand First MP Deborah Morris, now working as “Government Relations Manager” for PR firm, Communications Trumps, opposed the applications. Her information on the applications came from a [name suppressed] Sunday newspaper. She cited the “distinct commercial advantage” the overseas companies have in the bidding process because “they do not pay tax, ACC levies or GST when they fish our waters – therefore their bids could be wildly inflated. There is a real issue here re: tariffs too. [Suppressed] companies, for example, can take their NZ catch and sell it into Japan as local product therefore avoiding the kinds of tariffs NZ companies face in Japan.” The result would be to “severely undermine the fishing industry here – and all the jobs that go with it.” (Note that the OIC suppressed information coming from public sources, namely a Sunday newspaper. It is not clear whom Morris was representing in this letter.)
· Labour MP Damien O’Connor noted he had raised the issue with Caucus and with Michael Cullen directly. He considered that the Fisheries Act intended that ownership of quota should remain with companies with less than 25% foreign ownership and control. The BIL ownership was “clearly an anomaly”. He believed “passionately in the need to retain control of sovereign assets, such as the right to exploit our fish stocks in the hands of New Zealanders. Unlike land that can never be physically taken from our shores, the fish can be caught, processed and sold without any direct benefits to New Zealanders. A situation like that is simply unacceptable.” It was an issue that will “clearly distinguish us from the previous National Government and one where we should make a stand and ensure ownership remains with New Zealanders.”
· The New Zealand Recreational Fishing Council considered that the Sealord Group “was a positive influence in the sustainable management of the New Zealand fishery”. The Council wrote that “the public did not allocate these quotas for the advantage of foreign owned companies many of which are based in countries that subsidise their fishing fleets”. It cited trade barriers and high tariffs against New Zealand fish exporters, and alleged a lack of sustainable harvesting and management philosophies in the foreign companies. Once sold overseas, quota will not be returned. It opposed the sales.
· The Seafood Consortium Ltd (see above) opposed the sale because of the large amount of quota held by Sealord, whose sale overseas would “seriously alter the dynamics of the seafood industry in New Zealand” through loss of export earnings and less sustainable harvest practices. They also were concerned that foreign companies would be subsidised by their home countries, and at the unfair effect of tariffs and trade barriers. “This will produce a spiral effect with more and more of our nation’s fisheries resources passing into foreign ownership”. They wrote to the OIC, but also promised meetings with key Ministers.
· Barry Wilson, lawyer, government-appointed member of the New Zealand Fishing Industry Board, member of the Fisheries Task Force 1991, and chair of the Rock Lobster Steering Committee, wrote a detailed, ten-page submission opposing the sale to any foreign owner. He emphasised that he was not opposed to foreign investment as such: he currently acts for Stagecoach in New Zealand as well as other overseas companies. But he considered foreign investment was appropriate only in areas of the economy where the investment can be replicated, where a startup is involved, or where resources or capital are not adequate. But it was clear to him that “none of these considerations would apply in this case”. He outlined the complexity of the industry. He raised the possibility that a foreign owner would take the processing and marketing knowledge of the industry and use it elsewhere, where labour and assets are cheaper, catches are unrestricted, and markets closer, rather than “run its New Zealand investment to full capacity”. We lose control of the fishery and knowledge of how to run it. He considered the criteria in turn, answering each time that they could not be satisfied.
Again, the OIC’s responses were revealing. A number of the common objections were answered in an internal OIC memo dated 20 April 2000. They include the four issues dealt with under the Overseas Investment Act (summarised above). We summarise some of the others shortly. Though the memo predates some of the submissions, it anticipates many of their arguments.
All the submissions were annotated with hand-written comments. For example, the OIC wrote that Barry Wilson “appears to close eyes to possibility of criteria being met in any case” [sic], in response to his criticism of any foreign investment in the fishing industry. In response to his suggestion that a foreign owner might make use of knowledge it gained from the New Zealand industry to the country’s and Sealord’s disadvantage, the OIC writes, “these comments are geared at saying foreigners should never be allowed into the industry – we can not close our eyes in this manner”. This is a particularly asinine comment given that the OIC was at that stage instructed to “approve applications unless good reason exists to refuse”: in other words, close its eyes to all but the most blatant breaches of the criteria. Its actions indicate that it accepted those instructions with enthusiasm.
On another argument of Wilson’s, that our fishing secrets could be used “to outmanoeuvre us in the marketplace”, the comment is that “this is a global argument for saying no foreigners”. Apparently general arguments are not to be accepted by the OIC, unless they are favourable to foreign investment: the comment assumes that foreign investment is always good, and that the only argument against it (and rarely accepted) is one specific to an application. (More of this below.) Yet when Wilson makes his argument that the six statutory criteria are not complied with, the OIC responds with generality: to Wilson’s reasoning that our fishing industry are world leaders and so it is unlikely that foreign investment introduces “new technology or business skills”, the OIC rejoins that he “ignores product development, general fish product research, processing practice etc”. Elsewhere they respond with specific knowledge of the applications that Wilson and other objectors are not allowed to see, let alone scrutinise and evaluate. Again, the weakness of the criteria and the process are glaring.
The internal 20 April memo rebuts 23 different points made by unnamed objectors. Some have been censored to the point where they are indecipherable. The most important remaining ones are as follows:
Submission: The sale could lead to the loss of millions of dollars of tax revenue.
OIC response: Taxation effects are not matters that are dealt with under the national interest criteria. Anyway it is already overseas owned, by BIL, which can be assumed to be avoiding tax as “efficiently” as any other corporate. Moreover, “the tax treatment of fishing is a generic matter for the revenue authorities, not a matter directly relevant to this transaction.” It then makes two interesting arguments:
· It quotes a New Zealand Institute for Economic Research (NZIER) report that concludes that taxation arrangements tend to favour foreign ownership of fishing vessels rather than quota. While interesting in its own right, and contradictory to its primary argument, that taxation matters should not be considered, this also reveals another potential weakness in the legislation. It is pointing out that the criteria apply to ownership of quota, not of the fishing vessels or company. Even if taxation were a relevant consideration, it is saying, since the argument applies to the vessels and not the quota, it would still not be relevant.
· “Further”, the OIC continues, “as the negative impact claimed by [suppressed] is supposedly generic to all foreign fishers it is not a matter than can be considered under the ‘other’ category in section 57(4)(b)(iii) as it is not a matter that relates to the circumstances and nature of the particular application.” The section referred to states that the Ministers, when judging whether approval is in the national interest may also have regard to “such other matters as [they], having regard to the circumstances and the nature of the application, think fit”. The OIC is saying (as it does in its critique of Barry Wilson’s objections) that this means that general objections cannot be taken into account, only ones specific to the case. The interpretation is debatable, and if accepted has a bizarre effect. It is as if a doctor was told that she could not advise a patient against smoking because it does not relate to the specific circumstances the patient is consulting her about, despite the fact that in general it causes cancer and a host of other health problems.
Submission: The sale to a foreign party is almost certain to move other major companies off-shore with a corresponding loss of jobs.
OIC response: It is already foreign owned. The sale from one foreign owner to another does not change things. Moreover, one of the criteria is “enhanced competition”. If some companies choose to respond to that by moving off-shore that could still be in the national interest if the overall result was greater exports etc. “Moreover, any job losses resulting from a particular company moving offshore could be offset by growth in jobs at Sealord, elsewhere in the fishing industry or elsewhere in industries servicing or linked to fishing due to expansion of Sealords”. How a company moving offshore could lead to further jobs in Aotearoa is not explained. But it illustrates the barbed nature of the competition criterion. It can be satisfied by the destruction, or sale overseas, of the rest of the industry. This is repeated in the response to the next submission.
Submission: The sale to a foreign party will lead to the collapse of fishing companies through an inability to remain competitive against non-taxed New Zealand product which is processed off-shore.
OIC response: Again the OIC cites the “enhanced competition and efficiency” criterion. Though some of its response is suppressed, it cites the NZIER report as suggesting that “quota ownership is unlikely to lead to the taxation benefits [sic] alluded to”. “Moreover, the positive effects claimed by the applicants appear more likely to result than the claims in the submission”. Once again, the objectors are at the disadvantage of not knowing, or being able to respond to, what the applicants are proposing.
Submission: “The sale will directly affect the New Zealandisation of our fisheries which has been a policy of both Labour and National governments for many years. [Suppressed] believes the political party issues will need to be considered.”
OIC response: “The proposed sale is from one overseas person to another. Therefore the ‘New Zealandisation’ of fisheries is neutral as a result of this transaction. It is inappropriate to consider political matters – the matters to consider are those set out in the legislation. That legislation essentially provides that foreigners can own ‘quota’ so long as benefits are delivered to New Zealand. The legislation is geared at regulating foreign participation in the ownership of quota, not preventing it outright.”
It is interesting to note the OIC’s frequent use of the argument that since the asset is already in overseas hands, nothing, however bad, will make a difference to the status quo. On that logic, once sold overseas, the OIC will never prevent an asset being onsold to another overseas owner.
It is also important to emphasise what the OIC is correctly pointing out about the Fisheries legislation. Despite the self-congratulatory behaviour of Labour in supporting the legislation in 1999, and the evident belief by many, including MP Damien O’Connor, that it prevented the sale of quota overseas, the legislation does nothing of the sort. It simply delivered its sale into the hands of the OIC.
Submission:”[Suppressed] claims that no new job opportunities will be created nor will retention of employment be assisted. This is because there are New Zealand companies that can fund the purchase and develop Sealord. [Suppressed] also believes that a foreign fishing company is likely to want to fish the quota with its own vessels or other foreign vessels. This would likely lead to a loss of shore- and sea-based jobs.”
OIC response: “The source of funds (New Zealand or otherwise) is not relevant to determining whether Sealord will generate jobs.” Anyway, Sealord, rather than the new owner, makes decisions about which vessels to fish the quota with. Even if it were 100% New Zealand owned it could decide to fish with chartered foreign vessels. That might lead to more jobs through processing on shore and exports, even if it lost some jobs. “More generally, the job losses alluded to flow more from who owns and operates fishing vessels not quota” [our emphasis]. First, the logic that the “source of funds is not relevant” escapes us. What the submission says is that just as many jobs could be retained or created if it remained in local ownership. But that is not relevant to the OIC: all that is relevant is whether the new owner would retain or create jobs. Second, the importance of the technicality that the legislation protects quota, not fishing vessels and companies, is reiterated. The OIC points out that fishing vessels and processing create jobs, not quota. So the criteria are almost irrelevant in protecting its ownership.
Submission: “[Suppressed] believes that a sale to a foreign country will reduce competition and production efficiency within New Zealand. The reasons revolve around expectations that foreign vessels will be used, off-shore processing will occur and no taxes will be paid.”
OIC Comment: “While that could occur in relation to specific aspects of the fishing industry, the overall result is likely to be a more efficient industry measured at macro levels. More importantly, the legal test is not geared at determining whether competition etc will be reduced (that is a Commerce Act matter) but at whether there will be more competition or efficiency… the claims of the applicants on this matter have more credence than those of [suppressed] … the assertion in the submission does not seem to outweigh the NZIER viewpoint.” No analysis is made to justify the statement that the industry will be “more efficient measured at macro levels”. And the OIC don’t care if competition or efficiency is reduced (and they concede it might be) – only if it is increased. Figure that one out.
In summary, nothing persuaded the OIC to change its mind that the sale of the share of the quota was in the national interest and should be approved.
BIL had given potential buyers until 5 May to put in their bids. By 1 May, the OIC was desperately trying to get a decision from the Ministers on the second lap of the applications under the Fisheries Act, in order to please its clients. Apparently there was no consideration given to asking BIL to relax its deadline. The OIC was showing signs of frustration with the government. At least six substantial memos flowed from the OIC’s secretary to the Ministers responsible, all labelled “Commercial Secret”, between 1 and 5 May.
Some of the material in them has been totally suppressed by the OIC. But the sequence appears to be as follows.
On 1 May the Ministers were asked to prepare for a meeting on 4 May to give them the opportunity to “express their views” before the OIC made a decision. By then, the OIC was clearly ready to approve the applications, happily using its usual “approve unless good reason exists to refuse them” instruction and delegation from the National administration. Until almost the last moment, the government insisted it would not change the delegation. However, the OIC was aware that the Ministers might after all want to make the decisions themselves, requiring a change in the delegations. It obligingly prepared some alternative documents.
On 2 May, a sizeable pile of documents was sent to each Minister to prepare them for the meeting on 4 May. They consisted of OIC analyses of each application, the 20 April memo detailed above, an analysis of further submissions received, a legal opinion on the administration of the fisheries legislation (suppressed), and letters from the Ministry of Fisheries regarding the allegations outlined above, but agreeing to the approval of the applications. The covering memo warned the Ministers that “one outcome of this process could be legal action being taken against the OIC/Crown” due to the strong views being taken. The legal advice (suppressed) presumably addressed that possibility, and the OIC was being careful to dot all its i’s. It once again warned the Ministers against listening to objectors: “we also remind you that it would be inadvisable to agree to meet with any parties to discuss these applications” presumably to avoid the risk of “irrelevant considerations” being taken into account.
By then however, political temperatures had risen considerably. In a letter dated 3 May, to the Chairman of the OIC, the Ministers revoked the delegation to the OIC of its right to make decisions under the Fisheries Act with regard to the Sealord case. Presumably the Ministers no longer trusted the OIC to take into account all relevant considerations.
On 4 May, further submissions were forwarded to the Ministers, including those from Deborah Morris, Damien O’Connor and Barry Wilson (to whom special attention is given), and further letters from the Ministry of Fisheries. There was a further legal opinion on the issue of “good character”, highly relevant in regard to the Ministry of Fishery’s information. The OIC secretary is still not moved however: “each of the applications is in the national interest”. However he is still investigating “certain allegations” – presumably the Ministry ones. His unchallenging mode of investigation is outlined above.
Two other memos followed that day in a rising sense of panic. In the first, it was clear that the OIC secretary had not yet received the revocation of its delegation, but was expecting it. But “the timing of events is very tight”, so the Ministers were urged to read all the material and approve all but two applications whose investigation was continuing.
In the second, the remaining matters raised by the Ministry of Fisheries were analysed. It “goes to the issue of the ‘good character’ of the individuals controlling [suppressed]”. Nonetheless Mr Dawe remained satisfied of their good character and urged the approval of the remaining applications. But if the Ministers were not satisfied as to the good character of the individuals, they should allow the individuals to make further representations on the issue (but no thought of allowing objectors the same privilege).
He urged the Ministers “to resist making public your decisions or even how many applications you have been considering” because of the commercial secrecy he asserted was required. “Moreover, you are under no strict obligation to tell the world of your decisions”, he wrote, continuing the Commission’s long-held penchant for secrecy. He kindly supplied some written samples of ways to avoid answers to queries they might receive.
On 4 May the Ministers made their decision and the Treasurer conveyed it by telephone to the OIC.
The OIC wrote tersely to the Ministers on 5 May in a letter headed “Brierley Investments Sale of Interest in Sealord – Decision Reaction”. The secretary had “communicated” the Ministers’ decision to refuse the applications because it was not in national interest.
“The reaction of all applicants was very similar – universal disbelief and disappointment. The representatives of [suppressed] asked me to specifically let you know how disappointed and surprised they were with the decision in relation to the applications they were associated with. Some applicants have asked what aspects of their proposal they could improve to have you reconsider your decision. Please give that some thought and let me know what you would like us to communicate in response to that or similar questions.”
The OIC had become a conduit of commercial pressure on the Ministers: the quasi-judicial façade it had tried to construct in analysing the decisions and recommending thier approval had disappeared and they were acting as lobbyists for the companies.
All that was publicly said was a press release on 8 May. On the same day, the Ministers wrote formally to OIC Secretary Stephen Dawe recording the reasons for their decision.
They had withdrawn their delegation to the OIC because they were “determined to apply a neutral test” rather than the previous instruction to grant consents unless there was a good reason to refuse them. “We believe that this instruction may be ultra vires the Act.” More of this little bombshell below.
They agreed that each of the applicants met the good character requirement of the Act. They evaluated each of the applications against the other criteria. Much of their reasoning has been suppressed, but they concluded that some of the benefits “seem somewhat nebulous. There is no indication that similar advantages could not be obtained by something less than a permanent loss of New Zealand control of quota.” They noted that “we would need to take the claims of benefit on trust, and this does not offer us enough comfort that the national interest test has been met” – a radically different approach from the OIC’s standard practice.
After noting the descriptions of benefits used words like “potentially”, “possible”, “if” and “should”, and the lack of quantification or evidence of benefit beyond Sealord itself, they wrote, “there is far too much doubt about the benefits, and they are far too vaguely specified to allow us to conclude that the national interest test has been met”. Under additional considerations, they recognised the policy of successive governments (including their own) to support the New Zealandisation of the fishing industry, and noted the large amount of quota at stake.
They concluded by stating that although they “noted the comments of various third parties”, they were not persuaded by them. “The substantive reason for our disagreement with your general recommendations was that we were evaluating the applications in the context of a specification of government policy and applying a different standard of national interest than you had been instructed to…” They thanked Dawe and his staff “for the very detailed and professional manner in which you discharged your statutory duties with regard to these very complex matters of immense national significance and high public interest.”
The Ministers’ press release, under the name of the Treasurer, Michael Cullen, “Foreign bids for BIL’s Sealords stake declined”, announced that the two Ministers had declined all the overseas applications to purchase BIL’s stake in Sealords. They had “carefully considered the criteria laid down in the relevant legislation”. They “recognise that it has been an explicit or implicit policy of successive governments to support the New Zealandisation of the fishing industry.” They then carefully covered themselves over the crucial distinction (see above) between ownership of quota, which is subject to the Fisheries Act, and ownership of the industry:
While we accept that there is no necessary linkage between foreign shareholding in New Zealand fish quota and the New Zealandisation of either fishing or fish processing, it is clear to us that past and present government policy nonetheless implies that the relevant property rights should ordinarily be held by New Zealand interests.
We were not satisfied that any of the overseas applications satisfactorily met the required national interest tests to outweigh that consideration.
But they had a sting in their tail for the OIC:
We note that the previous National Government’s delegation to the Overseas Investment Commission to make such decisions contained a presumption in favour of approving applications. This presumption was in the general context of all applications under the Overseas Investment Act. Our revocation of that delegation in the case of Sealords applicants also, as a consequence, revoked for those applications the policy statement containing this presumption.
In any case, we have been advised that in that respect, the delegation made by the previous government may well be ultra vires the legislation and that we should approach the applications with no such or any other presumption.
The suggestion that the OIC’s delegation and therefore its decisions had been for years ultra vires (beyond the powers given by) the legislation was naturally more than a little upsetting to the OIC, already feeling raw at having its preferred course of action reversed. Perhaps all its decisions for several years had been invalid! Cullen rubbed salt into the wound in Parliament the next day when he said in reply to a question from Damien O’Connor:
I have received advice that delegations made in November 1999 to the Overseas Investment Commission by the previous Minister of Fisheries and the previous Treasurer may be ultra vires the Fisheries Act 1996 and the Overseas Investment Act. The delegation instructed the Overseas Investment Commission to grant consents unless there was good reason to refuse them. Both the Fisheries Act and the Overseas Investment Act require an even-handed approach to applications, with no prior presumption. (Hansard, 9/5/00.)
The OIC exploded. On 10 May its Assistant Secretary, Peter Hill, wrote to all three Ministers (the Treasurer, Minister for Land Information and Minister of Fisheries):
I refer to your press release about the Sealord applications and response to a Parliamentary question on Tuesday 9 May 2000 about the validity of the delegation/directive letter to the Overseas Investment Commission. I note that neither was prepared with input from this office. I attach an opinion from the Commission’s legal advisers on this topic. You will see that their advice is that the delegation/directive letter is vires the legislation. You will also note that they were asked for and provided the same view before the current version of the directive letter was formulated.
Your public pronouncements have left us in an impossible position. Our ongoing processing of applications is placed in jeopardy because, unless this issue is resolved in Court, public confidence in our decisions is eroded.
He makes the assumption that there is indeed public confidence in their decisions.
He tells the Government that it has five courses of action available to it:
a) wait for a legal challenge;
b) seek a declaratory judgement;
c) re-issue the delegation and directives but “remove or alter the passage(s) referred to by Crown Law”;
d) re-issue the delegation and directives but “remove or alter the passage(s) referred to by Crown Law” and revoke the delegation under the Fisheries Act;
e) issue a completely new directive and delegation in line with Government policy.
In the meantime they will send all decisions to the Minister so that the validity of their decisions cannot be questioned. (If you don’t like the way we do it, do it yourself!) Treasury had been consulted in the preparation of the letter and agreed with it. An urgent meeting was sought to discuss the issues.
The Ministers declined to meet with them. Instead they indicated that they intended to change the directive to the OIC. The same day, the OIC sent them a choice of four revised directives (letter from the OIC to the Treasurer, 10/5/00). They responded:
I refer to the Overseas Investment Commission report 816 of 10 May 2000, which raises difficulties associated with public pronouncements made by myself and Hon Pete Hodgson. Until further notice, we are revoking clause 2(b)(ii) of the statement of government policy outlined in the letter from the Office of the Treasurer and dated 19 November 1999. (Letter to the Chairman of the OIC, 11/5/00.)
Clause 2 (b)(ii) of the 19/11/99 letter is the instruction to approve applications “unless good reason exists to refuse them”.
On 6 July the Government revoked the 19 November 1999 delegation and directive completely, replacing it with one that retained the responsibility for approving fishing quota sales in the hands of the Ministers, and explicitly stated “that there are no doubts that the Commission’s responsibilities under its legislation should be exercised in a neutral manner”. In practice, other than for fishing quota, it is doubtful that there will be much change in the OIC’s practice. The Ministers’ letter states: “Please note that these changes are technical in nature and the Government remains committed to an open and facilitative overseas investment regime.”
The lack of any controls on general overseas investment, other than where land or fishing quota are involved, is well known. This episode highlights the weakness of even the stricter “national interest” criteria in these cases. In particular it indicates that the criteria should
· all be satisfied: satisfying only one can be destructive. For example, enhanced competition may lead to the destruction of the domestic fishing and processing industry;
· have an overarching requirement to strengthen the productive capacity of Aotearoa, and confer social benefits. For example, greater competition and enhanced efficiency and productivity may (in a strict economic sense, which is how it has been interpreted) lead to production and other activities moving offshore;
· take into consideration negative effects such as the possibility of lower competition or employment;
· under the enhanced export markets criterion, disregard markets that are opened due to preferential treatment given to the proposed overseas owners of the investment. This case illustrated the fact that if overseas owners get preference to export to their home country, then the result is unfair competition. That logic leads to the whole of the industry being overseas owned, as well as encouraging such discriminatory treatment;
· provide that the criteria should be applied freshly in each case (that is, as if the comparison was to New Zealand ownership), not weakened by comparison with a previous overseas owner as the OIC did here. Where possible there should be a comparison of the relative benefits of overseas and local ownership;
· test the “good character” of legal persons (such as companies) as well as natural persons (real people);
· favour proposals with less rather than more overseas control and ownership;
· take into account the different tax and regulatory treatment of overseas parties when assessing the economic effects (including effects on employment). In this case, overseas fishing companies were allegedly able to escape tax, ACC, GST, our employment law and working conditions, for example;
· make clear that the “such other matters as the Minister, having regard to the circumstances and the nature of the application, thinks fit” provision, which allows the Minister to take into account matters not anticipated by the other criteria, can apply to generic matters as well as ones specific to the particular case;
· make provision for protection of the environment and conservation of resources;
· make provision for upholding Treaty of Waitangi obligations.
The above should apply to all investment, but in the particular case of fishing quota, the legislation should make clear that the criteria
Finally, at least for major sales like this case, there needs to be provision for the public to be properly informed of the facts of the proposals and be given appropriate time to make submissions before decisions are made.
Norske Skogindustrier ASA of Norway has approval to acquire Fletcher Challenge Paper, a division of Fletcher Challenge Ltd for a sum “to be advised”. FCP, a major part of one of New Zealand’s most important companies, includes the Tasman Pulp and Paper Mill at Kawerau, plus substantial assets overseas including Canada and Australia. It owns 510 hectares of land in Aotearoa in the Bay of Plenty around Kawerau, Whakatane and Tauranga, and an additional 88 hectares of leasehold land in the same region.
FCL had tried to sell off FCP to its 50.8%-owned Canadian associate, Fletcher Challenge Canada, in 1999 (see our commentary on the October 1999 OIC decisions), but failed. Now it has succeeded, FCL is in the process of selling off its other three divisions, with both Fletcher Forests and Fletcher Energy being actively courted. It is the first of four steps in the dismantling of what is one of the most important companies in New Zealand, both currently and in historical terms.
FCL has for several years had a substantial overseas shareholding, but in 1999, the OIC finally conceded it was an overseas company for the purposes of the Overseas Investment Act, and withdrew an exemption it had been given to the OIC’s oversight. See our commentary on the August 1999 OIC decisions.
According to the OIC,
“Norske Skogindustrier ASA is a major international producer of printing paper and has a strategy of being one of the leading players in the worldwide paper industry. The Applicant desires to increase its production capacity and obtain full global coverage. This will be achieved through acquisitions rather than building new capacity, and the acquisition of Fletcher Challenge’s Paper Division, a major producer of newsprint and pulp, offers such an opportunity… The major asset of Fletcher Challenge’s Paper Division in New Zealand is the Tasman Pulp and Paper Mill at Kawerau, which is viewed as playing a strategically important role in the future operations of the Applicant in the Asia-Pacific market.”
Given that expansion “will be achieved through acquisitions rather than building new capacity”, it seems unlikely this will result in anything but the takeover, and pressure on New Zealand assets to perform as part of the intra-firm trading of their new owner. To the extent that FCP was still locally owned, it also means the loss of dividends from the overseas assets of FCP, and increased exodus of dividends.
Norske Skog described its acquisition as meaning that
Norske Skog is now the world’s second largest newsprint manufacturer, with 13 per cent of global production capacity. Norske Skog has 11,000 employees, its turnover is more than NOK 30 billion, and it has 21 whole and partly-owned mills in 13 countries on five continents. Total production capacity is 5.8 million tonnes of paper, including magazine paper and improved grades. Norske Skog also produces one million tonnes of market pulp.
It said that it was “the largest acquisition any Norwegian company has ever made outside Norway” (Press release, “Largest acquisition in Norway’s history completed today”, 28/7/00 – see http://www.norskeskog.no).
For examples of environmental protests against Norske Skog’s activities see http://forests.org/archive/europe/norskes2.htm (17/4/97 – Urgent Appeal to Spread Word That Norske Skog Broke Environmental Promise); and http://forests.org/archive/europe/urghelpn.htm (12/3/97 – Urgent Request for Norske Skog to Change Their Old-Growth Policies).
The OIC says that FCL is owned
The sale was at a price that surprised even FCL itself: approximately $5 billion. This was an 83% premium on both the average trading price of the shares during the 12 months preceding the offer, and the closing price on the day prior to the announcement. The sale paid off 60% of the group debt – an obstacle that contributed to the failure of the planned Fletcher Challenge Canada buy-out in 1999.
It was opposed by small shareholders’ watchdog, Max Gunn, who at the meeting to approve the sale, denounced such a “material heritage” going overseas, describing it as an “unmitigated disaster”. He described FCL Chairman, Roderick Deane, as a “grossly over-paid puppet”, and other directors responsible for the sale as “traitors to the economy of New Zealand and wimps who should be replaced”.
Dr Deane said the sale would facilitate the separation (read: speed up the sale) of the other divisions in the group, with completion aimed for December 2000 (Press, 5/7/00, “Huge support for Paper sale”, p.20).
Media Investments Ltd, a subsidiary of CanWest Global Communications Corporation of Canada, has approval to acquire 100% of RadioWorks Ltd for a sum “to be advised”. RadioWorks was formerly 7.5% owned in the U.S.A. and 2.5% owned in Australia.
RadioWorks was formed in May 1999 from a merger between Radio Otago and Radio Pacific, the second largest radio network in Aotearoa.
Radio Otago originally owned Radio Dunedin 4XD, said to be the oldest radio station in the world outside North America. Until 1997 it owned seven North Island stations in Tauranga (92.5 Classic Rock), Rotorua, Taupo, Hawkes Bay and Wanganui. That year, it sold the stations to Radio Pacific, in exchange buying four frequencies in the South Island: two in Dunedin, one in South Otago and one in North Canterbury. It bought Christchurch’s C93FM (including C93 and i94.5 FM) with the $4.5 million proceeds of the sale. In July 1998 it bought Nelson’s Fifeshire FM to complete its plan to cover all the South Island’s biggest markets.
Radio Pacific was, for many years, the only significant independent radio network. Its frequencies reached 95% of New Zealanders. Eight of those frequencies came from its acquisition of Energy Enterprises in March 1997, which had stations in Rotorua, Hamilton, Palmerston North and Hawkes Bay. Radio Pacific’s chairman (also an Energy director), Derek Lowe, said, “I do feel there should be some media companies that are owned and therefore controlled by New Zealanders.”
Two months later it took over the seven North Island stations belonging to Radio Otago. Further acquisitions, including the 93.4FM frequency in Auckland and two FM frequencies in Waikato (93.8FM and 100.0FM from Radio Network) had by November 1997 brought its total frequencies to 44, and it employed 200 staff. Energy Enterprises had 18 music stations.
In March 1998 Energy Enterprises bought three FM frequencies in the Wellington area from Phoenix Broadcasting: Wellington 97.5FM (the Quake), on the Kapiti coast and in the Wairarapa. Two months later, Radio Pacific bought XS Radio which broadcasts in Palmerston North, Masterton, Levin and Kapiti, and Radio Horowhenua for $4.449 million of borrowed money, from the XS Corporation of Palmerston North. That gave it 59 stations. In December 1998 it bought the frequency for station 89FM in Christchurch for $1.133 million, and 738AM, also in Christchurch for $255,000. At the same time it also bought a Timaru frequency, 1071AM for $26,741, shortly followed by a third frequency in Wellington for $600,000. That brought their frequencies owned, leased or operated to 80.
Radio Pacific and Radio Otago merged in May 1999 to form RadioWorks. The new company grouped 85 frequencies, second only to the Radio Network. The merged company kept on accumulating. In April 2000 it bought Northland Radio, which operates KCC FM and Magic FM, adding 11 frequencies and bringing the number of community radio stations owned and operated by RadioWorks to 22.
CanWest, best known for its ownership of TV3 and TV4, bought the More FM radio network for $33 million in July 1997. More FM runs eight stations with two in Auckland, three in Wellington, and one each in Christchurch, Dunedin and the Kapiti Coast. CanWest also owns Channel Z in Christchurch and Wellington and the Breeze in Wellington.
So when CanWest’s launched its bid for RadioWorks, it was taking over a network more than twice its size. Despite Lowe’s criticism of the price offered, CanWest’s tactics of standing in the market for shares without consulting the RadioWorks board, the board’s “don’t sell” recommendation, and his previous brave words extolling New Zealand ownership of New Zealand news media, he led the lolly scramble to sell his shares. CanWest ended up with 71.8% of the company, including the 12.2% owned by the TAB. It bought the company “cheaply” according to a report commissioned by independent directors – at 825 cents per share compared to a valuation of between 876 and 997 cents. The new RadioWorks board included CanWest owner, Izzy Asper, among the four CanWest representatives, but Lowe kept a seat.
CanWest is the biggest privately owned TV broadcaster in Canada. It originally bought TV3 after its turbulent private history. Then, shortly before the October 1996 election, in a politically charged presentation, it announced that it would start up another national commercial, entertainment-based, channel, TV4. It would have no news and current affairs, and no new local content, reinforcing TV3’s reputation for low local content, and began broadcasting at the end of June 1997. CanWest has always been keen to buy other media in New Zealand, and was a bidder for the Radio New Zealand network when it was privatised.
CanWest is also 57.5% owner of the Ten Network in Australia, and owns Chile’s La Red TV network, and Talk Radio in the U.K. In January 1997 it acquired a further 20% voting and 10% equity interest in Ten Network firm Donholken Pty for $159 million. Not all of the Australian interest has voting rights, due to Australian restrictions on overseas ownership of news media. CanWest is lobbying to allow it up to 50% voting shares.
Lobbying and politics are not unusual for Izzy Asper, owner of over 90% of the voting power and 65% of the equity in CanWest. He has been a leader of his province’s (conservative) Liberal party, and has been a vocal supporter of the economic policies of the last 15 years in New Zealand, particularly the “zero restrictions on foreign investment in the media”. “I was recently representing Canada in Brussels at a G7 meeting. I said to all the G7 heavyweights, Japan, the U.S. and all, ‘The only example in the world of a country that has its head screwed on and isn’t distracted by silly stuff is the government of New Zealand,’” Mary Holm quotes him saying. “Since the reformation in New Zealand in the 80s, you’ve become the experimental laboratory for the entire world. Sir Roger has travelled to Canada and is revered … the fact is, New Zealand is one of the most professionally managed countries in the world.”
However by November 1997 it was complaining about the effects of a “slow economy” on its revenue, CanWest vice-president of global operations, Gerry Noble, saying, “we want the economy to get back on track”.
Adding to the political flavour of the company, in August 2000 CanWest bought 13 big-city newspapers, many other smaller dailies, Internet properties and various other interests in Canada from Hollinger Inc. It was one of the biggest media transactions in Canadian history – valued at $7.7 billion. Hollinger is chaired by the notorious extreme right-wing media baron, Conrad Black. In the transaction Black gained a 15% equity interest and 6% voting interest in CanWest – the second-largest stake behind the Asper family – and two seats on the CanWest board, one of which he will take personally.
The commitment of TV3 and TV4 to local content has been minimal. In 1999 it reached a nadir, the two CanWest channels screening no new local drama or comedy shows during the year. Only New Zealand On Air funding persuaded it to recognise its New Zealand location in 2000.
CanWest’s public behaviour in Aotearoa has been less than exemplary. TV3 was in the centre of controversy after the 1999 election when it revealed that it donated $25,000 to the National and Labour Parties (as had INL) and not to minor parties. Senior Lecturer in Journalism at University of Canterbury, Jim Tully, commented that “media companies should not be donating money to political parties”, and that they were even more difficult to justify if they did not treat every party the same. TV3 was fined $500,000 in advertising revenue by the Broadcasting Standards Authority in 2000, for a 20/20 story. RadioWorks was criticised by the Authority’s chief executive for “causing difficulties by not supplying the authority with audio tapes of contentious shows”, despite the fact that they were required to keep news, current affairs, and talkback tapes for at least 35 days. Broadcasting Minister Marian Hobbs threatened to increase the authority’s powers because when complaints were laid against “certain private radio stations”, they would “accidentally delete” the only copy of the broadcast.
CanWest is also financing a 952 hectare forestry development at Redcliffs Station, Te Anau, Southland, and in June 1997 acquired the Frader Group.
(For sources of this material, see “News media ownership in New Zealand”, by Bill Rosenberg, at http://canterbury.cyberplace.org.nz/community/CAFCA/publications/Miscellaneous/index.html or from CAFCA.)
BRL Hardy Ltd of Australia has approval to acquire the balance of shares in Nobilo Wines Ltd that its does not already own (it owned 24.68%). Nobilo is the fourth-biggest wine maker in Aotearoa. The owners of the other shares in the listed company were the Nobilo Family (39.53%), George R. Gardiner of Canada (24.21%), the Vieceli Family of Aotearoa (12.05%), and minority shareholders in Aotearoa (24.21%). The price is “to be advised”, but the offer to shareholders caused some controversy because the Nobilo family was offered a premium of five cents a share over other shareholders. The Nobilos were offered the equivalent of 115 cents a share if they accepted BRL Hardy shares in payment, or 110 cents cash. Other shareholders were offered 110 cents for the share swap and 105 cents cash (Press, 14/6/00, “Nobilo price gap in order”, p.20).
The company owns 167 hectares of land (142 hectares in Marlborough, including four hectares at Hammericks Road, Blenheim; and 25 hectares at Hapai, west of Auckland) and leases 38 hectares at Mohaka, Waihua, Hawkes Bay.
Nobilo Wines, which was formerly called National Liquor Distributors Ltd, was formed by that company, then already partly owned by BRL Hardy, taking over Selak’s Wines Ltd and Nobilo Vintners Ltd in September 1998. It then listed on the New Zealand Stock Exchange. See our commentary on the August and September 1998 decisions for further details.
Imerys, which is owned 32% in France, 20% in Switzerland, 16% by Group Frère/CNP Group of Belgium and 16% by other Belgian shareholders, and 16% by Power Corporation of Canada, has approval to acquire the New Zealand China Clays operation from Ceramco Corporation Ltd for $41,000,000.
Because it is under the new threshold of $50 million, this would not have been required to seek OIC approval but for the fact that it involves substantial areas of land. They consist of:
The New Zealand China Clays operation consists of three companies: New Zealand China Clays Ltd, New Zealand China Clays Sales Ltd, and New Zealand Kaolin Ltd.
Ceramco, which is selling them, is 63% owned in Aotearoa, including 16% by PDFM Ltd, and 37% in Australia, including 10% by National Mutual Life Association of Australasia Ltd. Having disbanded its Bendon “intimate apparel” (women’s underwear) manufacturing operation in Aotearoa to importing and manufacturing in cheap labour locations overseas, at the cost of many jobs here, it is in the process of disintegration. Ceramco itself has changed its name to Bendon Group and in February 2000 acquired the eight-store chain of Bennett and Bain stores, a high-end lingerie retail network in receivership (Datex). It has announced it will sell off all other units over the next 18 months. (Press, 5/7/00, “Bendon cancellation”, p.22; 8/8/00, “Bendon kicks off new era with an interim dividend”, p. 14).
Imerys, according to the OIC,
“is recognised as a world leader in the production of industrial minerals, and in particular, minerals for the ceramics industry. [Imerys] views the acquisition as an opportunity to increase its Asian market presence. [It] considers that its business expertise combined with that of New Zealand China Clays ‘Group’ will be the key to developing a new strategy for the Asian market due to the combined entities’ knowledge of clients and markets and their technical expertise.”
What the OIC doesn’t say is that Imerys is the target of a major union campaign opposing its anti-union activities in the U.S.A. The 20 million-member International Federation of Chemical, Energy, Mine and General Workers’ Unions (ICEM) reported in 1999 (“Imerys Faces World Action Over U.S. Union-Busting”, http://icemna.org/ecmpime3.htm) that
Imerys has changed from a company which once sought stable relations with PACE [ICEM U.S. affiliate] to one which appears dead-set on destroying unions in the US,” said Joe Drexler, PACE Director of Special Projects.
Imerys withdrew union recognition of PACE at its plant in Sylacauga, Alabama, after the company acquired English China Clays (ECC) and merged its Georgia Marble plant with a much large non-union ECC plant, which stands just next to the Georgia Marble facility.
To find out the workers’ real wishes, PACE offered to hold a new election supervised by the National Labor Relations Board (NLRB) at the combined plant, provided Imerys would be neutral in the election and let workers decide without company interference.
But the company rejected the union’s offer, and instead had launched a union-busting campaign aimed mainly at non-union ECC workers. At the Georgia Marble plant, non-union workers outnumber union workers by a 2 to 1 margin.
The union charges that Imerys, through its hired union-buster, is:
· showing unionised workers anti-union films at mandatory meetings
· arranging for its supervisors to meet individually with workers, in order to discourage support for the union
· recruiting higher-paid workers to carry its anti-union message
· using scare tactics by associating union membership with plant closings, strikes, violence, and union dues in order to keep workers from supporting the union.
PACE has filed several charges with the NLRB, alleging illegal activity by the company.
The union contract (collective agreement) at Imerys’s Jeffersonville plant expired in mid-November. In an attempt to avoid negotiating a new one, the company now appears to be closing Jeffersonville. The work done there has already been transferred to a non-union plant. Imerys says that the Jeffersonville closure is not permanent. Ironically, this means that it intends to reopen the plant later as a non-union operation.
Similarly, the company plans to move a laboratory from its unionised Dry Branch plant in Georgia to the non-union Deep Step plant, also in Georgia.
It may also try to eliminate unionised jobs in its drilling operations by transferring them to an outside contractor.
The campaign against Imerys continues, to the extent of a special web site, “Justice for Imerys workers” at http://www.webshells.com/imerys/index.shtml. The site contains a wealth of information on who owns Imerys, and its international activities. The following description of the company and its ownership comes from pages on that site.
Imerys is the result of a takeover by Imetal S.A., a Paris-based multinational corporation, of English China Clays PLC (ECC), a Reading, United Kingdom-based industrial minerals multinational corporation, for £756 million (US$1.24 billion), in northern spring 1999.
Imerys has subsidiaries in the industrial minerals, metals processing, and building materials industries. It is the number one maker of slate and clay roof tiles in France and operates in fifteen countries. The company employed 9,933 people worldwide in 1997. In 1997, Imetal had annual sales of US$1.84 billion, of which 39% was produced by the industrial minerals division, 35% by the metals processing division, and 26% by the building materials division. Net income in 1997 was US$103.5 million.
The ownership structure of Imerys is both simple and complex. It is simple in that two families control Imerys: the Desmarais family of Canada and the Frère family of Belgium. However, standing on top of Imerys are layers of holding companies, also controlled by the two families and spread out over two continents. Holding companies, Pargesa Holding SA and Groupe Bruxelles Lambert SA own one half of Imerys stock. The remainder is publicly held and traded on the Paris Stock Exchange or Bourse.
Paul Desmarais Sr.
The 73-year-old patriarch of the Desmarais family has a personal net worth in excess of $1 billion (Canadian), and is the eighth richest person in Canada.
Desmarais has a longstanding interest in art and is a financial supporter of the Canadian national gallery and of smaller galleries and theaters in Montreal. Newspaper reports describe him as cool and cerebral; in contrast to Albert Frère, who is described as having a hands-on approach, Desmarais rarely intervenes directly in business dealings. Paul Desmarais Jr. describes his father as the strategist, and Frère the tactician, in their acquisitions. Desmarais, who spends his winters in Palm Beach, Florida, told the National Post, “I’ve thought about [leaving Canada] a thousand times. So many of my friends have done it. But I haven’t because I’m a Canadian, I’ve made my money here, and I’ve got to fight it out.”
Paul Desmarais Jr.
Paul Desmarais Jr., 45, is the chairman and co-CEO of Power Corporation of Canada, and chairman of the board of Power Financial. He is the older of Paul Desmarais Sr.’s two sons. Desmarais is an outspoken opponent of Quebec nationalism, and actively lobbies powerful business leaders in Quebec to support Canadian federalism. He has expended considerable effort to portray himself as the leading Quebecois businessman in favour of higher education, and serves as the chairman of the board of directors of the International Faculty Advisory Board of McGill University. He is also the chairman of the Canada-China Business Council. He is on the international advisory board of Barrick Gold, the world’s largest gold mining company outside South Africa. He also is a co-chair of the Centraide Campaign 1998, a Montreal volunteer mutual aid network.
At 43, the younger son of Paul Desmarais Sr. is president and co-CEO of Power Corp. He is primarily responsible for the publishing arm of the Power Corp. Desmarais Sr. has publicly announced that he has carved out separate areas of responsibility for his two sons, to prevent power struggles between them. André Desmarais’s wife, France, is the daughter of Prime Minister Jean Chrétien.
Baron Albert Frère
“Nothing really gets done in France or Belgium these days without Frère being involved somehow,” said a spokesman in Forbes. The 74-year-old enjoys personal oversight and involvement in business deals, and is described by Pargesa vice-chairman Aimery Langlois-Meurinne as someone who “loves to get involved in all kinds of negotiations.” Said Gerald Frère of his father and Paul Desmarais Sr.: “They will never retire. They are deal-makers and they never retire. They are deal-makers and they need to do business. It’s their drug.”
The site describes the various holding companies for Imerys as follows:
Imetal is owned 36.7% by Pargesa Holding S.A. and 23% by Groupe Bruxelles Lambert S.A. Both Pargesa and Groupe Bruxelles Lambert are jointly controlled by the Frère and Desmarais families.
Groupe Bruxelles Lambert S.A.
Groupe Bruxelles Lambert S.A. (GBL) is a Brussels, Belgium-based holding company jointly controlled by two wealthy families- the Frère family of Belgium, and the Desmarais family of Montreal, Quebec, Canada. Baron Albert Frère, the patriarch of his family, is chairman of the board and managing director. His son Gerald Frère is also an officer and member of the board of directors. The patriarch of the Desmarais family – Paul Desmarais Sr. – is Albert Frère’s partner. Paul’s son – André Desmarais and Paul Desmarais Jr. – are also officers and members of the board of directors. Aside from the five principal family members, very few other people are involved in GBL’s day-to-day portfolio strategy decisions, according to company insiders.
In a 50%-50% partnership with the Bertelsmann media conglomerate of Germany, GBL owns CLT-UFA, a Luxembourg-based TV and radio station group that is now Europe’s largest multimedia corporation (22 TV channels, 22 radio stations in twelve countries). It also wholly or partially owns a number of other radio and television stations in Europe under the RTL brand. The group has significant energy industry holdings in Europe, the U.S., and Canada. It owns a 75% controlling interest in Electrafina, a holding company of electric utilities. It owns Rockland Pipeline Company, based in Houston, Texas; American Cometra, Inc., a Fort Worth-based oil and gas company; Canadian Cometra, Inc., in Calgary, Alberta; and Canrock Pipeline Company Ltd., also based in Calgary. The group recently disposed of its powerful interests in Royal Belge S.A., the insurance giant, and Banque Bruxelles, and appears to be moving strategically towards technology and media, rather than the industry and financial sectors.
Groupe Bruxelles Lambert had net earnings of $469.4 million in 1996. The company’s assets were valued at $5.27 billion in 1996. The company is owned 48.9% by Pargesa Holding S.A.
Pargesa Holding S.A.
Headquartered in Geneva, Switzerland, Pargesa Holding S.A. is one of the most powerful investment holding companies in Europe. Like GBL, it is also jointly owned and controlled by the Frère and Desmarais families. Pargesa (Paribas-Geneve S.A.) was created out of the Swiss subsidiary of Compagnie Financière de Paris et de Pays Bas, the French investment banking company known as Paribas. Paul Desmarais Sr. made his first foray into Europe in the late 1970s with a $20 million investment for a 2.3% share of Paribas. Through that investment he met Albert Frère, another Paribas investor who owned a 2% stake. In the early 1980s, French President Francois Mitterand moved to nationalize Paribas. To avoid the French government’s plans, Desmarais and Frère transferred their Paribas holdings to Swiss-based Pargesa. Frère made a killing by buying up Paribas shares when they sank on news of Mitterand’s nationalization plans. By 1989, Frère and Desmarais had acquired control of 50% of Pargesa. The Desmarais-Frère alliance then seized operational control of Pargesa, and subsequently steered the corporation away from banking and insurance into heavy industry, communications, and utilities.
Pargesa holds a significant stake (6.8% as of June 1999) in Totalfina, the Belgian-French petroleum multinational corporation formed from the merger of Total and Petrofina. It also holds an 11.5% control (4.2% interest) of Suez Lyonnaise des Eaux, a 54.5% control (36.7% interest) in Imetal, a 49% control (9.3% interest) in CLT-YUFA media corporation, and an 83.7% control and interest in Orior Holding, S.A., a Swiss-based holding company. Paul Desmarais Sr. is the chairman of the group, while Albert Frère is the vice-chairman. Gerald Frère, Albert’s son, is one of three general managers who oversee day-to-day operations, and Paul Desmarais Jr. is also an officer.
Pargesa has four wholly-owned subsidiary holding companies, Pargesa Bank Corp., Pargesa Netherlands B.V., Pargesa Luxembourg S.A. and Financière du Parc B.V. The assets of the Pargesa Group are further distributed between dozens of holding companies. Despite the complexity of this web, the group is evidently highly centralized in terms of command and control.
This Netherlands-based holding company is the instrument for the partnership between the Frère and Desmarais families. Desmarais’ Power Financial Corp. holds a 50% interest in Parjointco, while Frère’s company CNP holds the other 50%. Parjointco holds a voting interest of 62.4% and an equity interest of 55% in Pargesa Holding S.A. The Desmarais and Frère families are connected by a partnership agreement, which was recently extended from an expiration date of 2001 to 2014.
Power Financial Corp.
Power Financial Corp. controls Canada’s largest mutual funds company, Investors Group, and Great-West Lifeco, Canada’s largest life insurance company. Power Corp. of Canada owns 67.7% of Power Financial Corp.
Power Corporation of Canada
The Desmarais family controls Power Corporation of Canada, and the brothers André and Paul Desmarais Jr. are the current co-CEOs, and Paul Jr. is the chairman. Power Corp. employs 15,500 workers and in 1998 had net earnings of $420 million (Canadian). The “power” in Power Corp. refers to political and financial power, not electrical utilities. Power Corp’s holdings are concentrated in financial services and the media.
The communications segment of the corporation contributed net income of $14 million (Canadian) in 1998. Power Corp. subsidiary Power Broadcasting operates three TV stations and 17 radio stations. Gesca Limitée, a Power Corp subsidiary, publishes four daily newspapers in Quebec, including La Presse. In 1993, the company bought a sizeable share of newspaper publisher Southam Inc. In 1998, André Desmarais announced at the annual shareholders’ meeting that Power Corp. wanted to increase its presence in the communications industry by acquiring additional newspapers and broadcasting facilities in Quebec and Ontario.
Power Corp. is intimately connected to current and former high-ranking officials in the Canadian government and in the governments of some European countries. Former Ontario premier Bill Davis is a director of the corporation; its international advisory board includes former Canadian Prime Ministers Brian Mulroney and Pierre Trudeau, former German Chancellor Helmut Schmidt and former French Prime Minister Edouard Balladur. John Rae, who was electoral campaign director for the federal Liberal Party for the 1997 campaign, is executive vice president of Power Corp. Paul Martin, who is now Finance Minister of Canada, worked for years for Power Corp. before buying out its holding in Canada Steamship Lines. Maurice Strong, Brian Mulroney, and Paul Desmarais have worked together to invest in small coal-fired power plants in the south of China.
Compagnie Nationale de Portefeuille (CNP), Fibelpar, Erbe, and Frère-Bourgeois
Compagnie Nationale de Portefeuille (CNP) is a Frère family-controlled holding company. Pargesa owns one-third of CNP. A 53.5% controlling interest in CNP is held by Fibelpar, which is also controlled by the Frère family. Fibelpar, in turn, is owned 57.1% by Erbe, another Frère family entity, which is the link between the family and the Paribas Group. Erbe, in turn, is owned 54.5% by Frère-Bourgeois, the parent company, which is 100% held by the Frère family. Together, CNP, Fibelpar, Erbe, and Frère-Bourgeois are known as “the Charleroi Group.”
Hirotomo Ochi of Japan has approval to acquire 30 hectares of land at 360 Teschmakers Road, Teschmakers, Oamaru, Otago, from the New Zealand Dominican Sisters Trust Board for $502,313 to establish an “international college of health science” which will teach organic farming, and to “establish an organic farm network”. Teschmakers
“is a small farm outlet, owned by the New Zealand Dominican Sisters Board, which was previously a girls’ school, and has recently been used as a conference centre. The Applicant plans to establish an international college of health science on the property. Part of the college’s function will be the running of practical courses on organic farming. The college will be aimed at educating youth, who will be trained in protecting the environment and developing healthy lifestyles. The Applicant also plans to undertake developments on the farm as part of the college, utilising the crop, stock, dairy and vegetables to establish an organic farm network. The produce from the farm network will be used to supply local as well as export markets, particularly those in Japan, South East Asia and America. The Applicant also plans to develop a hybrid town on the property, which will be similar to a town that he developed at Fukuroia City, Japan. The town at Teschmakers will be developed around the school over the next few years. It is envisaged that the town will provide support facilities, including accommodation, etc., for those employed and attending the college.”
In September 1998 we reported that Nikken Foods Company Ltd of Japan, which is 67.63% owned by Dr Hirotomo Ochi, had gained approval to acquire 162 hectares of land at 360 Glasnevin Road, Amberley, Canterbury for $1,400,000. Nikken “intends to convert the existing farming operation on the property to an operation producing organic products including both organic sheep, cattle, vegetables and grain. Nikken Foods, as a manufacturer of natural seasoning, requires a large volume of vegetables for production.” It will also produce “other health products” for export to Japan. It will export the produce to Japan, and will also purchase other organic produce from other New Zealand farms.
Development on the property will take 2-3 years, involving establishing a “wholly organic farm”, which will take some time in order to rid the property of residues; and then building a factory to undertake the “initial processing” of the produce. Once the factory is established the company will “do a costings exercise to determine whether the final stages of processing can be done in New Zealand … or should be done in Japan.”
According to the Oamaru Mail (“Dream sale for Teschmakers”, 19/6/00, p.1), Dr Ochi bought the property after a year of negotiations. A company representative in Oamaru said that “the company had been planning the project for several years, and had looked at several other countries before deciding New Zealand would be suitable for the tertiary-level organic health college.”
The Oamaru Mail says Nikken Foods specialises in organic and health food production and has an annual world-wide turnover of about $400 billion (probably a mistake for 400 billion yen). The college would be based on one established in Japan by Dr Ochi, with the focus on research and development for health sciences, nutrition, healthy ageing and the development of technology for health businesses. Part of the property would be used for organic farming. It was hoped the college would open in two years’ time.
According to the Oamaru Mail, the Amberley property will become a show case organic farm tied to the college.
The Institute in Basic Life Principles of the U.S.A. has approval to acquire a “camp and catering, conference and convention centre” on eight hectares of land at 467 Wellington Road, Marton, Manawatu for $1,049,063 from Martyn L. Slade Group of Companies Ltd. The institute, which “has operated in New Zealand for many years as a Christian teacher of basic life principles, intends to utilise the existing facilities to establish a residential training centre for both its New Zealand and offshore operations”. A transnational missionary, no less.
Auckland One Ltd, owned by D. and M. Jen of Singapore, has approval to acquire 0.1643 hectares at 50 Gillies Avenue, Newmarket, Auckland, for $2,190,000. The Jens also own at Newmarket
all of which adjoin the new acquisition. Further development of the shopping plaza involving these sites is planned.
The Jens (Denis Chen Chiu Kao and May Jen Chiang Lio Sun, known as Denis and May Jen) also own the company Newmarket Newzealand Ltd. Newmarket Newzealand is registered in the British Virgin Islands (New Zealand Property, November 1993, p.2). They bought the Clovernook Road land in December 1999 (see our commentary for that month). Both their companies are owned through a further company, Intro International. The Jens own the 277 Shopping Centre, which they are redeveloping, and the former Levene Extreme building and carpark, with a total area of four hectares in one of the most valuable parts of Auckland (Press, 14/8/00, “Developers target Broadway”, p.25).
· The New Zealand Forestry Group Ltd, which is owned 76% by Wesley Garratt of Aotearoa and 24% by J. Hong of Taiwan, has sold three further blocks of land, this time:
· 12 hectares at Whangaehu Valley Road, near Wanganui for $73,225 to Taiwan Titan Enterprise Co. Ltd owned 50/50 by Chi-Ming Wang and Wen-Chih Chang of Taiwan. the Wang and Cheng Family Trust, of Taiwan.
· 17 hectares at Whangaehu Valley Road, near Wanganui for $122,146 to Ling-Chun Lin of Taiwan.
· 42 hectares at Creek Road, Wanganui, for $196, 088, to the Poai Family Trust of Taiwan.
The first two buyers are members of the Mangamahu Forest Owners Association, and the third buyer is a member of the Mahuri 2000 Forest Owners Association, which we have not heard of before. Like the Paparangi Forest Owners Association, which is also associated with the New Zealand Forestry Group, these Associations have “entered into an arrangement with New Zealand Forestry Group to develop approximately 301 [226.5 in the case of Mahuri 2000] hectares of land near Wanganui”. The last sale related to Mangamahu and Mahuri was in February 1997 when 37 hectares of land in the Mahuri Forest, Mangamahu, Wanganui was sold by the Group to two residents of Taiwan for $143,491.
· A joint venture consisting of Nelson Forest Products Company (owned by Weyerhaeuser Company of the U.S.A., which manages the land, 51%) and RII New Zealand Forests I, Inc of the U.S.A. (49%), has approval to acquire 64 hectares of land at State Highway 6, Pelorus Valley, Marlborough, for $120,000. The land is adjacent to a Crown Forest Licence the joint venture holds, and it is being acquired to provide access for harvesting the forest. Approximately 18.7 hectares of arable land will be subdivided and sold to a neighbouring farmer.
Da Capo al Fine (NZ) Ltd which is owned by F. Cabot, A. Cabot and H.G. Seitz, as trustees of The Charlevoix Trust of the U.S.A., has approval to acquire two farms at Manapouri, Southland. They are
Both include or adjoin a heritage or historic area.
“On both properties, the majority of the land is used for sheep and cattle farming, with the remaining land, approximately 15 hectares in each case, consisting for forestry, tracks and wetland. The applicant intends to farm the two properties together as a more productive and economic unit. It is proposed to increase the productivity of the existing sheep and cattle operation on the properties and to also establish a deer farming operation.
The applicant also intends to develop the tourism potential of the two properties. It is proposed to construct a five-bedroom guest house within the next twelve months and also to investigate the feasibility of constructing a luxury fishing lodge adjacent to the Waiau River. Furthermore it is proposed to further develop the existing gardens on the Freestone Hill property, which are visited by horticultural enthusiasts both from New Zealand and overseas… In addition, other eco-tourist related developments such as nature tours, scenic boat cruises, etc. will be investigated.”
· Mr M. K. Glenn of the U.S.A., who is seeking permanent residency, has approval to acquire 10 hectares of land at 13 Sharp Road, Matakana, Warkworth, Northland for $618,750. He is acquiring it from Vegar Estate Wines Ltd of Aotearoa in a joint venture with a company “associated with” Vegar Estate Wines, Matakana Valley Estates Wines Ltd, whereby he provides the money and Matakana Valley Estates Wines provides the grape-growing and winemaking expertise.
· J.D. Wade of the U.K. has approval to acquire Nevada Farms Ltd which owns 17 hectares of land at 261 Papakura-Clevedon Road, Clevedon, South Auckland, for $339,000. “The applicant is a professional polo player who has been coming to New Zealand for over six years to play polo and school polo ponies. The applicant currently has 14 polo ponies in work” on the property. He will use it as a base for his playing and training, and proposes to build stables and other facilities. It is not an economic unit for normal farming.
· McDonald’s Lime Ltd, owned 72% by Milburn New Zealand Ltd (itself owned 54.62% by the Schmidheiny Family of Switzerland and the remaining 45.38% overseas) and 28% by Broken Hill Proprietary Company Ltd of Australia (BHP), has approval to swap 32 hectares of land near a limestone quarry for neighbouring farm land. The land, at Oparure, near Otorohanga, Waikato, is “more suitable for farming and contains no limestone resource” while the land being acquired by McDonald’s is “steeply contoured, is more proximate to known limestone resources and will provide a natural buffer zone for McDonald’s for future quarrying operations”.
· Rex Brooke-Taylor of Aotearoa is involved in the sale of land for vineyards in two very similar decisions. In the first, Andreas E. Rihs of Switzerland has approval to acquire up to 80% of Kaituna Vineyards Ltd, which owns 170 hectares of land at Kaituna, Blenheim, Marlborough, for an amount “to be advised”. The land is currently bare and the company intends to develop it as a vineyard to market wine under its own label. Rihs will “become involved in the management of the company and the development of the vineyard”. In the second, J. Larter of the U.K. has approval to acquire up to 50% of Northbank Wine Estates Ltd, which owns eight hectares, also at Kaituna, for $154,688. Northbank “recently purchased land with the intention of developing the property as a vineyard and to market wine under its own label”. Larter has “contacts in the wine marketing area in the U.K. and Europe”.
· Tasman Agriculture Ltd has approval to acquire 70 hectares of land at Pyramid Road, Riversdale, Gore, Southland for $433,125 for conversion from sheep and beef use to dairying. The acquisition is interesting, because shortly after, Tasman announced that it was getting out of owning farms, and was going to progressively sell them down. At 9/8/00, it had 64 dairy units comprising over 13,000 hectares in the South Island, plus further farms in Tasmania, but was beginning to sell, two being reported sold on 5/9/00 (Press, 9/8/00, “TasAg farm sale”, p.23; 5/9/00, “Dairy properties sell for $8.1m”, p.1). Tasman is owned approximately 66% by Brierley Investments Ltd. Hence the OIC records it as being owned 47.6% in Aotearoa, 17.8% by “unknown overseas persons”, 13.2% by Camerlin Group Berhad of Malaysia, 12.7% by Societe Generale Asset Management Corporation of the U.S.A., 4.4% by Franklin Resources Ltd of the U.S.A., and 4.2% by the Singapore Government.
· Athlumney Farms Ltd, owned by the Cleary Family of Ireland has approval to buy two further farms in Southland. They are sheep and beef farms of 55 hectares, at Ryal Bush, being purchased for $371,250, and 150 hectares, at Five Rivers, for $337,500. Both are to be converted to dairying. The OIC notes that “to date the applicant has acquired 10 properties, comprising a total of approximately 1,483 hectares for conversion to dairying”. The last such acquisition was in October 1999, when the Cleary family also acquired land at Bayview, Napier, Hawkes Bay for residential subdivision.
· C.K. and F.J. McKenzie of the U.K. have approval to acquire 116 hectares at Mossburn-Lumsden Highway, Southland for $418,794. They have “identified the opportunity to use the property as a base for collection of sheep embryo recovery and live sheep for export to the United Kingdom”. It will be managed by a local farmer, under a lease arrangement.