September 2002 decisionsOne application refused - again Lion Nathan buys Wither Hills winery Australian Pharmaceutical Industries buys Zuellig’s health business in Aotearoa McCain Foods buys land for access to its Feilding processing plant More Palmerston North land for Uruguayan golf course and farm Universal Homes of Singapore buys land in Mangere for subdivision New Zealand Forestry Group sells six more blocks of Ngaruawahia land Summary statisticsAll investments As for August, the value of investment approved in the year to September 2002 is considerably higher than for the previous (September) year, but the net value (i.e. disregarding sales from one overseas investor to another) is considerably lower. By far the greatest part of the value of the approvals is for sale from one overseas investor to another.
Investment involving land Gross sales of land approved by the OIC during the years to September have increased in area, though net sales are static. Refusals (above) have risen in number, area and value, but are still a tiny proportion of the total.
One application refused - againB R Pettitt of Hong Kong has been refused approval – for a second time – to acquire 348 hectares at 165 Golden Valley Road, Waihi, Coromandel for $4,200,000 from Montrosa Schuler Holdings Limited of Aotearoa.
In February 2002, the Applicant applied for consent to acquire the subject property with the intention to continue the existing dairy heifer grazing operation. The application was refused as it was not considered to be in the national interest.
The Applicant having changed solicitor and farm consultant has submitted a second application, with a proposal to improve the productivity and income derived from the property, to satisfy the statutory criteria. In this regard the Applicant’s farm consultant recommends diversifying from the current dairy heifer grazing regime to deer farming. It is proposed that the conversion will commence immediately and be undertaken progressively over a five-year timeframe.
The Commission considers that the overall proposal is not in the national interest as there are a number of uncertainties that exist as to whether the proposal will or is likely to result in an overall net benefit in terms of the national interest criteria.
In February the application was a joint one between Pettitt and Y W Y Leung of Hong Kong. That time we were informed that
The property contains a substantial residential dwelling of 513 sq. m. It adjoins the foreshore with 1.5-2 kilometres of beachfront and has views of Waihi Beach and Tauranga Harbour. The property is currently utilised for grazing of dairy heifers and calves for other local farmers. The Applicant proposes to continue grazing stock owned by other local farmers but limiting it to heifers solely and increase productivity through more intensive farming methods. It is claimed that this is likely to result in increased weight gain of the stock. Lion Nathan buys Wither Hills wineryLion Nathan Limited, owned 46.13% by Kirin Brewery Company Limited of Japan, 27.77% in Australia, 18.63% in Aotearoa, 6.47% in the U.S.A., and 1% elsewhere, has approval to acquire the Wither Hills Group winery for $52,000,000 from B, J and A Marris of Aotearoa. This includes: · 379 hectares of freehold land at Ben Morven Road, New Renwick Road, St Leonards Road, and Rarangi, Marlborough; and · 20 hectares of leasehold land at Omaka Aerodrome, Marlborough
According to the OIC, Lion Nathan
proposes to acquire one of New Zealand’s leading and most awarded premium wine producers, Wither Hills. Wither Hills, established in 1994, produces world class Sauvignon Blanc, Chardonnay, and Pinot Noir from its vineyards in the Wairau Valley.
The proposal will enable the Applicant to further build its presence in the wine market following its recent acquisition of six vineyards. The vendors are to remain within the business in a management capacity. The Applicant intends Wither Hills to be its flagship New Zealand wine brand, and a key component of its international wine strategy.
The Applicant is proposing to expand the current business by investing capital to plant approximately 160 hectares of land that is currently unplanted and expanding the existing winery to meet the increased volume of grapes.
According to Reuters (Press, “Lion buys Wither Hills”, 3/9/02, p.C1), “Wither Hills is expected to make around 80,000 cases of wine in the 2002 year from its Wairau Valley property. Around 70% of production is in sauvignon blanc, with the rest chardonnay and pinot noir.” It “was established in 1994 by father and son team Brent and John Marris”. This appears to be Lion’s consolation prize for losing the battle for New Zealand’s biggest wine maker, Montana, to Allied Domecq of the U.K. in 2001.
The acquisition of the six vineyards referred to by the OIC was approved by it in August 2002. It allowed Lion Nathan to acquire 59 hectares at Rapaura Road, Wrekin Road, Stump Creek Land, Hawkesbury Road, Old Renwick Road and St Leonards Road, near Blenheim, for $12,937,500 from Ngai Tahu Vineyards Limited. Quotable Value manager of valuation, Blue Hancock, told NZPA that Ngai Tahu paid $9 million for the properties only two years ago. The new price is $219,000 per hectare. Hancock said that the highest price until then for Marlborough land producing grapes had been set a few weeks earlier at $165,000 a hectare, and bare land was selling at between $20,000 and $100,000 a hectare depending on its locality – up from $7,000 to $8,000 in 1999. Prices were double those in the Hawkes Bay wine areas (Press, “Lion buys more vineyard land”, 6/9/02, p.B4). See our commentary for that month for further details of Ngai Tahu purchase.
The Independent’s wine columnist, Bob Campbell, estimated in August 2002 that “75-80% of ‘New Zealand’ wine is made by companies with offshore owners” (The Independent, “Made in NZ. Owned anywhere but here”, 14/8/02, p.20).
These trends have led to a warning from a Marlborough farm consultant:
“I have real concern for Marlborough 10 years down the track, especially with the trend to increasing foreign ownership of Marlborough’s grape-growing and wine industry,” says Agriculture New Zealand’s Ian Blair. Marlburians are becoming increasingly apprehensive of becoming “peasant labourer workers working for national or foreign interests”, he says.
“Much as we might think the dominant emphasis on viticulture and its mushrooming expansion will benefit Marlborough, the reality is that unless labour payments are adequate, labour will always be a problem.”
He warns that no agricultural primary sector is immune from the cyclic nature of the marketplace. “Wine won’t always be on a high,” he cautions. Organisations promoting Marlborough need to take a more balanced approach to a wider range of diversity of sustainable primary production in the region, he says.
Mr Blair says the potential for viticulture has forced land values to skyrocket so that owners find it difficult to refuse lucrative offers from investors, often foreign companies. “The tragedy is that Marlborough’s industry is being driven by market forces and money without any degree of local, social and long-term, economic responsibility.”
Marlborough’s economic success in weathering tough, turbulent economic times such as the 1980’s has been due to its diversity and the strength of family-owner farms that see money turned over locally, he says. But a monoculture, increasingly owned by large corporate interests, results in most profits and much spending leaving the region or the country. (Business Monthly, “‘Peasant-labourer’ wine monoculture feared”, by Tony Orman, July 2002) Australian Pharmaceutical Industries buys Zuellig’s health business in AotearoaAustralian Pharmaceutical Industries Limited (API) of Australia has approval to acquire PSM Healthcare Limited, Stevens KMS Equities Limited and Zuellig Pharma Limited for $80,500,000 from Interpacific Holding Limited, owned by the Zuellig family, of Switzerland.
The Applicant’s principal activities are the manufacture and wholesale distribution of pharmaceutical and allied products to hospitals and pharmacies and the provision of finance and retail services to pharmacists throughout Australia. It has no existing New Zealand business. The Applicant proposes to acquire the New Zealand healthcare business of Interpacific Holding Limited, which includes pharmaceutical distribution, retail pharmacy services and the manufacturing of “over the counter” medicines, toiletries and pharmaceutical medicines in New Zealand. The Applicant expects the proposal will result in an enhancement of market position in Australia and New Zealand, and provide logistical support and improvements to the health care industry as well as retail pharmacy expertise to help grow the New Zealand distribution and retail pharmacy business.
In fact Zuellig is not exiting the business: as part of the deal, it is taking a 13% shareholding in API, which is buying Zuellig’s Australian business in the same deal. A Zuellig media release states:
Integrated healthcare services company, API, has acquired from Interpacific and Interpharma their Australian and New Zealand operations for a maximum consideration of approximately A$113 million. … The businesses acquired have a combined annual turnover exceeding A$600 million. …
The Interpacific Group will hold approximately 13% of API’s expanded issued capital once the acquisitions are completed.
Interpharma, a wholly-owned subsidiary of Interpacific (formerly known as “The Zuellig Group”), is a holding company comprising various dynamic and sustainable core businesses in 13 countries across Asia Pacific, servicing over 125 international research-based pharmaceutical manufacturers.
Group businesses include Zuellig Pharma Distribution, Interpharma Manufacturing, Pharmalink sales and marketing services, as well as the B2B platforms AsiaRx and Zip-Online, and HealthCare Consulting…
The three businesses to be acquired by API are:
· Zuellig Pharma Limited: located in New Zealand, Zuellig Pharma is the market leader in pharmaceutical distribution, hospital distribution and retail pharmacy services. Zuellig Pharma operates from 10 branches with 360 staff and supplies 21,000 different products to over 7,000 customers. It is expected to have a turnover in excess of A$500 million for the 12 months to 31 December 2002
· PSM Healthcare Limited: located in New Zealand, PSM is a leading manufacturer of pharmaceutical medicines and consumer toiletries. PSM operates from two manufacturing sites, employs 200 staff and is expected to have a turnover from Australia and New Zealand of approximately A$30 million for the 12 months to 31 December 2002
· Halas Dental Limited: Halas Dental is a market leader in dental products distribution in Australia and New Zealand. Halas Dental operates in all states in Australia and also New Zealand, services over 11,000 customers and employs 228 people. Halas is expected to have a turnover of approximately A$100 million for the 12 months to 31 December 2002
The acquisition also includes the leading retail brands throughout New Zealand – Amcal, Guardian and Vantage (banner groups in New Zealand), and a 40 per cent holding in Unichem (the leading banner group in New Zealand).
(see “API Buys Australian and New Zealand Operations of Zuellig Pharma: API Buys Aust And NZ Operations Of Zuellig In Exchange For Strategic Shareholding In API”, http://www.zuelligpharma.co.nz/ap_news-detail.asp?index=1659)
In April 1993, Zuellig’s Stevens KMS Corporation Ltd took over Community Pharmacy Ltd making the group the only national pharmaceutical wholesaler, with about 40 per cent of New Zealand’s pharmaceutical wholesale market, and the loss of some jobs. The group also owns the tractor and farm equipment company, CB Norwood Distributors.
Zuellig’s local web site (http://www.zuelligpharma.co.nz/cntyprof_nz.html) describes its operations in Aotearoa (Zuellig Pharma Ltd) as follows:
The Zuellig Pharma Group has been part of New Zealand’s dynamic pharmaceutical industry since 1988 when it acquired a controlling interest in Stevens KMS Corp and renamed it Zuellig New Zealand. Five years later, it bought New Zealand’s largest and only other national wholesaler, Community Pharmacy Ltd, to become the dominant player in the country’s wholesale pharmaceutical industry. During this same period, Zuellig Pharma also acquired a third party distribution operation and more recently, a hospital and client services division.
Within the Zuellig Pharma operation, the Wholesale Division operates out of 10 branches that deliver both Ethical and OTC [over the counter] products to 1100 retail pharmacies across the country. Providing a full line national distribution service, the Distribution Division includes direct to patients and even other wholesalers in competition with Zuellig Pharma’s own Wholesale Division. The Hospital Division is also run out of one central location primarily offering specialist logistic services to one of New Zealand’s largest Crown Health Enterprises (CHE), Health Waikato.
As well as being poised to take advantage of any contracting out or privatisation of hospital and other health services, the companies are in the centre of the controversy over whether pharmacies should be deregulated to allow corporate ownership by investors who are not qualified pharmacists. In September 2001, Pharmacy Today reported (http://www.pharmacy-today.co.nz/cover_stories/sept01_pharmalliance.html):
Unichem shareholders have voted to change the name of the group’s holding company to Pharmalliance NZ Ltd, paving the way for corporate ownership of pharmacies should deregulation changes allow.
The move also puts a structure in place that would comfortably accommodate the merging of pharmacy brands now under Zuellig/Unichem ownership.
There is the possibility that Pharmalliance could become the holding company for more than 350 pharmacies, representing around 55% of the pharmacy OTC market.
And further down the track, Unichem chief executive Tim Roper doesn’t rule out the possibility of a listing on the stock exchange.
At this stage it’s only theory, but with deregulation, Tim Roper sees Pharmalliance having corporate ownership of pharmacies. On the group’s current turnover of $300 million, a profit of $30 million would be feasible if there was company ownership rather than individual ownership.
And goodwill on pharmacies could increase with the removal of a defined buyer market, which Tim Roper believes depresses the value of pharmacies.
Zuellig already has 100% ownership of Vantage and the former Sigma brands - Amcal, Guardian, Pharmacycare and PPS. It also has a 40% shareholding in Pharmalliance (formerly Unichem Chemists Ltd) - Unichem, Dispensary First and Pharmacy Management Ltd (the company that manages the three-way agreement between Unichem, Zuellig and ProCare, and Unichem’s Woolworths’ contracts).
The parent Zuellig Pharma is a large Asia-Pacific operation. It describes itself as follows (http://www.zuelligpharma.co.nz/ap_aboutus.html) :
Zuellig Pharma is the only truly regional distributor of pharmaceutical and healthcare products in the Asia-Pacific region. At more than four times the size of our nearest competitor, we are the industry leader in providing distribution, marketing and manufacturing services. Today, we serve over 125 multinational research-based pharmaceutical manufacturers in 14 countries and more than 80,000 customers including hospitals, clinics, doctors and pharmacies. McCain Foods buys land for access to its Feilding processing plantMcCain Foods (NZ) Limited, owned by the McCain Family of Canada, has approval to acquire 0.076 hectares at Darragh Road, Feilding, Manawatu for $8,550 from Waikawa Limited of Aotearoa. Transnational McCain Foods has processing plants in Feilding, Hastings and Timaru.
The subject property adjoins the Applicant’s Feilding potato processing plant acquired in 2001. The vendor has recently undertaken a subdivision of land that adjoins the Applicants land. It was a requirement of the consent to the subdivision by the Manawatu District Council that the subject property be sold to the Applicant to provide a second access to the processing plant. The proposed acquisition will secure further access to its Feilding processing operation which is likely to lead to an enhancement of safety and traffic flows at the processing plant and efficiencies through improved product flow.
The purchase of the Feilding plant (from Heinz-Wattie Ltd) was approved in OIC decisions in May and September 2001. See our commentaries for those months for further details. More Palmerston North land for Uruguayan golf course and farmValor Ideal Limited, owned 50% each by Frederico Chamyan and Jose Richard Chamyan, both of Uruguay, has approval to acquire 3.6 hectares at Railway Road, Palmerston North, Manawatu for $110,000 from C and DB Carrick of Aotearoa.
The property adjoins approximately 80 hectares of properties that Valor Ideal has previously obtained consent to acquire. “Approximately 33 hectares of these properties is utilised as a golf course and the remaining 47 hectares for farming cattle.”
The subject property has been subdivided by the vendor and has no legal access to any legal road and is surrounded by land already acquired or subject to unconditional sale and purchase agreements by the Applicant. The property is currently utilised by the vendors as a residence and as a hobby farm carrying only a few head of cattle. The proposal will enable the Applicant to increase productivity from their farming operation. The expanded operation will generate greater efficiencies to the Applicant’s farming operations through economies of scale. It is intended longer term that the acquisition will provide additional land for the proposed expansion of the golf course and other facilities including an indoor recreation facility, and a proposed industrial park if the land is rezoned.
The Chamyan’s company has been steadily buying up land in the area, the last such purchase being approved in July 2002. See our commentary for that month for further details. Universal Homes of Singapore buys land in Mangere for subdivisionUniversal Homes Limited, owned 76.1% in Singapore and 23.9% by China Merchant Holdings International Limited of China, has approval to acquire 0.99 hectares at Peninsula Road, Mangere, Auckland for $1,520,000 from Pukaki Properties Limited of Aotearoa.
According to the OIC, Universal Homes
is a predominant player in the Auckland housing market with a principal activity in the development of blocks of land in the Auckland region for the construction and sale of residential house and section packages. The Applicant is continually searching for land for residential development to meet the demands of the population. The Applicant proposes to develop the subject land which comprises 20 vacant formed residential lots and construct 20 homes for resale. The development is likely to commence during 2003 once the subdivision is complete. The construction of the homes is expected to be completed within approximately 12 months.
Universal’s last purchase, 16 hectares in Whangaparaoa, Auckland, was approved in June 2002. See our commentary for that month for details. New Zealand Forestry Group sells six more blocks of Ngaruawahia landSix groups of investors from Taiwan and China have approval to acquire land at State Highway 22, Te Akau Road, near Ngaruawahia, Waikato from the New Zealand Forestry Group Limited, which is owned 76% by Wesley Garratt of Aotearoa and 24% by J Hong of Taiwan. They are all members of the Brooklands Forest Group, which “has entered into an arrangement with New Zealand Forestry Group, to develop approximately 1,200 hectares of land at Ngaruawahia”. They are: · Hui Lin, Jie Weng and Jie-Yang Lin of China, 18 hectares, for $113,280; · Kuang-Jui Chin and Jung-Kuei Hung of Taiwan, 24 hectares, for $153,600; · The Kun Tech’s Home Family Trust, 19 hectares of Taiwan for $117,760; · The Kuo and Chen Family Trust of Taiwan, 20 hectares for $125,440; · The Lu Chien Hsing Family Trust of Taiwan, 38 hectares, for $242,560; and · The Tsai Sisters Family Trust of Taiwan, 19 hectares, for $124,160. These sales are like many in this and other regions organised by New Zealand Forestry Group, the last such sale being in August 2002, also in Ngaruawahia, with investors in the Brooklands Forest Group. The investors provide the money, while New Zealand Forestry Group manages the development of the forestry operation. This is the first time however that a buyer has been from China. Land for forestry· Buller Forest Ventures Nominees Limited, owned 66% by Aoteoroa Land and Livestock, LLC of the U.S.A., 17% by Jeremy Michael and Charlotte Elizabeth Robertson of the U.K., and 17% by William John Baxter Heffernan of Aotearoa, has approval to acquire 12 hectares at Main Road, Owen River, near Murchison, Nelson for $110,250 from SR and BJ Allen of Aotearoa. Buller Forest Ventures, “whose shareholders are experienced in the forestry and timber industries, proposes to acquire the subject property, which is currently partially affforested, to create a long-term forestry investment. The investment includes management for existing forestry plantations, creation of new plantations and conducting subsequent timber harvesting operations and reforestation of areas harvested.” · Teele (Holdings) New Zealand Limited, owned by Jaren Forest Leet of the U.S.A., has approval to acquire 40 hectares at Tahakopa Valley Road, Catlins, Southland for $196,875 from Catlins Forestry Company Limited of Aotearoa. Teele “proposes to acquire three forestry blocks that comprise approximately 10 hectares of native timber and 30 hectares of pinus radiata established approximately six years ago. The subject property comprises three of nineteen blocks, which have been subdivided by the vendor. The reason for the subdivision is to assist in marketing the forestry blocks to potential investors with the aim of attracting development capital to assist in ongoing development of the vendor’s forestry operation. The forestry blocks have been marketed locally since February 1996. To date four blocks has been sold. The sales by the vendor are necessary to assist with ongoing silviculture and development costs of the forest. The proposal can be viewed as a joint venture arrangement with the overseas party providing the development capital and the New Zealand vendor the forestry management skills.” Land for wine· Montana Group (NZ) Limited, owned by Allied Domecq PLC of the U.K., has approval to acquire 8.0 hectares of freehold situated at Tiniroto Road, Patutahi, Gisborne for $358,593 from GR and HM Gaukrodger of Aotearoa. Montana “is the largest participant in the New Zealand domestic wine business and future growth opportunities are limited. The Applicant has identified the acquisition of further vineyards or land for development for the growing of grapes as a way of being able to compete more effectively in the national and international wine markets.” · Berridge Vineyard Estates Limited, owned by Richard David Berridge of the U.S.A., has approval to acquire 4.0 hectares at State Highway 6, Gibbston Valley, Queenstown, Otago for $450,000 from Gibbston Ventures Limited of Aotearoa. Berridge “is proposing to establish a viticultural operation in Otago and is looking at acquiring a number of properties within the locality. The property the subject of this application is the seventh property to be acquired.” The land adjoins two other properties whose acquisition by Berridge was approved by the OIC in October 2001 (see our commentary for that month). They were 5.7 hectares and 1.8 hectares for $618,750 and $360,000 respectively. He had already bought three other blocks of land totalling 80 hectares in July and August 2001. The present block will be used for producing Pinot Noir. “The grapes from this vineyard and the others that the applicant proposes to establish are to be processed at a winery that the applicant is establishing on one of his other vineyard properties. It is intended that the wine will be marketed both locally and overseas, primarily in the United States where the applicant has extensive market connections.” Berridge’s last purchase was in January 2002 when he acquired 129 hectares at State Highway 6, Wanaka Road, Cromwell, Otago for $1,265,625. Other rural land sales· Karreman Bloodstock Limited, owned by Dirk and Anne Marie Karreman of Australia, has approval to acquire 81 hectares at Roto-o-Rangi Road, Cambridge, Waikato for $5,800,000 from T W Jarvis of Aotearoa. Karreman Bloodstock proposes “to acquire the land and buildings of The Oaks Stud, located near Cambridge. The Applicant and vendor have previously settled the sale of the business (comprising the farm equipment, mares, weanlings, shares in certain stallions, goodwill and a short-term lease of the land and buildings). The Oaks Stud was established in 1987 to breed, rear, train and sell racehorses.” The Karremans “are experienced in the thoroughbred breeding industry” and “intend to further develop The Oaks Stud’s reputation as a world class thoroughbred nursery”. · Anthony Arthur and Susan Mary Brandreth of the U.K. have approval to acquire 169 hectares at 209 Tavistock Road, Kohika, South Canterbury for $984,375 from DJ and HM Coles of Aotearoa. They “intend to relocate to New Zealand under the Long-Term Business Visa scheme and acquire the subject property as a permanent residence. The Applicants are experienced self-employed farming contractors in the United Kingdom, and propose to utilise the subject property as a mixed sheep/cropping unit and as a base for a farm contracting business.”
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