An application to buy a “lifestyle” property has been refused by the OIC. David James Hill and Valerie Reppelin-Hill of the U.S.A. have been refused approval to acquire 11.3 hectares at 225 Tyntesfield Road, RD6, Blenheim, Marlborough for $652,500 from Richard Philip Bramwell and Wendy Ann Bramwell of Aotearoa. The OIC states:
The Applicants propose to acquire the subject lifestyle property. The Applicants’ objective is to acquire a property for lifestyle purposes and to establish it as a viable investment property. In the near term it is proposed to renovate the existing residence and plant 4 hectares of the property in an organic vineyard producing Pinot Noir. The remaining land is likely to be utilised for sheep grazing and other agricultural purposes such as olives and fruit trees. In the longer term, the Applicant intends to build another residence and establish a bed and breakfast accommodation operation and establish a boutique winery on the property.
The proposal does not meet the lifestyle policy which requires an applicant:
(a) to be taking up New Zealand permanent residency with 12 months of the date of approval; or
(b) to be undertaking significant developments on the property and converting it from a lifestyle property into a viable investment property; or
(c) to have significant investments in New Zealand.
[Decision number 200320094.]
ANZ Banking Group (New Zealand) Ltd, owned 95.67% in Australia and 4.33% in Aotearoa, has approval to acquire NBNZ Holdings Limited for $5,700,000,000 from Lloyds TSB Group plc of the U.K.
NBNZ Holdings is the owner of the National Bank of New Zealand, one of the oldest banks in the country, founded 1872 in London and still U.K.-owned. It grew by acquisition including in recent years the Rural Bank and Country Bank. Of the main banks, it was an exception for two reasons: it generally scored higher than the other large banks in customer satisfaction (though still behind the remaining, small, New Zealand-owned banks); and it was U.K. rather than Australian owned. The price was a record for a company takeover in Aotearoa.
The purchaser, ANZ, regularly scores near the bottom in customer satisfaction. Purchaser of the privatised Postbank – now almost totally digested within the ANZ banking intestines – its poor service, especially to small and low-income customers, contributed significantly to the public support for setting up the government-owned Kiwibank to fill the gap. According to the Commerce Commission, quoting a 2002 Auckland University Consumer Survey, in customer satisfaction, “TSB ranks the highest, followed by National and ASB. ANZ, BNZ and Westpac all rank third.” Following the announcement that National was on the market however, 18% of its customers said they were considering jumping ship to another bank according to the University’s 2003 survey. TSB was still top, followed by ASB and BNZ. Only 52% of ANZ’s customers said they were satisfied or very satisfied (27% saying they were considering changing banks), sharing the bottom of the business category with Westpac. A later survey by BRC Sherwin Chan and Walshe of 301 Wellington companies showed that 41% banked with National and of those, 51% said they would transfer to another bank if ANZ bought National (Commerce Commission Decision No. 507, 25/9/03, p.40-41; New Zealand Herald, “Bank’s customers get jitters”, by Paula Oliver, 13/10/03; Press, “Poll warns of flight from bank”, by Mathew Loh Ho-Sang, 27/10/03, p.B9).
National was the largest of the locally incorporated banks (which do not include Westpac) by total assets, with $40.783 billion compared to the next biggest, BNZ, at $38.992 billion (Reserve Bank, “G1. Information extracted from the Key Information Summaries of locally incorporated banks”, as of 30/6/03). Westpac operates in Aotearoa as a branch of its Australian parent, and the branch had total assets of $40.946 billion at 30/6/03, making it (just) the largest before this takeover. However, Westpac has 200 outlets, BNZ 181 and National 159; ANZ, the leader in closing branches, had 143 (Westpac Westpac General Disclosure Statement, June 2003; KPMG 2003 Financial Institutions Performance Survey).
ANZ had $29,166 billion in total assets, so the ANZ/National combination will be the largest bank by far, with an initial total of $70 billion in total assets, though this may well shrink if, as is expected, National customers leave for other banks. ANZ and National together have 34.2% of banking assets (which was not a problem for the Commerce Commission which gave its approval to the sale), ahead of Westpac (19.0%), BNZ (18.5%) and ASB (11%). Some observers noted that the takeover would leave “a gaping hole in New Zealand’s financial market system, significantly lessening liquidity… National is a major market player in the $26 billion Government stock market, which comprises just seven pricemakers, and has a significant involvement in the $9b corporate bond market. In foreign exchange, … National was recognised as having a strong currency business, and that its departure from that market could have implications for liquidity.” (Press, “National Bank for sale?”, 4/6/03, p.B10; “Anti-trust rules no bar to bank sale”, 10/6/03, p.C2; “Lloyds TSB says buyers for National”, by James Weir, 13/9/03, p.C3.)
The overseas ownership of our banking system (the big five had 84% of the total assets of all 17 registered banks operating in New Zealand according to the Commerce Commission) for once had the Reserve Bank and others worried, not so much because of the overseas ownership as such, but because of the Australian ownership of all four (was five) biggest banks – ANZ/National, ASB, BNZ, and Westpac. (The smallest of the Big Four is ASB – owned by Commonwealth Bank of Australia (CBA) – with $27.511 billion in total assets. The biggest of the remaining locally registered banks is Netherlands-owned Rabo New Zealand, which is a tenth the size with total assets of $2.770 billion at 30/6/03.)
The approval of the Reserve Bank was required for the takeover. The Reserve Bank Amendment Act 2003 requires its consent to a purchase of more than 10% of a bank registered in Aotearoa. In giving its approval, the Reserve Bank’s Governor, Alan Bollard commented:
In giving consent, we recognised that, under certain circumstances, all our large banks being Australian-owned could increase our system’s exposure to stress emanating from the Australian economy and financial system. We will be considering this further and have let it be known that we will take further measures to manage this risk if necessary. (“After the National Bank acquisition: living with big Australian banks”, address to the Australasian Institute of Banking and Finance, by Dr Alan Bollard, Governor, Reserve Bank of New Zealand, 6/11/03.)
Earlier, he had warned that if the purchaser of National was from Australia (as in the end it was),
all systemically important banks in New Zealand would be owned solely out of one country. We have kept in touch with the parties and have informed them of our general views on this. Our position is that we would expect there to be no material transfers of National Bank business into branch form, and we would expect further discussions before any movement of technical capacity that reduced the bank’s ability to continue to operate on a stand-alone basis under New Zealand statutory management. We would also be looking at the adequacy of current risk-management requirements for systemically important banks in the context of any further aggregation of country risk. (“Financial System Regulation in New Zealand”, address to the Finance Sector Ombudsman Conference by Dr Alan Bollard, Governor, and Tim Ng, Manager, Financial System Policy, Reserve Bank of New Zealand, 25/7/03.)
The Reserve Bank attached a number of conditions to the takeover. In making them, Bollard commented:
These requirements are aimed at reinforcing the Reserve Bank’s bank local incorporation policy. We are aiming to ensure that the boards of locally-incorporated registered banks have unambiguous legal authority and the practical ability to control all the functions, systems and management capacity necessary to operate on a standalone basis.
These concerns are driven by the gutting of the corporate and processing (such as payments clearing) functions of banks after overseas takeover, as has occurred with Trustbank and Postbank, with increasing functions being moved to Australia. That would put the viability of the local operation at risk if the Australian parent got into difficulties – and also milks Aotearoa of job opportunities, expertise and the services required for head office functions. In addition, the Reserve Bank is known to be concerned at the position of the local branch of Westpac. Australian legislation ranks Australian creditors above New Zealand (and other overseas) creditors in a wind-up. Westpac states:
The Banking Act 1959 (Australia) gives priority over Australian assets of the Overseas Bank to Australian depositors. Accordingly, New Zealand depositors will rank after Australian depositors of the Overseas Bank in relation to claims against Australian assets.
However, the Westpac Banking Corporation Act 1982 (New Zealand) gives New Zealand depositors priority to the New Zealand assets of the Overseas Bank. Accordingly, New Zealand depositors will rank ahead of other unsecured creditors of the Overseas Bank in respect of claims against the New Zealand assets of the Overseas Bank. Based on the audited statement of financial position as at 30 September 2003 the value of the New Zealand assets is greater than the New Zealand deposit liabilities.
The conditions the Reserve Bank placed on ANZ (available at http://www.rbnz.govt.nz/news/2003/0141629.html) were described by Bollard in his November address as follows:
The Reserve Bank’s conditions associated with the acquisition were in four main areas. First, any transfers or outsourcing of the National Bank’s core banking functionality, including by way of an operational merger, will require the Reserve Bank’s further consent. Core functionality includes all management, operational capacity and systems necessary to operate the bank on a standalone basis in the event of failure of an outsourcing provider, including a parent bank. The intent of this requirement is to ensure that any outsourcing does not undermine the legal authority and practical ability of the directors or statutory manager of the National Bank to run the bank on a standalone basis if the need should arise. This doesn’t necessarily mean that the core functionality must be in New Zealand – it means that legal and practical access to it in a crisis must be unimpeded.
The second area where we imposed conditions of consent strengthens the first. We require that the National Bank chief executive’s employment contract be between that person and the board of the National Bank, and that any amendments to the National Bank’s constitution have our consent. The intent of these measures is to ensure that there is coherence in the National Bank’s local accountability arrangements and that the local board remains in a strong position to exercise independent and meaningful governance of the management of the National Bank, in the best interests of the National Bank, in good times and in bad. This requirement should be seen as a means of reinforcing our emphasis on the role of directors in overseeing a bank’s operations, and our ability to manage a crisis involving the failure of any large bank in New Zealand.
Third, we require all prospective appointments of directors or senior executives to the ANZ or the National Bank to be advised to us and the appointments made only if we have no objection. This measure ensures that the appointment process is in line with our new obligation introduced by the RBNZ Amendment Act to have regard to the suitability for their positions of directors and senior managers of registered banks. Generally speaking we would be unlikely to object to an appointment unless there were strong reasons to believe the individual would be unsuitable for a position of responsibility over a registered bank.
Finally, we require that each registered bank in the ANZ Group maintain a level of capital in line with our current policy on capital adequacy for consolidated banking groups. This tightens up the capital adequacy rules a little in this case, to account for the fact that the ANZ Group now contains two systemically important registered banks. We regard it as important that each of these banks maintain adequate capital on a solo basis.
None of this of course changes fundamental problems of overseas control of our banking system.
It also assumes that National will continue as a separate entity to ANZ.
National had 4,777 staff in 2002, ANZ 3,515. At an early stage in the sale process, unions expressed concerns at staff layoffs. However the bank said that job losses were expected to be by non-replacement of staff rather than sackings. The combined group was expected to make cost savings of $128 million a year after three years, at a cost of $230 million in “integration costs”. Branches would be closed: 33 branches out of the two networks were close together. If the two banks merged completely, National’s head office in Wellington was at risk: aside from it, only Kiwibank, Taranaki Savings Bank and Westpac have head offices outside Auckland (Press, “Banks may offer share float”, by James Weir, 25/10/03, p.C1; “Anderson ‘committed’ to job”, by James Weir, 29/10/02, p.B10; KPMG survey).
The sale of National was conducted for Lloyds TSB by Deutsche Bank. An alternative to the trade sale that eventuated (CBA, Westpac and HSBC were also said to be interested) would have been to float the bank on the New Zealand share market. According to some observers (such as Bryan Gaynor) that could on past experience have given Lloyds TSB a higher price. Evidence for this was provided when ANZ subsequently suggested it might partially float the New Zealand bank by 2006. Another alternative was the New Zealand Black Horse Holdings consortium led by Waikato entrepreneur Phillip Verry (see “Central North Island Forests sold to Harvard University fund” in our commentary on the October 2003 decisions) and his son Martin. He claimed to have backing from a European financial institution, but complained that his offer was “never seriously considered” by Lloyds TSB because “it wanted quick cash”. He said “New Zealanders had been let down badly”. (Press, “ANZ seeks consent to buy National”, by Mathew Loh Ho-Sang, 14/8/03, p.B6; “Protect NZ customers – MP”, 2/9/03, p.C2; “Banks may offer share float”, by James Weir, 25/10/03, p.C1).
Either alternative would have saved New Zealand a significant proportion of the profits National largely remits back to the U.K. – a record $503 million in 2002. According to KPMG’s 2003 annual survey of New Zealand financial institutions, the banks are hugely profitable – Bryan Gaynor compares the $2.555 billion net earnings of all the registered banks in 2002 with the $622 million reported by the 68 largest listed New Zealand companies in the same period. The banks were worth about $36 billion, “only slightly less than the total value of the New Zealand sharemarket” (New Zealand Herald, “NZ should have stake in banking sector”, by Bryan Gaynor, 21/6/03, p.C2).
Some farmers were concerned at the prospect of the sale. Many had become customers via National’s purchase of the Rural Bank, and it is a major rural lender with 40% of the rural market. ANZ would add another 10% market share. Farmers were worried that the new owners would offload more risky debtors such as in the rural sector (Rural News, “Uncertainty surrounds bank sale”, by Gareth Gillatt, 23/6/03). National does carry a slightly riskier portfolio than the other banks, but at a very low level. According to the Reserve Bank and Westpac, National and Westpac had the highest impaired assets ratios of 0.2% of total assets (as does the much smaller Rabo New Zealand Bank, which has primarily rural customers), compared to a range of 0.01% (Taranaki Savings Bank) to 0.12% (BNZ). ANZ’s ratio was 0.1%.
Lloyds TSB had a record of using its New Zealand subsidiary as a source of emergency capital. National Bank has twice lent more money to its parent than Reserve Bank rules allow. In 1995, Lloyds (in a parallel to what happened here the following year) bought the U.K. Trustee Savings Bank, TSB, for $2.3 billion. The National Bank lent $1.06 billion to TSB in the first three months of that year, and exceeded the limit of 75% of total capital required by the Reserve Bank as a condition of the Bank’s registration. The loan was “unwound” at the end of 1995, but repeated again (to the tune of $1.02 billion) in the first three months of 1996, taking 21% of its capital. The Reserve Bank showed itself to be toothless in this process: it did little but get the National Bank to promise not to do it again (Press, “Nat Bank lending exceeds RB rules”, 29/6/96, p.27).
[Decision number 200320085.]
In a decision almost completely suppressed until released on appeal in March 2004, Antipodean Properties Ltd, owned 50% by Jonathan Berman of the U.K. and 50% by The William Pears Group of Companies Ltd of the U.K., has approval to acquire 0.58 hectares at Three Kings Plaza, 540 Mt Albert Road, Auckland for $6,750,000 from Three Kings Lessor Limited of Aotearoa.
The OIC states:
The Applicant who is the New Zealand subsidiary of a United Kingdom based private property investment group is proposing to establish a commercial property portfolio in New Zealand. The Applicant has previously received consent to acquire a portfolio of nine retail properties located at Auckland, Wellington, Christchurch and Dunedin and the Three Kings Shopping Centre. The Applicant is now proposing to acquire the Three Kings Plaza which adjoins the Three Kings Shopping Centre and is linked by shared pedestrian rights of way and the use of common parking areas. The acquisition is likely to result in a more efficient management of the two centres.
Antipodean's last purchases were in August 2003. See our commentary for that month for further details.
[Decision number 200320089.]
Tiong family’s Neil Construction buys Albany, Auckland land for subdivision
Neil Construction Limited, owned by the Tiong Family of Malaysia, has approval to acquire 0.03 hectares at Rising Way Road, Albany, Auckland for $16,875 from Seabar Developments Limited of Aotearoa. The land “includes/adjoins land that exceeds 0.4 hectares which is provided as a reserve, a public park, for recreation purposes, or a private open space”.
The Applicant proposes to acquire the subject property to add it to the company’s portfolio of residential subdivision land in the Auckland region. The subject property adjoins a 7.5175 hectare and a 4 hectare block previously acquired by the Applicant. The subject land is surplus to the adjoining developer’s requirements as they could not be usefully included in their development. The land provides additional road frontage to the Applicant’s planned development. The subject land will be developed in conjunction with the adjoining land owned by the Applicant which is to be undertaken in two stages with a likely completion date in 2005.
Neil Construction last received approval to buy land for subdivision – in Manukau – in October 2003. See our commentary for that month for further details.
[Decision number 200320088.]
Waihi Gold Company Nominees Ltd, owned by Newmont Mining Corporation of the U.S.A., has approval to acquire a further home in Waihi, Coromandel. This one is 0.11 hectares at 28c Roycroft Street, Waihi , Coromandel for $35,000 from Mark Christopher Prins of Aotearoa.
In December 2001, a substantial ground subsidence occurred at Barry Road in Waihi which resulted in the destruction of two properties and placed another eleven properties at risk. The subsidence was associated with historic mine workings undertaken by companies no longer existing. An agreement was reached between the Applicant, the Hauraki District Council and the Earthquake Commission to enable compensation and/or relocation for the affected property owners. As part of the agreement the affected properties were transferred to the Applicant. Subsequently, a further 25 properties were identified as being subject to a risk of ground collapse as a result of the historic mine workings. These properties are in the process of being transferred to the Applicant. The Applicant has now been approached by a number of property owners in the immediate vicinity who consider that the market value of their properties has been adversely affected. The Applicant has developed a “Property Sales Assistance Programme” under which, where it can be shown that the property’s market value has been adversely affected, the Applicant will acquire the property at market value. The property the subject of this application is part of the programme. The proposed acquisition will also consolidate the buffer between the Applicant’s mine and other surrounding residential areas.
Waihi Gold owns the Martha Mine in the town, and is developing a new mine, the Favona Prospect. It last bought properties in Waihi due to the subsidence in October 2003, when it bought 27 properties, in September 2003 (four properties), and in June 2002, when it bought 13 properties (see our commentary for that month for details including a map of the area). It has also being buying land for the Favona development and the Martha Mine – see December 2002 for the last such acquisitions. [Decision number 200320080.]
Effem Foods Limited, owned by Mars, Incorporated of the U.S.A., has approval to acquire land in Taranaki/Wanganui, whose details have been suppressed, for a suppressed amount, from Walter George Lennox and Elizabeth Marjorie Lennox of Aotearoa. The rationale of the purchase and approval has also been suppressed.
In July 1992, we reported that
The major U.S. confectionery manufacturer, Mars Inc, is setting up a subsidiary here, Effem Foods Ltd. (Presumably the name says something about the company’s attitude towards its customers.) Effem is buying a 22.4904 hectare dairy and dry stock farm on the corner of Peake and Bruntwood Roads, Cambridge for $670,000. It also has plans to “establish a manufacturing plant for the Mars range of ice cream products which are currently imported into New Zealand. The Commission is advised that the plant, which will be fully automatic and equipped with advanced technological machinery will initially employ 60 people and eventually employ up to 200 people (depending on demand). Over 90 percent of the planned production of 15,000 tonnes per annum, will be exported to Asia, Japan and Australia.”
[Decision number 200320092.]
· The Lo and Hsu Family Trust of Taiwan has approval to acquire 19.2 hectares at Otorohaea Trig Road, RD 2, Ngaruawahia, Waikato for $133,920 from New Zealand Forestry Group Limited owned 76% by W Garratt of Aotearoa and 24% by J Hong of Taiwan. Like previous such sales, the purchaser is a member of the Carlyon Forest Body Corporate “which has entered into an arrangement with New Zealand Forestry Group the Vendor, to develop approximately 199.28 hectares of land at Ngaruawahia. The majority of this area (80 percent) has already been planted in forestry with the remaining land to be planted in 2003.” This sale is like many in this and other regions organised by New Zealand Forestry Group, the last such sale being in September 2003 (see our commentary for that month for further details). The investors provide the money, while New Zealand Forestry Group manages the development of the forestry operation. [Decision number 200320091.]
· Morton Estate Wines Limited, owned by the Coney Family of Canada, has approval to acquire a restaurant on 0.22 hectares at State Highway 2, Katikati, Bay of Plenty for $280,000 from Friedrich Heussinger of Aotearoa, to protect its patch on its neighbouring vineyard. According to the OIC, “The Applicant is one of New Zealand’s leading wine producers with an established winery in Katikati and vineyards located in the Hawkes Bay and Marlborough regions. The vendor operates a restaurant on the subject property which adjoins land owned by the Applicant and is utilised as a winery and cellar door sales facility. Both properties have a similar style of architecture and a cohesive look which the Applicant advises leads people to believe that the restaurant is part of the Applicants operations. The proposed acquisition by the Applicant is likely to lead to protection of the Applicant’s brand image and the Applicant offering a total package to tourists comprising cellar door, tour of the facilities and a restaurant.” The land “includes/adjoins land that exceeds 0.4 hectares which is provided as a reserve, a public park, for recreation purposes, or a private open space”. [Decision number 200320090.]
· Lion Nathan Limited, owned 46.13% by Kirin Brewery Company Limited of Japan, 46% by minority shareholders in Australia, 0.47% by “persons who may be ‘overseas persons’”, and 7.4% by minority shareholders in Aotearoa, has approval to acquire 6.1 hectares at New Renwick Road, Blenheim, Marlborough for $607,500 from David Godfrey Stace and Rachel Helen Stace of Aotearoa. “The Applicant is a substantial internationally focused alcoholic beverages group with its principal business being brewing in Australia, New Zealand and China. The Applicant is building an Australasian based premium wine company through acquisition of land for viticultural development. This acquisition is intended to complement the Applicant’s Wither Hills vineyard, part of which adjoins the subject property, through the utilisation of existing vineyard plant and equipment. The Applicant proposes to develop the subject property into a vineyard to be operated in conjunction with its existing vineyards.” Lion Nathan’s last such purchase was in June 2003: see our commentary for that month for further details. [Decision number 200320084.]
· Vinotago Limited, owned by John Lewis Montero and Roberta Alice Manell-Montero of the U.S.A., has approval to acquire 16.6 hectares at Mt Pisa Station, State Highway 6, Cromwell, Otago for $337,500 from Mt Pisa Station Limited of Aotearoa. “The subject 16.6 hectares comprises part of Mt Pisa Station. The vendor is currently in the process of acquiring the freehold of Mt Pisa Station through the pastoral lease tenure review process. The agreement between the vendor and the Applicant for the subject 16.6 hectares is conditional upon Mt Pisa Station being freeholded and a subdivision being completed. The Applicant is proposing to establish a viticultural development growing premium quality Pinot Noir grapes producing high quality wines.” [Decision number 200320086.]
· Dean Stevinson NZ Ventures LLC, owned by Dean Michael Stevinson of the U.S.A., has approval to acquire 6.2 hectares at Gibbston Back Road, Gibbston, Otago for $767,940 from Richard and Patricia Allen of the U.S.A.. “The vendors acquired the subject property in 2002 for a vineyard development and have now decided to sell the subject property and concentrate on their other viticultural developments. The property has 4 plantable hectares which will be planted in Pinot Noir. The vineyard development has commenced. The Applicant proposes to complete the vineyard development. The vineyard development will be managed by Southern Lakes Consulting Limited. The grape production is likely to be sold under contract to be harvested and processed by Peregrine Wines, whose wines enjoy a national and international reputation in the premium wine market.” In May 2003, Dean Michael Stevinson was given approval to acquire 17.9 hectares at Luggate-Cromwell Road, Cromwell, Otago for $506,250 from Lake Dunstan Holdings Limited of Aotearoa. The land was to be used similarly to the current purchase. See our commentary for that month for further details. For land acquisitions by the Allens, and Richard Allen’s past as a member of the Reagan administration and his continuing far right political activities, see our commentary for October 2002. [Decision number 200320087.]
· Ronald Patrick Sant and Yvonne Kathleen Sant of the U.K. have approval to acquire 5.2 hectares at 137 Te Rore Road, RD 1, Kaitaia, Northland for $292,000 from Kevin Francis O’Brien and Christine Mary O’Brien of Aotearoa. “The Applicants are to apply for New Zealand permanent residency under the Skilled Migrant category and propose to acquire a lifestyle property situated near Kaitaia. The Applicants intend to reside on the property which has a dwelling. The property is not used for any economic purpose. The Applicants are demonstrating a commitment to New Zealand through applying for and taking up New Zealand permanent residency.” [Decision number 200320093.]
Campaign Against Foreign Control of Aotearoa,
P. O. Box 2258