Central North Island Forests sold to Harvard University fund
KT Partnership, owned by the President and Fellows of Harvard College of the U.S.A., has approval to acquire
The price was initially suppressed but released on appeal in May 2004: $1,081,099,016.
This is the acquisition of the huge Central North Island forests and related assets, including the former Kaingaroa state forest (142,000 hectares), one of the largest plantation forests in the world. The 1800-odd hectares declared above are only the freehold portion: the vast majority of the forest is in Crown Forestry Licences which have escaped Overseas Investment Commission oversight since the 1998 amendment to the Overseas Investment Act. As the OIC notes,
The proposed acquisition includes the management of 183,898 hectares (approximately 99% held under Crown Forestry Licences) of plantation forests, the Kaingaroa Processing Plant located in the Kaingaroa forest (which processes trees into logs for transportation) and the Te Ngae seedling nursery. The acquisition includes the shares in the forestry management company, Timber Management Company Limited and a 50% share in a timber marketing export company, Silva Forest Products Limited. The proposed acquisition does not include the processing plants located at Waipa, Rotorua and Mount Maunganui.
It is being acquired from the Central North Island Forest Partnership (CNIFP) which at the time consisted of CITIC New Zealand Limited BVI (in receivership) and Forestry Corporation of New Zealand Limited (in receivership). This, according to the OIC is owned ultimately as follows:
and minority shareholdings from the following countries:
As the OIC reports, “Since the partners of the partnership were placed into receivership in February 2001, the receivers have endeavoured to sell the forest estate and other assets.”
The forest was sold in 1996 when the Forestry Corporation was privatised, with much controversy. Forestry Corporation was set up by the 1980’s Labour government to hold and run Crown forests. Its board, dominated by the New Right saw its job as privatisation (its Chair, Rosanne Meo, and CEO, Tim Cullinane, were both members of the Business Roundtable). Accordingly, it was a leader amongst forestry companies in maximising its financial returns by exporting raw logs rather than in their further processing. It was sold to a consortium consisting of Citifor Inc. (37.5%), Fletcher Challenge Ltd (through its forestry division, Fletcher Challenge Forests Ltd, which managed the business, 37.5%), and Brierley Investments Ltd (BIL, 25%). Citifor was a subsidiary of CITIC USA Holding Inc., in turn a subsidiary of China International Trust and Investment Corporation (CITIC), ironically a Chinese state-owned corporation. See our commentary for September 1996 for further details.
The new partners soon began to fall by the wayside, and then fall out. In 1998, BIL, in trouble itself, exited. At the time of the privatisation BIL had been given an option to sell its 25% stake after three years to Fletcher Forests for the market value of 93.3 million Fletcher Forests shares, to be paid in cash or shares. Fletcher Forests in turn had the right to force Citifor to buy half Brierley’s holding for cash (NZ Herald, 22/8/96, “BIL able to quit forestry holding in three years”). See our commentary for September 1998 for further details.
By then, the partnership was in financial strife. In July 1998 it had announced it was negotiating to restructure over $1.2 billion in debt after its Douglas Fir prices collapsed. The debt was raised to buy the Corporation. The partnership’s “cash flow forecasts were based on heavy early harvesting of the former corporation’s Douglas Fir crop. Unfortunately harvesting had to be reduced when Douglas Fir prices collapsed. The 12 banks involved have been kept aware of the situation.” (New Zealand Forestry Web server, 2/7/98, “Debt restructure talks for forestry partnership”.)
By 2000 the Fletcher Challenge empire was being broken up, leaving Fletcher Forests as the main remaining splinter, with increasing reluctance to own forest assets. By then, the Central North Island Forests Partnership had dissolved acrimoniously after Citic accused Fletchers, which was managing the operation, of selling the logs too cheaply to Fletcher Challenge Paper mills. All parties (except the banks) appeared relieved that it went into the hands of receivers in 2001, having failed to make payments on its $1.48 billion debt to an international syndicate of 12 banks. The dispute was reportedly largely over how much of the processing of logs should be done in Aotearoa and how much it should be simply exporting logs to be processed in China. The receivers went looking for buyers.
In 2002, Fletcher Challenge Forests management decided to make a bid for the forests, despite increasing reservations amongst shareholders. In a substantial defeat for management, the reservations won the day, amid concerns about the increased debt levels it would require Fletchers to take on, and the fact that CITIC, through an approximately 40% owned Hong Kong-listed, Bermuda-registered company, South East Asia Wood Industries (SEAWI), was going to buy 35% of Fletchers through an issue of new shares. SEAWI’s forestry experience appeared to consist of a small loss-making plywood mill in China. Its shareholders had in the last two years, through British Virgin Island subsidiaries, engaged in a number of share issues and loans which raised suspicions that their skills and interests were closer to those of Enron executives than of a forestry company. SEAWI’s position in Fletchers would make it easily the largest shareholder and although there were restrictions on the number of seats it could take on the Board of Directors, it would be the controlling shareholder. This underlined concerns that the deal would mean an end to processing of the wood in Aotearoa (New Zealand Herald, 24/7/02, “An unhappy legacy of weakness”, by Brian Gaynor, p.E2; The Independent, 7/8/02, “Xylem plans multi-pronged court battle against Fletcher”, p.4). See our commentary for July 2002 for further details.
Falling log prices, helped by a rising New Zealand dollar, put pressure on the CNIFP receivers, just as it had on Fletcher Challenge Forests. As an indication, in July 2003, Carter Holt Harvey announced that it would write down the value of its forests by 31%. Fletcher had valued the CNIFP forests at $1.5 billion – implying a loss of at least $450 million to the bankers controlling the receivership. The asking price was reportedly US$650 million – by then just above $1 billion – which was the amount owned to the syndicate of banks. Bankers reportedly valued it at $820 million, but the actual price has not been revealed. (Press, “No money from trees for banks”, 18/7/03, p.B4; New Zealand Herald, “Americans toast Kaingaroa buy”, 20/12/03).
Meanwhile, the receivers at long last removed Fletchers operational management of the CNFIP assets, in August 2003 creating the Timber Management Company with 60 staff, including 35 from Fletchers. Of the 3.1 million tonnes harvested each year, about one third was going to an export log marketing company jointly owned by CNIFP and Carter Holt Harvey (Silva Forest Products Limited), about 500,000 tonnes to Fletchers, pulp and paper mills about 800,000 tonnes, 400,000 tonnes to the Waipa sawmill, and the rest to the domestic market (New Zealand Herald, “New flag flies over vast forest estate as search for buyer continues”, by Pam Graham, 2/8/03).
The Waipa sawmill was sold separately – to a local company, Waipa Corporation Ltd, owned by Phillip Verry and Gary Catley, who were “new to the industry”. The price was reportedly $1. The mill, one of the largest in the country, employs about 225 people and 100 more on contract. However their purchase had a sour taste. Hamilton company director and owner of a mill at Orini, John Zwiers, challenged their purchase in the High Court, alleging that they breached confidentiality agreements. Zwiers asked to be declared the rightful owner of the Waipa mill, saying the pair used confidential information Mr Zwiers had prepared to obtain finance to buy the Waipa sawmill, breaching their fiduciary duty because the relationship they had with Zwiers was one of trust and confidence. He claimed the two businessmen breached the Fair Trading Act because they allegedly engaged in a course of conduct that was misleading and deceptive. Zwiers claimed in the documents filed in court that in December 2002 he registered an interest in buying the sawmill, signing a confidentiality agreement with the receivers, Ferrier Hodgson. He claimed he also had a confidentiality agreement with Catley, who said he wanted to take a 50% share in the purchase and said he could assist in raising finance. The parties agreed that Zwiers would own 50% and Catley and Verry 25% each. They agreed they would need to raise $22 million and the purchase price would be $9.5 million. (Press, “Waipa mill sold locally”, 17/12/03, p.B7; New Zealand Herald, “Timber newcomer buys Waipa sawmill”, 17/12/03, p.C4; Waikato Times, “Pair accused of breaking sawmill deal”, by Mary Anne Gill, 24/12/03).
The sale formally took effect in December 2003. The purchase was under the management of the US company GMO Renewable Resources on behalf of Harvard University’s Harvard Management Company, which owns the $US18 billion of endowments and assets of the elite US university (Press, “Harvard University buys NZ forest estate”, by Paul Gorman, 25/10/03, p.C6). GMO has substantial assets already in Aotearoa, manages others (see for example our commentary for August 2003), and has a chequered history here. GMO Renewable Resources bought the historic 5,899 hectare Glenburn Station in Wairarapa in May 1998, amid considerable controversy. It is a subsidiary of Grantham, Mayo, Van Otterloo and Co., LLC, which was a major shareholder in Trans Tasman Properties Ltd. See our commentary for June 2002 for further details.
[Decision number 200320074.]
CR Delta of the Netherlands buys Ambreed dairy semen business
CR Delta International Limited, owned by CR Delta VRV Holdings BV of the Netherlands, has approval to acquire Ambreed NZ Limited for a suppressed amount from Breeding Services New Zealand Limited of Aotearoa. The OIC states:
Ambreed conducts a dairy semen production and sales business and has recently entered the herd testing market in New Zealand. The Applicant is a multinational business which has similar operations in overseas markets and is one of the 5 largest dairy semen businesses in the world. The proposed acquisition of Ambreed by the Applicant is likely to enable Ambreed to grow its market share and provide enhanced services through the utilisation of the Applicant’s research and development facilities
CR Delta VRV is a cattle breeding co-operative operating in the Netherlands and Flanders. While it “intends to work actively in order to cherish the concept of being a co-operative”, it is also trying to put “an increasing emphasis on a businesslike attitude towards members/customers” and “a more market and customer focused outlook within our organisation”. Accordingly, it is aiming for “a profit after taxes equivalent to 4% of turnover”. It is expanding internationally because
The continuing decline in volume and sales in the national market in The Netherlands and Flanders puts pressure on the ability to pay for the size and quality of product development. Therefore CR Delta VRV intends to grow in the foreign market and, when opportunities arise, make additional acquisitions. Further attempts will also be made to establish structural co-operation with cattle improvement organisations abroad.
Ambreed describes itself as the “second largest Artificial Breeding company in New Zealand with 25% market share”. It has a sales network of 120 part-time and full-time people throughout Aotearoa, and exports dairy and beef semen to 40 countries. (See http://www.ambreed.co.nz.)
The purchase includes 274 hectares of land comprising:
[Decision number 200320076.]
Waihi Gold Company Nominees Ltd, owned by Newmont Mining Corporation of the U.S.A., has approval to acquire a further 27 homes in Waihi, Coromandel. In each case,
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 have become the subject of a “Community Solutions deed”. Under the deed the Applicant will acquire the properties. It will arrange for the removal of some houses and the demolition of the remainder. The land will be retained by the Applicant pending the closure of the Martha Mine after which some of the properties are likely to be transferred to a community trust to be held in the long term for public open space and recreation. The remainder of the properties will be disposed of. The property the subject of this application is part of the “Community Solution Deed”. The proposed acquisition will also consolidate the buffer between the Applicant’s mine and other surrounding residential areas.
The properties are:
· 0.1255 hectares at 25 Grey Street for $138,500 from Albert Brian Morgan and Ann Jean Morgan [Decision number 200320044];
· 0.2077 hectares at 35 Grey Street for $147,500 from Raymond George Miller [Decision number 200320045];
· 0.1695 hectares at 7 Newman Street for $187,500 from Mary Rosa Maitland [Decision number 200320046];
· 0.1869 hectares at 9 Newman Street for $59,500 from William Edgar Mudgway [Decision number 200320047];
· 0.1128 hectares at 12 Newman Street for $122,500 from Alys Elizabeth Newman [Decision number 200320048];
· 0.2423 hectares at 15 Newman Street for $67,500 from Peter Joseph Joyce [Decision number 200320049];
· 0.0952 hectares at 18 Newman Street for $129,500 from Neil Raymond and Julia Dawn McNee [Decision number 200320050];
· 0.073 hectares at 4 Roycroft Street for $157,500 from Kevin William Pennell and Wendy Maria Pennell [Decision number 200320070];
· 0.0827 hectares at 8 Roycroft Street for $117,500 from Alan Guy McNee and Carol Margaret Warburton [Decision number 200320051];
· 0.0793 hectares at 8A Roycroft Street for $132,500 from Hazel Ruth Reidy [Decision number 200320052];
· 0.0649 hectares at 8C Roycroft Street for $108,750 from Yvonne Waipuia Paekau [Decision number 200320053];
· 0.0649 hectares at 8B Roycroft Street for $135,000 from Patricia Ann Connelly [Decision number 200320054];
· 0.067 hectares at 16 Roycroft Street for $110,000 from Peter John Leach and Lois Ruth Leach [Decision number 200320055];
· 0.0671 hectares at 16B Roycroft Street for $77,500 from Rachel Van Driel [Decision number 200320056];
· 0.134 hectares at 18 Roycroft Street for $73,000 from Wendy June Trebilco [Decision number 200320057];
· 0.0918 hectares at 20 Roycroft Street for $75,500 from Julie Diane Guscott [Decision number 200320058];
· 0.2378 hectares at 22 Roycroft Street for $217,500 from Josephine Cecile French [Decision number 200320059];
· 0.1671 hectares at 26 Roycroft Street for $145,000 from Kevin John Horn and Suzanne Robin Horn [Decision number 200320060];
· 0.2082 hectares at 26B Roycroft Street for $232,500 from Raymond Philip Mulhern and Beverley Margaret Mulhern [Decision number 200320061];
· 0.2023 hectares at 7 Slevin Street for $47,500 from Josephine Cecile French [Decision number 200320062];
· 0.0809 hectares at 10 Slevin Street for $100,000 from Kelvin Thomas Mercer and Patricia Mary Mercer [Decision number 200320063];
· 0.2023 hectares at 14 Slevin Street for $125,000 from Ronald Hannken and Maree Ann Hannken [Decision number 200320064];
· 0.1962 hectares at 15 Slevin Street for $120,000 from Iain George Anderson Wright and Audrey Enid Wright [Decision number 200320065];
· 0.2407 hectares at Slevin Street for $55,000 from Marian Jean Stuart and Graham Peter Walker [Decision number 200320066];
· 0.2023 hectares at 17 Slevin Street for $67,500 from John Alan Tretheway, Graham Peter Walker and Marian Jean Stuart [Decision number 200320067];
· 0.134 hectares at 22 Slevin Street for $97,500 from Joyce Helen Tolley and Martin Frederick Beckett [Decision number 200320068];
· 0.0779 hectares at 19 Slevin Street for $97,500 from William Russell Bond and Sally Christine Bond [Decision number 200320069].
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 September 2003, when it bought 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.
Neil Construction Limited, owned by the Tiong Family of Malaysia, has approval to acquire 39 hectares at Flat Bush School Road, East Tamaki, Auckland for $7,312,500 (inclusive of GST) from J E Matthews Limited of Aotearoa. According to the OIC,
The Applicant proposes to acquire the subject property, which is located at the edge of urban development in the Flat Bush area of Manukau City, to add it to the company’s portfolio of residential land for subdivision. The property has been utilised by the vendor as a lifestyle property and for grazing of cattle.
The subdivision development proposed for the land will provide sections which will assist in meeting the ever increasing demand for residential lots in the Auckland region. It is expected that the development of the property will result in 55 new countryside living sites and 40 residential sites. The development will be undertaken in four stages commencing in 2004 with a likely completion date of 2008.
Neil Construction last received approval to buy land for subdivision – in Tauranga – in August 2003. See our commentary for that month for further details.
[Decision number 200320075.]
Omya New Zealand Limited and Mintech (NZ) Limited, owned by Omya AG, (formerly known as Pluess-Staufer AG) of Switzerland, have five approvals to acquire land at Te Kuiti, King Country. According to the OIC,
The Applicant operates in New Zealand as an industrial minerals processor. It mines and processes limestone, bentonite, dolomite and marble and also imports talc, white cement, mica, bayrites and calcium carbonate. The subject property is located adjacent to the Applicant’s quarry where the Applicant has previously acquired other residential houses adjacent to the quarry over the past 10 years to create a buffer zone. The proposed transaction is likely to fulfil an environmental purpose by mitigating the effects of quarrying on nearby residential properties. It is proposed that the Applicant will acquire the property subject to a tenancy in favour of the vendor to continue to reside on the property.
The land being acquired is:
Mintech was originally part of the company Lime and Marble, an independent Nelson based company quarrying (you guessed it) lime and marble, which branched out into mining. During the 1980’s, part of it became Mintech New Zealand and was owned by Newmans and Transport Nelson, before being sold to AG Pluess-Staufer of Zurich, Switzerland, which more recently changed its name to Omya. The Swiss company has “some 5600 employees and over 100 sites” according to its web site, http://www.omya.com.
Omya is the object of strong opposition in Vermont, U.S.A., where it has large scale mining operations. The group, Vermonters for a Clean Environment, has a web site http://www.vtce.org largely devoted to the environmental damage caused by Omya’s operations, and its history, including collaboration with the Nazi occupation of France. The site has links to Omya’s international operations, among them New Zealand, including controversy over its dolomite lime quarry on Mount Burnett, near Collingwood, Golden Bay where the Department of Conservation has concerns that an application to extend the quarry would endanger unusual plants. The Royal Forest and Bird Protection Society says that “the quarry extension would destroy habitat for at least five nationally threatened or rare plants, several of which are only found on the dolomite soils and rocky outcrops of Mt Burnett” (Forest and Bird Conservation News, “Time to implement seven year-old mining policy”, November 2003, p.2).
Young Hwan Na of South Korea has approval to acquire 93 hectares at Turners Road and Lower Styx Road, Christchurch, Canterbury for $5,625,000 from Richards Bros Limited and Richards Farm Limited of Aotearoa. The OIC states:
The Applicant proposes to establish an 18 hole golf course (including pro shop, clubhouse, bar and restaurant), golf driving range, golf academy, a sports complex (including tennis courts, gymnasium, sauna/spa complex, and ten pin bowling centre) on the property. In addition 80 residential units are likely to be constructed on the property. (Some units are to be utilised for residential rental accommodation and some units for resale). Incorporated into the development plans is a golf academy where overseas students will be able to attend the academy to learn golf and English language skills. It is likely that the Applicant will engage Boffa Miskell to manage the development of the project. Boffa Miskell was involved with the development of both the Clearwater and Millbrook resorts.
[Decision number 200320073.]
· Prime Resources Company Limited, owned 27.9972% by Dae Beom Chung, 27.2056% by Bong Chae Chung, 16.8% by Dae Young Chung, 16.8% by Hee Seon Chung and 11.1972% by An Soon Seo, all of Korea, has three approvals, to acquire
· 81 hectares at Linwood Road and Batty Road, Karaka, South Auckland for $5,400,000 from the Tololi Family of Aotearoa [Decision number 200320071];
· 21 hectares at Glenbrook Road, Pukekohe, South Auckland for $1,181,250 from Franmaree Trust of Aotearoa [Decision number 200320072]; and
· 22 hectares at Dunstan Road, Gisborne for $4,567,500 from Pine Sawmills (Gisborne) Limited (In Receivership) of Aotearoa [Decision number 200320077].
In the first two cases the OIC states: “The Applicant is proposing to establish an investment portfolio in New Zealand primarily in the forestry and the agricultural sectors. The Applicant has previously received consent from the Commission to acquire a 38 hectare forestry investment near Gisborne. The Applicant’s sole director has submitted an application for New Zealand permanent residency under the Business Investor category and intends to reside permanently in New Zealand. It is proposed that an arrangement with Karaka Group Limited will be entered into under which the subject property will be developed for the agistment of horses. Karaka is a New Zealand company formed for the investment in commercial thoroughbred bloodstock will manage the property.” In the third case, “The proposed acquisition is likely to complement the Applicant’s existing forestry investment. The sawmilling operation undertaken by the vendor ceased in April 2003 when the vendor was placed in receivership.” In August 2003, Prime Resources gained approval to acquire 39 hectares at Parikanapa Road, Gisborne for $269,143 for forestry. However, in that approval Prime Resources was said to be owned only by Bong Chae Chung. See our commentary for that month for further details.
P. O. Box 2258