Four decisions this month are concerned with the sale by Fletcher Challenge Forests (FCF) of its forest estate. FCF (shortly after renamed Tenon) is disposing of its forests to focus on wood processing and distribution. While the lead purchaser, Kiwi Forests, is locally owned, it is parcelling out much of its purchase to its US and Canadian partners.
Kiwi Forests Group Limited (33.34%, Aotearoa), Viking Global Timber Fund LLC (33.33%, U.S.A.) managed by Prudential Timber Investments LLC and Ontario Teachers’ Pension Plan Board (OTPP, 33.33%, Canada), has approval to acquire:
· East Woodlands Limited, Northwest Woodlands Limited and South Woodlands Limited, which own an estate or interest in 71,017 hectares of freehold land in the Bay of Plenty/Coromandel, Whakatane, Opotiki, Rotorua and Taupo, some of which adjoins the foreshore, a lake, land held for conservation purposes, heritage or historic areas, reserves and public parks;
· 49,588 hectares of leasehold land in the Bay of Plenty/Coromandel, Whakatane, Opotiki, Rotorua and Taupo; and
· forestry rights and various associated assets.
The price is “to be advised”. However, Kiwi also has a separate approval [decision number 200410015] to acquire up to 100% of the first of the above assets for $352,226,245 from the three partners. OTTP also has a separate approval to acquire “forestry rights and various associated assets” over the second of the above assets (the leasehold land) from the three partners for a sum “to be advised” [decision number 200410016]. Viking Global Timber Fund LLC, managed by Prudential Timber Investments, Inc, and owned 38.8% in Canada, 33.3% in the U.S.A. and 27.9% in Denmark, has an identical approval to OTTP for an amount that has been suppressed [decision number 200410017].
The vendor, Fletcher Challenge Forests Limited, is according to the OIC ultimately owned as follows
· 22.9106% in small shareholdings in the U.S.A.
· 7.3% by the Xylem Fund ILP of the U.S.A.
· 8.1306% in small shareholdings in the U.K.
· 2.2% by other overseas shareholders
· 0.7191% in small shareholdings in Australia
· 0.0819% in small shareholdings in Singapore
· 0.0356% in small shareholdings in France.
· 58.6223% in small shareholdings in Aotearoa
However this “ultimate” ownership listing disguises the fact that the company has significant large shareholders. Rubicon (another former part of the Fletcher Challenge group) at the time owned 19.997%, and later made a takeover bid to bring that to over 50%. Ron Brierley’s Guinness Peat Group (a major shareholder in Rubicon) owned 2% (Press, “Rubicon bids for Tenon”, by Richard Inder, 10/4/04, p.C3).
The OIC states:
Fletcher Challenge Forests Limited (FCF) has announced that it will partition out its forest ownership activities from its added value processing, marketing, distribution and forest management activities as part of its intention to reduce capital invested in its forests and increasing its focus on the value added segments of the industry. The forestry assets comprise freehold land, leasehold land, forestry rights and cutting rights.
Kiwi Forests Group Limited proposes to acquire the forestry estate and assets that are being offered for sale by wholly owned subsidiaries of FCF. Concurrent with this proposal, separate acquisitions of specified portions of the forestry estate and assets are being proposed by the Ontario Teachers’ Pension Plan Board and Viking Global Timber Fund LLC. The assets acquired by OTPP and Viking will be managed by Prudential Timber Investments, Inc (Pru Timber). Consent is required by Kiwi due to its association with the other parties in structuring and completing the proposed transactions.
The forestry estate and assets to be acquired by Kiwi include freehold land (including a net stocked area of 49,487.5 hectares), seven forestry rights in respect of a net stocked area of 25,104.5 hectares and various associated assets. Upon completion of the acquisition, Kiwi will enter into a number of wood supply agreements with FCF. It is proposed that the freehold land will be owned by Kiwi. In addition to the forestry rights being acquired by Viking and OTPP from Kiwi, both Viking and OTPP are acquiring certain interests in land and forestry rights from FCF.
OTPP will acquire forestry rights granted by Kiwi in respect of a net stocked area of 33,314.5 (including 15,418.7 hectares to be split with Viking); forestry rights granted by third parties of a net stocked area of 14,828.1 hectares; a cutting right granted by a third party of a net stocked area of 237.5 hectares; leases granted by third parties over 44,958 hectares (a net stocked area of 13,420.7 hectares) and Crown leases of 89.7 hectares (a net stocked area of 71.7 hectares). In addition OTPP and Viking are acquiring leases granted by third parties over 325.1 hectares (a net stocked area of 273.2 hectares) and Crown leases over 3,997.86 hectares (a net stocked area of 2,584.9 hectares).
In addition to the jointly acquired leases and the forestry rights to be split with OTPP, Viking is acquiring forestry rights granted by Kiwi of a net stocked area of 1421.7 hectares; forestry rights granted by third parties of a net stocked area of 137.8 hectares and leases granted by third parties over 217.3 hectares (a net stocked area of 128.4 hectares).
[Decisions 200410015, 200410016, 200410017, 200410025.]
The sale process was far from straight forward. In 2003 FCF accepted an offer from a US timber investor, the Campbell Group, for $685 million. Kiwi made a surprise counteroffer reported to be $725 million. To consider it, FCF had to pay Campbell a $17 million “break fee”. Kiwi is owned by four wealthy New Zealand businessmen:
· Adrian Burr, wealth $120 million, property investor, art collector and former executive with the collapsed Chase Corporation.
· Trevor Farmer, wealth $120 million, owner with Alan Gibbs of investment company Tappenden Holdings, former executive of failed Tasman Pacific Airlines.
· Mark Wyborn, wealth $50 million, director of property company Tramco and various other investments.
· Ross Green, co-founder of largest listed property investor in New Zealand, Kiwi Income Property Trust.
The first three control Viaduct Harbour Holdings which owns large parts of Auckland’s Newmarket and waterfront. Their philosophy is reported to be “never sell the land – simply never”. This is not anything to do with a spiritual attachment to land or anything so idealist. Viaduct Harbour Holdings’ method of making money is to buy land with potential, lease it with rent reviews every three to five years, then let others take the risk of developing it and watch the money roll in (New Zealand Herald, “Never sell the land – simply never”, by Anne Gibson, 31/1/04).
They funded the bid by reselling the forest cutting rights and leases to OTPP and Viking. The structure was designed to leave the land ownership in New Zealand hands while selling the trees to overseas interests. Some of the land is unused (of the 120,000 hectares involved, about 106,000 hectares has trees on it) and the new owners may have alternative plans for it including dairying, lifestyle blocks, and building sections (Press, “Four Kiwi tycoons buy Fletcher forests land”, by Richard Inder, 22/1/04, p.B5; “Lucrative plans for forest land”, 13/4/04, p.C3).
However the deal almost fell apart even after it had been accepted by FCF. First, Kiwi made the deal dependent on it getting finance to buy the cutting rights for FCF’s 20,700 hectare Tarawera forest, at $165 million. A rapidly appreciating New Zealand dollar increased the problems by reducing the prospective return on the assets, largely based on exporting the timber. Second, FCF retained commitments to supply 455,000 cubic metres of wood per annum to a number of its customers, including rivals Carter Holt Harvey and Norske Skog, which Kiwi had refused to take on because of their open ended nature (Press, “Threat seen to Fletcher Forest sale”, by Richard Inder, 23/1/04, p.B5). In addition FCF had to persuade the landowners of its leases to transfer the leases and forest rights to the new owners.
By the 31 January 2004 deadline, Kiwi was saying it couldn’t raise the $165 million required for the Tarawera deal, reducing the value of the deal to FCF to $560 million. Campbell was a possible buyer of Tarawera (Press, “Forest sale setback batters FCF”, by Richard Inder, 31/1/04, p.C9). Meanwhile, Norske Skog and Carter Holt Harvey began proceedings against FCF to enforce pulp wood supply contracts of up to 300,000 cubic metres per annum to their Kawerau mills. They took the view that FCF’s sale of its forests would prevent it from complying with the contracts and were attempting to force FCF to buy back some of the forest or stop the sale of the Tarawera forest (Press, “Fletcher sued over pulp supply contracts”, 20/2/04, p.B9; “Bid to halt forest sale”, 26/2/04, p.B6; “Tenon cash return cleared”, by Richard Inder, 6/3/04, p.C3).
In the end, all went to plan. FCF (by now called Tenon) received a new offer from Kiwi for the Tarawera forest, for the original price of $165 million. Kiwi had found a buyer for the forest cutting rights in US timber investor Hancock Natural Resource Group. Minority shareholders in the forest, made up of government and Māori interests, would take control of the land. At the same time, Tenon announced a settlement of the dispute with Carter Holt Harvey and Norske Skog. It would pay them “under $5 million” in compensation and vary the wood supply agreements (Press, “Tenon sells Tarawera forest estate”, by Richard Inder, 2/4/04, p.B10).
In a decision which was suppressed almost in its entirety until released by the OIC on appeal in May 2004, Energy Corporate Limited, owned 60% by Royal Dutch Petroleum Company (N.V. Koninklijke Nederlandse Petroleum Maatschappij) of the Netherlands and 40% by Shell Transport and Trading Company of the U.K. (which is the ownership of Shell New Zealand), has approval to acquire 100% of the shares in Gas Investments NZ Limited for $24,400,000.
The OIC states:
Gas Investments NZ Limited (GINZ), was established for the limited objective of raising finance to purchase a specific loan and related support arrangements. The Gas Loan is repayable by Energy Gas Holdings Limited, a subsidiary of Shell Overseas Holdings Limited. The Gas Loan and related support arrangements were acquired by GINZ in 1999 as part of the securitisation of that loan by Fletcher Challenge Energy Limited. As part of Shell's acquisition of Fletcher Energy in 2001, Shell indirectly assumed all obligations under the Gas Loan and related support arrangements and all notes issued by GINZ. The proposed acquisition of the shares in GINZ is likely to provide Shell with greater capacity to restructure the Gas Loan and related support arrangements.
[Decision number 200410018.]
Pacific Brands prepares to buy New Zealand subsidiary in float of group
In a decision which was suppressed almost in its entirety until released by the OIC on appeal in May 2004, Pacific Brands (Australia) Pty Limited, owned by Pacific Brands Limited of Australia, has approval to acquire Pacific Brands Holdings (NZ) Limited for $173,345,271 from Pacific Brands Holdings N.V.
According to the OIC,
Pacific Brands Limited proposes to undertake an initial public offering of shares in March 2004 and to be listed on the Australian and New Zealand Stock Exchanges. The Applicant proposes to acquire all the shares in Pacific Brands Holdings (NZ) Limited pursuant to a call option to be exercised immediately after the initial public offering closes. This transaction will facilitate the ultimate beneficial ownership of the Pacific Brands Group from the current consortium of private equity investors to public ownership following the initial public offering.
The Pacific Brands Group is one of Australia and New Zealand's leading managers of consumer brands operating in four key groups – the underwear and hosiery group, the outerwear and sport group, the home comfort group and the footwear group. Its brands include Berlei, Bonds, Clarks, Dunlop, Everlast, Grosby, Holeproof, Hush Puppies, KingGee, Slazenger, Sleepmaker and Tontine.
[Decision number 200410019.]
· Tenuta Campo Di Sasso Limited, owned 37.5% by Lodovico Antinori, 32.5% by Piero Antinori, 18% by Nicolo Antinori and 12% by Umberto Mannoni, all of Italy, has approval to acquire 12.7 hectares at Taylor Pass Road, Blenheim, Marlborough for $2,812,500 from Meadowbank Holdings Limited owned by the Grigg Family of Aotearoa. “The Applicant is the New Zealand operation of a long established Italian wine business that is majority owned by the Antinori family. The proposed acquisition is part of the Applicant’s overall strategy to develop an interest in the New Zealand wine industry which will lead to a diversification of their wine sales in Europe and North America. The subject property has approximately 10.8 plantable hectares planted in Sauvignon Blanc. It is also likely that the Applicant will enter into a contract to purchase Sauvignon Blanc grapes from the vendor’s neighbouring 14 hectare vineyard.” [Decision number 200410012.]
Waihi Gold Company Nominees Ltd, owned by Newmont Mining Corporation of the U.S.A., has approval to acquire two more properties in Waihi, Coromandel:
· 0.1287 hectares at 16 Dobson Street for $234,500 from Norman John and Maureen Russell, and Raymond Arthur Hancox of Aotearoa. [Decision number 200410013.]
· 0.0766 hectares at 26A Roycroft Street for $127,500 from Brian John Twidle and Julie Anne Burton of Aotearoa. [Decision number 200410024.]
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 last bought a property for this purpose in January 2004. See our commentary for that month for further details.
Change in ownership of Pohuenui Island
Montgreenan Holdings Limited and Garden Bay Resort Limited, owned 50% each by Gunter Thiel and Andreas Fellmann, both of Luxemburg, have approval to acquire 2,122 hectares at Pohuenui, Pelorous Sound, Marlborough for $2,069,231 from Vladi Private Islands (Pacific) Limited owned by Farhad Vladi of Germany.
According to the OIC,
Consent was granted for Pohuenui Nature Resort Limited to acquire the property known as Pohuenui Island, situated at the entrance of Pelorus Sound, on 30 July 2002. In reality the property is actually a peninsula connected to the South Island by a narrow strip of land, however access is by sea and air only. Consent is now sought for two of the existing shareholders, Montgreenan Holdings Limited and Garden Bay Resort Limited, to acquire the 25% shareholding held by Vladi Private Islands (Pacific) Limited.
Over the past 11 years Pohuenui Island has been developed as a combined farm and tourist operation. Approximately 520 hectares are utilised for sheep farming with the balance of the property in various stages of regenerating native bush. The property, which contains a 5 bedroom homestead, a 3 bedroom cottage, and a larger bunkroom facility that sleeps 24, is operated as a farmstay/lodge operation.
Mr Vladi, who is selling his shareholding, owns a homestay operation on nearby Forsyth Island. It is proposed that synergies and efficiencies in the operations of Pohuenui Island and Forsyth Island are likely to continue. The Applicants intend to concentrate their investment on the tourism operation and in this regard intend to construct a new accommodation lodge some distance away from the existing facilities to operate on a similar basis to the one on Forsyth Island.
Vladi buys, sells and collects islands. He also owns commercial property in Aotearoa. For details of the July 2002 purchase, and details on his background, see our commentary for that month. [Decision number 200410014.]
Young Hwan Na of South Korea, has approval to acquire 64 hectares at Spencerville Road, Christchurch, Canterbury for $4,038,750 from Graham Charles Wells and Robert Geoffrey Wells of Aotearoa.
The Applicant obtained consent in October 2003 to acquire a 92.9865 hectare property located at Lower Styx Road, Christchurch. That proposed development included a professional golf course, golf driving range, a sports complex (including tennis courts, gymnasium, sauna/spa complex) and restaurants and accommodation on the property.
It is advised that during due diligence and further discussions with professional advisors that the acquisition of the subject adjoining property would enhance the Applicant’s proposed development. The integration of this property is likely to lead to flexibility in the development and a more aesthetically pleasing design. The result of this is likely to be a more attractive and consequently popular facility comprising an international championship standard golf course, increased parkland and buffer area and improved facilities. It is likely that without the integration of both properties the dimensions and scope of the proposed development is likely to be compromised.
The Applicant proposes the following development: an 18 hole international standard golf course (including pro shop, clubhouse, bar and restaurant), a golf driving range (including a nine hole practice course), sports complex (including sauna/spa, tennis courts and gymnasium), a golf/English language academy, and 80 residential dwellings (for rental accommodation or on-sale).
See our commentary for October 2003 for further details of the previous purchase.
[Decision number 200410026.]
Universal Homes Limited, owned 76.1% in Singapore and 23.9% by China Merchant Holdings International Limited of China, has approval to acquire 7.0 hectares at Parkview Drive, Gulf Harbour, Whangaparoa, Auckland for a suppressed amount from Gulf Corporation Limited of Aotearoa. According to the OIC,
The Applicant 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 property as a medium density residential subdivision of approximately 150 housing units comprising 15 vacant sections, 95 free standing houses and 40 apartments/terrace houses. The development is likely to commence in October 2004 and be completed by August 2008.
Universal’s last land purchase was in Huapai, North Auckland, in September 2003, but also bought land in Whangaparaoa in June 2002. See our commentaries for those months for further details. [Decision number 200410022.]
· David James Balfour and Jennifer Elizabeth Hamilton Balfour of the U.K. have approval to acquire 10 hectares at State Highway 33, Paengaroa, Te Puke, Bay of Plenty for $4,500,000 from Francis Richard Larsen of Aotearoa. “The Applicants applied for New Zealand permanent residency under the General Skills category on 7 October 2003. They are holders of New Zealand Work visas and are currently residing in New Zealand. They propose to acquire the subject property situated near Te Puke. The Applicant intends to reside on the property which has been planted as a kiwifruit orchard in 2000. The Applicants are demonstrating a commitment to New Zealand through applying for and intending to take up New Zealand permanent residency.” [Decision number 200410021.]
· Bayview Developments Limited, owned by Marco Andrea Crivelli of Japan, has approval to acquire 31 hectares at 126 Braemar Road, Awakaponga, Bay of Plenty for $731,250 from Sicimorr Trust of Aotearoa. “The Applicant currently operates a kiwifruit orchard and deer breeding operation on two properties totalling 29.6387 hectares in the Whakatane district. The subject property adjoins one of the Applicant’s existing properties. The subject property is currently utilised by the vendor for grazing heifers and weaner calves. The Applicant intends to increase production from the property by planting 2 hectares in kiwifruit vines and expanding the deer breeding operation. The proposed acquisition will allow for shared machinery and provide economies of scale with the property being run in conjunction with the Applicant’s existing properties.” Bayview’s last purchase was in June 2002, when we reported that it had received approval to acquire 7.5 hectares at 191 Gow Road, Whakatane, Bay of Plenty for $880,000. See our commentary for that month for further details. [Decision number 200410020.]
· Susan Mott of Australia has approval to acquire 13.5 hectares at 1888 Inland Road, Waiau, North Canterbury for $285,000 from Elizabeth Yvonne Carter of Aotearoa. “The subject property is a lifestyle property upon which the vendor utilises as a residence and for grazing horses. The Applicant who is an Australian citizen proposes to acquire the property as a residence. It is proposed to establish on the property a bed and breakfast operation, a tearoom business, lavender growing and an alpaca rearing operation. The Applicant proposes to reside permanently in New Zealand. The Applicant is demonstrating a commitment to New Zealand through applying for and taking up New Zealand permanent residency.” [Decision number 200410023.]
The year 2004 has started with a bang, with over $1.5 billion (gross) of sales in February. Exactly which OIC consents led to this large sum cannot be exactly located as several have had their consideration suppressed. It is certainly partly a result of the large forestry sale approved this month, but this only accounts for half of it. However the net value (i.e. disregarding sales from one overseas investor to another, and discounting part New Zealand ownership of the assets) is considerably lower, because a large part of these forests was already overseas owned. By far the greatest part of the value of the approvals is for sale from one overseas investor to another. The sums, whether gross or net, are considerably higher than the first two months of last year.
Investment involving land
Gross sales of land approved by the OIC during the years to February have increased hugely in area from last year. It appears there is some double counting however reflecting perhaps the resale in the various Fletcher Challenge Forests related sales this month, which in fact amounted to only to around 70,000 hectares. Net sales are negative – reflecting the OIC’s view that there is greater proportional local ownership now than before the large forestry sales reported. Much of this month’s forestry sales were in “other interests in land”, mainly forestry rights, and this is reflected in the large areas (gross and net) of rights sold in February (below). There have been no applications refused this year (see above).
Campaign Against Foreign Control of Aotearoa,
P. O. Box 2258