March 2009
Decisions
Transpacific Taken Over: Confidential Decision Released On
Appeal Aussies Tighten Grip On NZ Retirement Village Business QPE Still Has More Money To Spend Aussies Consolidate Their Ownership Of Our Health Food
Industry As Well Nuplex Risks Becoming An “Overseas Person” Ripples From The AIG Debacle Hit Our Shores Global Financial Crisis Survivor Grabs Credit Rating Agency Origin Gets Approval Buy More Of Contact Energy Ownership Of Satellite Communications Facility Changes
Hands Capital Raising Needed For Former Carter Holt Harvey
Forests Weiti Forest Park Beachfront Soon To Be Gated? Irish Keen On Dairying Prospects In Southland Transpacific Taken Over:
Confidential Decision Released On Appeal
A Decision previously considered confidential by the OIO has now been made public, thanks to CAFCA’s standard policy of appealing every such deletion under the Official Information Act 1982. And it is one of more significant OIO decisions in recent times. Specifically, WP X Holdings BV (Netherlands 100%) has been given OIO approval to acquire up to 50.5% in Transpacific Industries Group Ltd (Australia 80%, various 20%) which has significant operations in waste collection, recycling and landfill operation and ownership in Australia and New Zealand. The acquisition will be achieved via a placement of new Transpacific shares to WP X Holdings. The asset value stated was $1,650,404,064!
Here in New Zealand Transpacific is better known as Waste Management which was bought by Transpacific in a controversial takeover in 2007. See our June 2006 and September 2007 commentaries for more background on this The approval also includes effective acquisition of a freehold interest in a number of sites around New Zealand, including 3,165 hectares at Mt Cass Road, Waipara, (North Canterbury), the site of the controversial Kate Valley regional landfill established a few years ago. Transpacific’s operations in New Zealand have not been without further controversy. Waiheke Island residents asked the Auditor General to investigate the decision making process of Auckland City Council in awarding the island’s waste contract to Transpacific. The Auditor General however sided with the Council. Transpacific’s siting of a recycling depot behind a pub and across the road from a community hall in Waipapa has also drawn criticism.
Back to WP X buying into Transpacific. As reported by www.stuff.co.nz (10/6/09): “After nearly four months in a trading halt ASX-listed trans-Tasman waste and environmental services company Transpacific Industries Group has reached agreement to raise A$800m (NZ$1.018 billion) in equity through an conditional agreement for a placement to Amsterdam-based WP X Holdings BV. WP Holdings is an affiliate of the US$25 billion global private equity firm Warburg Pincus, long tipped as a front runner to be a cornerstone shareholder in Transpacific. The placement puts paid to widespread speculation Transpacific might sell its New Zealand business Waste Management to reduce debt. Transpacific got into financial strife earlier this year after its $150 million of US private placement loans were breached by a non-cash write-down of $115.6 million on interest rate hedges and investments in listed securities. This triggered cross-default provisions in a syndicated $A2.13 billion facility”. On 20/7/09, the Australian reported Transpacific’s Institutional share offer fell short, raising $A560m of a targeted $A737m. A retail share offer was to follow and WP X would take up shares from both its entitlement and as sub-underwriter. “Under its agreement, the maximum percentage of Transpacific shares WP X will own is around 34.3% and the minimum is 19.9%. The exact percentage of the WP X shareholding will be unknown until settlement”.
So let’s have a look at WP X and in particular Warburg Pincus, which has very deep pockets. According to Wikipedia: “Warburg Pincus, LLC is a private equity firm with offices in the United States, Europe, and Asia. It has been a private equity investor since 1966. The firm currently has approximately $US25 billion in assets under management and invests in a range of sectors including consumer, energy, financial services, health care, industrial, media, technology, telecommunication and real estate. Warburg Pincus is a growth investor and its active portfolio of more than 100 companies is highly diversified by stage, sector and geography.
“The firm was founded in 1939 by Eric Warburg of the Warburg banking family under the name EM Warburg & Co. Its first address was 52 William Street, New York, the Kuhn Loeb building. Throughout the early post-war period, the firm remained a small office of not more than 20 employees. In 1965, when Eric Warburg retired to Germany, control was handed to Lionel Pincus, a partner in the Ladenburg Thalmann investment bank, and the working language of the office switched from German to English.
“Warburg Pincus began investing in Europe in 1983 and opened its first office in Asia in 1994. It has invested more than $US5 billion in Europe; more than $US2 billion in India and more than $US1 billion in China. The firm is structured as a global partnership led by co-presidents Charles Kaye and Joseph Landy. Kaye has been with Warburg Pincus since 1986 and worked to launch the Asian operations. Landy has been with the firm since 1985, focusing on investments in information technology, communications applications and structured investments. Approximately 40% of the firm’s investments are outside of the US”.
Decision # 200910051
Aussies
Tighten Grip On NZ Retirement Village Business
QPE Funds Management Pty Limited as Manager of Quadrant Private Equity No. 2A and No. 2B Funds Australia (100%) received Overseas Investment Office (OIO) consent to purchase from AMP Capital Investors Limited and AMP Investment Services Pty Limited Australia (91%), New Zealand (9%) rights or interests in 50% of the shares of AMP Capital Retirement Limited which owns or controls: a freehold interest in 5.8937 hectares of land at 166 - 168 Ruapehu Drive, Palmerston North; and
Consideration for the purchase was stated as confidential. The OIO states: “QPE Funds Management Pty Limited (QPEF) as Manager of Quadrant Private Equity No. 2A and No. 2B funds (the Applicant) is seeking approval to: (a) acquire 50% of the shares in the AMP Capital Retirement Limited: (b) enter into a 50:50 joint venture arrangement with the Vendors to govern the management of the AMP Capital Retirement Limited; and (c) enter into a 50:50 joint venture arrangement with AMP Capital Investors (New Zealand) Limited which will manage, the 15 retirement villages and development sites throughout New Zealand, through a management company to be established. The proposed investment will provide AMP Capital Retirement Limited with the essential capital and experience it needs for future growth and efficiency”.
AMP Capital Retirement Limited operates Summerset Rest homes which has more than $200m in assets and is the third largest chain in New Zealand with plans to own 20 villages by 2011 (National Business Review, 20/4/09). AMP Capital paid $125m for Summerset in November 2005 (see February 2006 Decisions re this purchase). In August 2007, AMP planned to raise about $300m for 80% of Summerset via a sharemarket float, but ditched those plans after some analysts suggested the indicative share price was too high.
Quadrant has been previously active in New Zealand as part of a $275m leveraged buyout of outdoor clothing and equipment retailer Kathmandu in 2006 with Goldman Sachs JB Were (see April & October 2006 Decisions). Goldman Sachs was recently described by one journalist as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smelt like money”! (Rolling Stone, 13/7/09, “The Great American Bubble Machine”, by Matt Taibbi, http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine). Currently Quadrant is looking to exit its Kathmandu investment via an initial public offering (IPO) or share market float. Perhaps they don’t like being in partnership with a vampire squid?
Decision # 200821648
QPE
Still Has More Money To Spend
A day after the above approval, QPE received a second approval, being Quadrant Private Equity Pty Limited as manager of Quadrant Private Equity No. 1 Australia (100%) acquisition of rights or interests in up to 67.2% of the redeemable preference shares and up to 68.5% of the ordinary shares of Seniors Money International Limited. The vendor was Existing Shareholders of Seniors Money International Limited other than Quadrant Private Equity Pty Limited New Zealand (67.74%), Australia (28.23%), Various (1.53%), United Kingdom (except Isle of Man and the Channel Islands) (1.38%), Kenya (1.12%). The value was stated as over $100m. The OIO states:
“The Applicant previously obtained the consent of the Overseas Investment Office on 27 June 2008 in respect of its acquisition of rights or interests in up to 65% of the shares in Seniors Money International Limited (SMIL). The acquisition was implemented immediately after the consent was granted resulting in the issue of $15.4 million (or 61.6% of the redeemable preference shares (RPS) in SMIL to the Applicant. At that time the Applicant also held (as it does now) 19.9% of the ordinary shares in SMIL.
“SMIL now proposes to issue up to $7.5 million of further RPS on the same terms and conditions as those applicable to the existing RPS issued by SMIL in June 2008. Following completion of the issue of the RPS by SMIL, under the Agreement, the Applicant will: own between 57.82% and 67.2% of the RPS in SMIL and 19.9% of the ordinary shares in SMIL; and have the right to convert each of the RPS (including the $15.4 million of RPS which it already holds) into ordinary shares which may result in the Applicant acquiring up to 68.5% of the ordinary shares of SMIL”. See June 2008 Decisions regarding Quadrant’s earlier foray into SMIL.
Decision # 200910012
Aussies
Consolidate Their Ownership Of Our Health Food Industry As Well
Next Capital (Services A) PTY Limited as Trustee for the Next Capital Fund 1A, Next Capital (Services B) Pty Limited as trustee for the Next Capital Fund 1B and Next Capital Pty Limited as Trustee for the Next Capital Health Group Co-Investment Trust Australia (100%) was given approval to acquire rights or interests in 100% of the securities of Vitaco Health Group Limited, the value of the assets of Vitaco Health Group Limited and its 25% or more subsidiaries being greater than $100m. Consideration was in fact stated at $203,068,000. The vendor was Existing shareholders in Vitaco Health Group Limited other than Next Capital New Zealand (100%). The OIO states:
“The Applicants hold approximately 72.36% of the issued securities of Vitaco Health Group Limited (Vitaco). Vitaco is the holding company for two separate groups comprising Healtheries New Zealand Limited (Healtheries) and Nutra-Life Health & Fitness (NZ) Limited (Nutra-Life). Healtheries is a well established New Zealand business manufacturing an extensive range of health foods and supplements. Nutra-Life is a supplier of vitamins, minerals, herbs and other dietary supplements. The Applicants seek consent to acquire up to 100% of the issued securities of Vitaco to enable the Applicant to acquire further securities from other Vitaco security holders and to enable the injection of further equity capital should it be required from time to time”. See July 2006 and February 2009 Decisions for Next Capital’s entry into New Zealand’ s hire and rental car industries.
Decision # 200910065
Nuplex
Risks Becoming An “Overseas Person”
Nuplex Industries Limited New Zealand (80.1%), Australia (15.1%), United States of America (2.1%), Hong Kong (Special Administrative Region) (1.6%), Various (1.1%) received approval to conduct a rights issue of shares of up to $138m. The OIO states: “Nuplex proposes to undertake a capital raising comprising of a renounceable pro-rata rights offer to its existing shareholders resident in Australia and New Zealand (Rights Issue).
“The rights issue will be fully underwritten by First NZ Capital New Zealand Limited. Currently, approximately 19.9% of Nuplex is owned by overseas persons. Therefore, Nuplex is not currently an overseas person for the purposes of the Act. After the allotment of the rights issue, Nuplex is likely to be held 25% or more by overseas persons although the exact percentage cannot be predicted. Best estimates available from First NZ Capital Limited suggest a maximum of 35% of Nuplex could be held by overseas persons following the allotment of the rights issue, making Nuplex an overseas person“.
Nuplex has been struggling on a number of fronts for at least the past year. Firstly, the resin and chemical maker suffered a significant drop in sales as the global economic crisis kicked in mid 2008. This led to a 25% drop in earnings and their banks becoming jittery, with one, Citibank, reluctant to roll over an $A50m debt facility. By February 2009, Nuplex’s own broker, First NZ Capital, began spreading speculation of a breach of its debt/earnings ratio covenant, resulting in a 25% fall in the share price and a “please explain?” from the Stock Exchange. Nuplex admitted the speculation was true. What followed was a classic example of “vampire squid” tactics. To quote Tim Hunter of the Sunday Star Times (23/3/09):
“Market sources say First NZ Capital's move was a classic investment banking tactic to force Nuplex's hand. With its share price tanking and its lenders playing hardball, Nuplex had to do something fast. The first effort proved to be a shambles. On March 16, First NZ Capital organised a placement and underwritten rights issue to raise $110m, but failed to reach a deal on price with big institutions and ‘habitual investors’, a term likely to include Rich Lister and hard-nosed investor Peter Masfen, owner of about 3.7% of Nuplex.
“Pressure mounted with the failure of the deal. Nuplex's revised bank covenants were conditional on raising capital and the institutional investors smelled blood. Four days later Nuplex announced a seven-for-one pro rata rights issue to raise $132.8m. The discount to the share price was enormous. 577 million new shares would be issued at just 23c each. Before the profit warning in November (08) shares were above $5. The issue would obliterate the shareholding of anyone who didn't take up their rights to buy new shares, but the effect on every shareholder was equal. If everyone took up their rights, no one would lose.
“The deal was also underwritten by First NZ which stood to buy any shares unsold, so Nuplex could be certain it would raise the full amount. First NZ's fee for the underwrite was $2.6m. Analysts have since estimated Nuplex shares will be worth 38-40c after the rights issue, suggesting 23c a share is a bargain buy. ‘The stock offers investors compelling medium term value and recovery potential’, was one comment from Macquarie Equities analyst Lyall Taylor.
“That wasn't enough for the big end of town. Knowing they had Nuplex by the short and curlies, the institutions insisted on securing extra for themselves through a ‘call option’. The call option gave a select group of ‘sub-underwriters’ the right to buy a further 99 million shares, 15% of the company at just 23c a share. A Stock Exchange waiver meant the normal requirement for a shareholder vote would be set aside. With post-rights shares likely to be worth at least 40c (net asset value per share would be twice that), the exclusive side deal effectively delivered tens of millions of dollars straight into the clutches of a handful of investors”.
The lesson for Nuplex? With friends like First NZ Capital, who needs enemies!
Decision # 200910055
Ripples
From The AIG Debacle Hit Our Shores
Jill Considine, Chester Feldberg and Douglas Foshee as trustees of AIG Credit Facility Trust United States of America (100%) received approval to acquire rights or interests in 79.9% of the shares of American International Group Inc, the value of the assets of American International Group Inc and its 25% or more subsidiaries being greater than $100m. The vendor was Existing Shareholders in American International Group Inc. United States of America (91.01%), Switzerland (6.49%), Bermuda (2.32%), Various (0.18%) and the value was stated at $140,630,794. This $140m is a very small fraction of the US$180+ billion Uncle Sam has had to pump into this financial black hole. The OIO states:
“The AIG Credit Facility Trust was created pursuant to the AIG Credit Facility Trust Agreement (Trust Agreement) dated 16 January 2009 between Jill M Considine, Chester B. Feldberg and Douglas L Foshee (the Trustees) and the Federal Reserve Bank of New York (FRBNY). The AIG Credit Facility Trust has been created for the purpose of acquiring, holding and eventually disposing of the stock acquired. The AIG Credit Facility Trust will hold the stock for the sole benefit of the United States Treasury”.
AIG was possibly the highest profile casualty of the recent global financial crisis. Prior to the crisis, AIG was the world’s largest insurance company. In that role it essentially insured many of the worlds’ largest banks against losses in the nebulous world of financial derivatives (credit default swaps, collaterised debt obligations, etc). When these derivatives were eventually seen for what they were, aka “the emperor has no clothes”; AIG faced many massive payouts, which would have bankrupted it, if it wasn’t for the good ol’ US taxpayer mortgaging the next generation or three to bail them out.
AIG was the proverbial “Too Big to Fail” according to the US government, which may have been true, as its demise would almost certainly have brought the whole house of cards down. However it would be interesting to surmise what role the US Federal Reserve (the American Central Bank) played in this saga, as that institution is essentially controlled by the banks with which AIG dealt. Perhaps “dealt” is the wrong word, giving the impression of a high stakes game of poker. A closer analogy would be Russian roulette with the Federal Reserve (read banks) permanently holding the gun (fully loaded), pointed at the US taxpayer!
Here in New Zealand, AIG has recently changed the name of some of its insurance divisions to Chartis – the Greek word for map. Quite befitting, given the Greek tragedy that has befallen its parent company. Presumably the name change was partly to get away from the AIG name or perhaps as a precursor to an initial public offering or even sale. With the National government appearing to push ACC towards privatisation, the Council of Trade Unions has rightly questioned this, in light of the AIG collapse as well as recent history here. Specifically, a previous National government, privatised aspects of ACC, with HIH, one of the workplace cover providers, going bust! Despite the apparent deep pockets of Uncle Sam, do we really want Kiwis’ health and safety cover potentially in the hands of dodgy international financial alchemists?
Decision # 200910043
|
|
|
March 2009 |
Jan - March 2009 |
Jan - March 2008 |
|
Number of approvals |
20 |
42 |
28 |
|
Net Investment $ |
(17,688,314) |
48,577,105 |
136,599,827 |
|
Gross value of
consideration |
693,358,754 |
1,779,615,940 |
2,272,426,924 |
|
Asset Value |
Confidential |
9,369,365,858 |
N/A |
Freehold land
approved for sale
|
|
March 2009 |
Jan-March 2009 |
Jan-March 2008 |
|
Number of approvals |
16 |
37 |
22 |
|
Net land area (ha) |
9,247 |
11,204 |
1,131 |
|
Gross land area (ha) |
193,040 |
195,863 |
5,386 |
Other interests
in land approved for sale (for example leases and crown pastoral leases)
|
|
March 2009 |
Jan-March 2009 |
Jan-March 2008 |
|
Number of approvals |
3 |
8 |
6 |
|
Net land area (ha) |
914 |
916 |
84 |
|
Gross land area (ha) |
64,631 |
90,611 |
10,213 |
Fishing Quota
As usual there was no fishing quota approved for sale this month.
Compiled by:
Campaign Against Foreign Control of Aotearoa,
P. O. Box 2258
Christchurch.
