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Foreign investment in Aotearoa/New Zealand
Overseas Investment Office - April 2020 Decisions
Universal Homes (China) Gets Rubber Stamp
Universal Homes Ltd (China PR 100%) has a Standing Consent (Increased Housing test) granted under s.12(a) and s.23A of the Overseas Investment Act 2005. The OIO states that Universal is one of NZ's largest house building companies, with a long record of completing residential developments. Universal acquires residential land to develop housing and sell house and land packages to the public.
The OIO is satisfied that Universal has demonstrated that residential land acquired under this standing consent is likely to be used to increase the number of residential dwellings. The standing consent has been granted in accordance with the Increased Housing test in Sch. 2 of the Act. It is for a maximum of 27 transactions by 3 April 2023 and will permit Universal to acquire up to a total of 21.5 ha. of residential-only land in the Auckland region.
27 is the largest number of automatic consents so far. Universal Homes' registered ultimate owner is China Merchants Group, Beijing, a Chinese State-owned conglomerate (think Belt & Road Initiative). See other Universal Homes consents for land in March and July 1996, April and October 1997, June and November 1999, June and September and October 2002, May 2003, February and June 2004, December 2017, January and October 2019. Standing consents have also been given to Fletchers Residential (4/2019) and Neil Homes (9/2019).
Back to TopEmergent Flips Polarcold Stores To US Giant Lineage Logistics After One Year
Lineage Logistics Holdings, LLC (US 98%; various overseas 2%) has consent to acquire all issued shares in Emergent Cold Topco Pty Ltd which has approximately 0.8078 ha. at 820 Breakwater Road, State Highway 50, Napier, from Emergent UK 3 Ltd (US 73.8%; Cayman Islands 12.1%; Canada 3.6%; various 3.1%; Guernsey 2.5%; Ireland 1.8%; UK 1.1%; Switzerland 1%; Finland 1%). The price was $155 million.
The OIO states that Emergent Topco Pty Ltd is a provider of cold-chain logistics services and supply chain solutions. This acquisition will provide Lineage Logistics Holdings with an indirect interest in four NZ entities which own cold storage facilities, one of which has sensitive land. Lineage Logistics intends to undertake upgrades on some of the facilities acquired. The benefits to NZ include the introduction into New Zealand of at least $1.65 million and the creation of at least 10 permanent full-time jobs.
See May 2019 for OIO consent for Emergent UK 3 (mainly an equity fund) to acquire Polarcold Stores for $151.4 million with a two-year plan for development. So here is Emergent UK flipping its NZ subsidiary to Lineage Logistics within a year. We look forward to the price being revealed. But this is part of a larger deal. Lineage (established 2007), the world's largest refrigerated warehouse company, has acquired Emergent Cold (established 2017), the largest temperature-controlled service providers in the Southern Hemisphere, giving Lineage now 260 temperature-controlled facilities in ten countries.
Lineage Logistics is an international warehousing and logistics company and the world's largest refrigerated warehousing company, with around 200 facilities in North America, Europe and Asia (Wikipedia). It is owned by San Francisco-based Bay Grove LLC, which was established in late 2007 by three former investment bankers - actual named people - who say Bay Grove creates platform companies with long time horizons through acquisitions and deployment of (other people's) capital.
Divestopedia.com defines a platform company as an initial acquisition made by a private equity firm in a specific industry that will serve as the foundation for a roll-up of other companies in the same industry, in which it develops expertise. See Lineage Logistic's media release (28/11/19) about its plans for Asia-Pacific expansion.
Crains Detroit Business reports that, after several acquisitions in 2017 and 2018, Lineage agreed in November 2019 to acquire Emergent Cold in a deal reportedly worth more than $US900 million, marking Lineage’s entry into the Australia, NZ and Sri Lanka markets.
The Wall Street Journal (18/11/19) says Lineage bought Emergent Cold off hedge fund Elliott Management Corp, and reports on other cold store mergers as investors push money into a market with low margins and high costs of warehouse development. Crains quotes Lineage's CEO as saying that its aggressive acquisition strategy reflects "opportunities created by a fragmented market", in that only 20% of the market so far is owned by the top ten cold storage providers. A catalyst is on-line grocery shopping, which in the US is expected to reach 13% of sales by 2022.
Back to TopElanco's Purchase Of Bayer's Animal Health Business Includes NZ Products
Elanco Animal Health, Inc. (US 93%; UK 3%; France 2%; Switzerland 1%; various 1%) has consent to acquire Bayer AG’s animal health business and assets from Bayer AG (US America and Canada 30.2%; German 20.2%; UK and Ireland 14.2%; various 35.4%) for approximately $267,243,000 (the value implied by the global transaction).
The OIO states that Elanco Animal Health is a global company that innovates, develops, manufactures and markets products for companion and production animals. Elanco seeks to purchase Bayer's animal health business and assets in NZ, as part of its purchase of Bayer's global animal health business. Elanco intends to continue operations in NZ in the ordinary course. It has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and it has demonstrated financial commitment to the investment.
Reuters (20/8/19) reports that Elanco is buying Bayer's veterinary drugs unit in a cash and stock deal valued at $7.6 billion. This will make Elanco the second largest producer medicines for pets and livestock, and expand its reach online. The fast growth of the animal health market prompted US pharmaceutical company Eli Lilly and Co. to float Elanco in 2018, and rival US drug maker Pfizer to also spin off its veterinary medicine business.
Bayer AG, one of the world's largest pharmaceutical companies dating back to pre-War Germany (Wikipedia), bought NZ company Bomac Industries from the McLaren family in 2010. Bomac was then NZ's largest privately owned animal health business, manufacturing 250 animal healthcare products; see commentary of December 2010. Reuters says the sale of its animal health business helps Bayer slash debt from its $63 billion takeover of seed company Monsanto in 2018 as it braces for a potential settlement of lawsuits over an alleged cancer-causing effect of weed killer Roundup.
Back to TopAMP Australia Increases Holding In Wiri Prison Operation To 70%
AMP Capital Funds Management Ltd (Australian Public 85%; Japanese Public 11.3%; various overseas 3.7%) has consent to acquire an additional 30% of SecureFuture Wiri Holdings Ltd (SERCO) (resulting in a 70% interest) and a leasehold interest in 20.1529 ha. at 21 Kiwi Tamaki Road, Wiri, Auckland. The vendor is John Laing Investments NZ Holdings Ltd (UK Public 74.6%; US Public 8.8%; various overseas 16.6%). The price was $37.6 million.
The OIO states that AMP Capital Funds Management intends to acquire an additional 30% stake in the company operating the Kohuora Auckland South Corrections Facility. John Laing Investments helped construct the prison and now wishes to reinvest its funds elsewhere. AMP is a secondary investor who entered the Public Private Partnership at the management and oversight phase.
The prison is operated as a public private partnership (PPP) with the Department of Corrections. AMP's effective control over the prison is strictly limited by pre-existing contracts so this is, effectively, a passive investment with the prison being run by the existing subcontractors. Allowing AMP to increase its holdings is likely to promote the Government's PPP strategy including secondary sell-down transactions.
The OIO states that it is likely to be in NZ's economic interest to have the PPP model working in a way that encourages additional investment. AMP has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and AMP has demonstrated financial commitment. See our commentary of December 2019 for background on SERCO, the Wiri prison and AMP's involvement in prisons in Australia.
Back to TopInvestore Buys More Commercial Property
Investore Property Ltd (NZ 88.5%; Australia 11%; various 0.5%) has consent to acquire approximately 2.1594 ha. at 295 Penrose Road, Mt Wellington Shopping Centre, Mt Wellington, Auckland; and approximately 3.7393 ha. at 65 Chapel Street, Bay Central, Tauranga. It is also acquiring a further 2.7058 ha. at 2 Carr Road, Three Kings, Auckland (not "sensitive land" under the Act), which together have a value of greater than $100 million. The vendor is Stride Property Ltd and Stride Holdings Ltd (NZ 88.1%; Australia 9.2%; various (4.7%) and the price $140,750,000.
The OIO states that Investore Property is a commercial property ownership business that invests in quality Large Format Retail property assets, being single-storey or low-level properties comprising retail shops, outlets, and car parking areas. It owns many large format retail properties in NZ. The benefits of this Investment include oversight and participation by New Zealanders, with Investore's five directors being NZ residents and a relatively high level of the shares being held by NZ. In the past it has invested beneficially, maintaining and upgrading such properties.
A benefit for Investore itself is that commercial property owners do not pay capital gains tax on the properties they buy and sell. The properties are largely bought with other people's money; see details of its latest capital raising. An analysis of 50 top listed NZ companies by Bill Rosenberg in 2018 included Investore, showing annual revenue at $37,398,000, net profit before tax at $30,775,000 and an effective tax rate paid of 7.3% (NZ Council of Trade Unions, presentation to E Tū, 5/919).
Back to TopNew Share Issue By Augusta Capital For Commercial Property "Post Covid"
Augusta Capital Ltd (Rockridge Investment Trust, NZ 17.2%; Kawaroa Trustees Ltd, NZ 6%; other NZ 53.6%; various Australian 18.4%; various overseas 4.7%) has consent for the issue of shares in Augusta Capital Ltd which has 19.305 ha. in various locations throughout NZ, being management rights in certain properties and a 25% interest in a development partnership agreement for a site in Queenstown.
The OIO states that Augusta is one of NZ's largest property funds management specialists and owns and manages 74 office, retail and industrial properties across the sectors throughout NZ and Australia. It was incorporated in NZ and is listed on the NZX. Augusta has experienced a significant drop in actual and forecasted revenue due to the economic climate resulting from global Covid-19. In response, Augusta intends to issue shares to raise capital with the aim of improving its financial position. Augusta expects to raise up to approximately $45 million.
The stated benefits to NZ from the Capital Raise include job retention and continued majority New Zealand ownership. The OIO notes that Augusta has previously made high dollar-value investments in New Zealand since its incorporation in 2001. Not granting consent would be likely to adversely affect New Zealand's image overseas as it would be inconsistent with measures introduced by other New Zealand regulators to assist businesses in the face of the economic impacts of Covid-19.
There's been a few of these "image" threats that presumably originate with applicants; they're just rude. How will sucking in more capital enable Augusta to recover from Covid losses? Maybe by snapping up some property bargains as cafés and accommodation businesses go under? The Government is speeding up an Overseas Investment Act amendment to include a "national interest" criteria, with this thought in mind. It remains to be seen whether any acquisitions with Augusta's new capital, or by most overseas companies will be deemed against the national interest.
Back to TopOyster Reorganises Investment In Tauranga Crossing Shopping Centre
Oyster Property Holdings Ltd on behalf of Tauranga Crossing Shopping Centre LP (New Prime Hold Company Ltd, NZ 50%; Australian Public 39.5%; Singapore Public 9.2%; South African Public 1.2%; various overseas 0.1%) has consent to acquire, via multiple transactions, the Tauranga Crossing Retail Centre and Lifestyle Centre (approximately 20 ha., plus buildings), at 31 Taurikura Drive, Tauranga. The vendor is Tauranga Crossing Ltd (TX Holdings Ltd, NZ 50%; Prospect Custodian Ltd, NZ 35%; Petra Securities Ltd, NZ 15%), and the price is $189 million.
The OIO states that the applicant is part of Oyster Group, a commercial property and funds manager that deals in property fund structuring and equity raising. Oyster Group currently manages over 20 property funds for retail and wholesale investors. Oyster Property Holdings will nominate the benefit of its interest to the Tauranga Crossing Shopping Centre Limited Partnership before settlement of the sale and purchase agreement, under which the Limited Partnership will enter into an unincorporated joint venture with Taurange Crossing Ltd.
The Limited Partnership and Tauranga Crossing Ltd then collectively manage and maintain Tauranga Crossing as tenants in common. Oyster Property Holdings has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and has demonstrated financial commitment.
Tauranga Crossing opened an outdoor town centre and The Millyard dining precinct in August 2016. Its lifestyle centre opened in 2018, and the first part of a fully enclosed shopping centre opened in October 2018, followed by a cinema complex and another 70 retailers and dining outlets opening in April 2019. I guess expansion at that speed has led to changes in financing and ownership, orchestrated by Oyster. Oyster Property Group's Website describes it as an NZ commercial property and funds manager with expertise in property fund structuring and equity raising.
It currently manages over 20 property funds structured for retail and wholesale investors, and manages a range of retail, office and industrial assets with a combined value over $NZ1.9 billion. Oyster is 50% owned by ASX-listed Cromwell Property Group, a real estate investor and manager with a global investor base, a property portfolio in Australia of $A3.2 billion and total assets under management of $A11.9 billion across Australia, NZ and Europe. See May 2018 consents for Oyster's similar involvement in Central Park Corporate Centre, Greenlane.
Back to TopHeinz Wattie Leases Land For Vegies In Hastings
Heinz Wattie's Ltd (USA 100%) has consent to acquire a leasehold interest in 60.5 ha. at 148 Rosser Road, Hastings, from Tony Maxwell Rasmussen and Patricia Josephine Rasmussen under the TM & PJ Rasmussen Partnership (NZ 100%) for $1.6 million (by the end of the lease). The OIO states that Heinz Wattie is retrospectively acquiring a leasehold interest in land that it currently uses for growing crops, to be processed at its factories. It is also extending this lease, so it can continue using the land.
Heinz Wattie is one of NZ's leading growers and manufacturers of food products and has invested in factories around NZ, creating thousands of jobs. Its investment has resulted in an increase in efficiency and productivity of the land, and an increase in processing primary products such as tomatoes, beetroot and sweetcorn, the rate of which will be maintained through the duration of the lease.
Wattie's Canneries was founded by James Wattie in 1934, was bought by Goodman Fielder in 1987 and sold to Heinz in 1992 for $565 million. In the 1990s Heinz bought and on-sold other NZ food businesses, such as Tegel and Griffins. It currently has two production centres in Hastings, and a third in Christchurch. It employs 1,900 people, of which approximately 350 are casual. For other Heinz Wattie consents, see November 1995, May and September 2001 October 2005, October 2006, June 1998 and May 2013.
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