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O’Reilly buys another radio network: NZ Radio Network buys Prospect We reported in April 1996 that the privatised Radio New Zealand commercial network had been sold as The Radio Company Ltd to three companies closely associated with Irish magnate, Tony O’Reilly, for $89 million. The purchaser was New Zealand Radio Network Ltd. That company, through subsidiary The Radio Network of New Zealand Ltd, now has approval to buy a further radio network, Prospect, which (as the Independent Broadcasting "Group") was sold only in March 1996 to the GWR Group Plc of the U.K. GWR are making a tidy profit: they bought it for $26.5 million and sold it for "approximately $40 million". The Prospect companies comprise: Primedia Auckland Limited, Primedia Hamilton Limited, Look Outdoor Limited, Median Limited, Arrow Limited, Ran Limited, IRN Limited, Studio Time Limited, Graphic Outdoor Limited, Primedia Limited, and Prospect Limited. Particularly significant is IRN (Independent Radio News) which means O’Reilly can now more easily cut himself loose from Radio New Zealand News (which remained with publicly owned radio) when the contract with it ends. That must put the viability of that service into some doubt, and opens up the possible scenario of O’Reilly’s broadcasting and print news services cooperating or merging. The deal adds 12 radio stations to its existing 41. (That total of 53 stations is large even in international terms. In a deregulatory move in January 1997, the U.S. Government agreed to let Westinghouse Electric Corporation and Infinity Broadcasting merge into the largest radio group in the U.S.A. It operates just 82 stations, admittedly with much larger audiences: Press, 9/1/97, "US radio merger nod", p.23.) Seven of Prospect’s stations are in Auckland and five in Hamilton, including The Breeze, i98FM, Hauraki FM and i97. Fifty-six stations were involved in the deal, but the remaining three have to be sold under a Commerce Commission ruling (New Zealand Herald, 18/11/96, "Radio Network buys Breeze, Hauraki"). Nonetheless, the Commerce Commission’s acceptance of the purchase is odd because it would reportedly have forced GWR to sell Prospect if bidding had gone the other way and GWR had won Radio New Zealand’s stations. Once again the Commerce Commission has shown itself to be a cardboard policeman. The purchase was criticised by the Labour Party for its cramping of competition and the absence of rules on cross-media ownership, and additionally by the Alliance for the growing foreign ownership of broadcasting (New Zealand Herald, 19/11/96, "O’Reilly says drop in dollar is vital"). The ownership of New Zealand Radio Network Ltd appears to have changed. In April it was owned 33.3% each by Wilson and Horton Ltd, Australian Provincial Newspapers Holdings Ltd (APN), and Clear Channel Communications Inc (CCC). According to the OIC, 14.3% of APN’s share is now owned by Stephen Walker of Aotearoa, leaving it with 19%. Wilson and Horton is now over 85% owned by O’Reilly’s Independent Newspapers Plc, after a takeover bid failed to reach its target of 100% (New Zealand Herald, 16/11/96, "Irish finish bid with 85pc of W&H"). APN is more than 50% owned by Independent Newspapers Plc (Press, 4/4/96, "RNZ stations sold for $89 million", p.3); and CCC is a San Antonio, Texas based broadcasting company which owns 50% of the eight station Australian Radio Network, the other 50% being owned by APN. Skellerup of U.S.A. sells Levene Paint Manufacturing to ICI Skellerup, now owned by Maine Investments Ltd of the U.S.A., is selling off another subsidiary. This time it is the paint manufacturing assets and business of Levene Paint Manufacturing Ltd, which it is selling to ICI New Zealand Ltd, a subsidiary of ICI Australia Ltd. The price is suppressed. ICI will presumably merge the operation with its own paint manufacturing business because "the proposal is seen by ICINZ as a key step in both building volume for its Gracefield manufacturing plant and underscoring the viability of its operations at that site". According to the New Zealand Press Association, quoting ICI, "the Levene manufacturing plant in Auckland, which is not being sold, will continue to contract manufacture paint for ICI until production is moved to ICI’s Lower Hutt plant." It says "Levene makes decorative industrial, and roadmarking paints and protective coatings worth more than $20 million a year." (Press, 26/11/96, "ICI NZ buys paint", p.36.) Since its management buyout and sale to Maine Investments in March 1996, Skellerup has sold CablePrice Ltd to Hitachi of Japan, its half share in Dominion Salt to Ridleys of Australia, and the North Wiri Quarry (owned by subsidiary DML Resources) to Milburn of Switzerland (see below). Broadway Industries sell Chemstock Animal Health to IAMA, Australia IAMA Ltd of Australia has approval to buy Chemstock Animal Health Ltd of Christchurch from Broadway Industries Ltd, a New Zealand listed company, for $11,500,000. IAMA "is Australia’s largest rural merchandise distributor and the proposal represents an opportunity for IAMA Limited to diversify into the New Zealand veterinary product market" according to the OIC. Chemstock deals in veterinary pharmaceuticals and Broadway made a profit of between $8.5 million and $9.25 million on the sale (Press, 8/11/96, "$8m gain for Broadway on Chemstock", p.32). Bakery materials division of Abels sold to Swiss/Liechtenstein firm N.Z. Bakels Ltd which is owned by EMU AG of Switzerland, in turn ultimately owned by the EMU Foundation, a Liechtenstein Charitable Trust, has approval to acquire the bakery raw materials division of margarine maker, Abels (1995) Ltd for an originally suppressed amount. The amount was released in August 1997: $10,928,050. Abels is owned by Aspak Foods Ltd, which is itself owned 33.3% each by Goodman Fielder Ltd, the Dairy Board, and "a group of New Zealand dairy companies". N.Z. Bakels Ltd is "involved in the manufacture of various bakery raw materials". Abels was bought by the triumvirate only a year previously: in September 1995. Then we reported:
The "reversion to majority New Zealand ownership" was short-lived. According to the New Zealand Press Association, "the 2.4 hectare Abels margarine factory site in Newmarket, one of Auckland’s last large industrial sites, was sold last month for redevelopment. Production of margarine is being transferred to a new factory in East Tamaki. Abels had been on the site since the early 1920s." (Press, 25/11/96 "Swiss firm buys margarine maker", p. 30.) N.Z.P.A.’s report had the whole of Abels being sold to EMU; however the OIC approval is only for "the business assets and undertakings comprising the bakery raw materials division" of Abels. Kiwi Income Property Trust buys four CBD properties from General Accident Kiwi Income Property Trust (KIPT), an Aotearoa listed unit trust "with approximately 15% of the units held by various overseas persons" and managed by Kiwi Income Properties Ltd which is 50% owned by FCMI, a public company of Canada, and 50% by Aotearoa residents, is buying four central city buildings. All four buildings are being sold by Sentry Investments Ltd which is a subsidiary of General Accident Plc of the U.K., the owner of New Zealand Insurance. The total price is "approximately $93,000,000". They are:
Sentry is selling off properties worth a total of $180 million according to Fiona Rotherham (Independent, 7/6/96, "Sentry to sell Fay Richwhite's Big Pinky", p.1) in order to help fund its Chancery Square hotel and office development in Auckland and the company’s Willis/Boulcott Street site in Wellington. Some of the properties listed in this decision are only partly owned by Sentry. Several companies bid for the properties. Sentry bought the National Bank Centre for approximately $85 million in July 1990 according to OIC decisions of that month. Similarly it acquired Cigna House in September 1991 jointly with the Mainzeal Group Ltd for $19.25 million. KIPT is half owner of the Northlands and Palms (Shirley) shopping malls and the Hong Kong Bank building in Christchurch and is keen to buy or develop more malls (Press, 1/6/96, "Call for more Chch malls", p.42). In June 1996 it bought the Bellsouth Centre at 21 Pitt Street, Auckland from the Auckland Regional Services Trust for $31,500,000. At that time KIPT had "approximately 20%" of its units held overseas, and the ownership of Kiwi Income Properties Ltd was detailed as "50% by FCMI Financial Corporation of Canada and 50% by R. Didsbury and R. Green of New Zealand." In February 1994 it bought the Majestic Centre, Wellington for $48,550,000 in a 50/50 deal with FCMI. At that stage it already owned the Plaza, Palmerston North, and KMart, Porirua, and commercial buildings in Auckland and Christchurch. It originally planned to buy the Fay Richwhite Tower at 151 Queen Street, Auckland, as part of the deal, which would have cost it a total of $130 million. However Sentry’s 50% partner in the building, Queen and Wyndham Management (owned by Fay Richwhite), exercised a pre-emptive right to buy out Sentry’s interest, presumably because the price KIPT offered (reportedly $38.5 million) was too low. It funded the remaining deal by issues of convertible notes and a one-for-five renounceable rights issue. The purchase of the National Bank Centre and the Huttons Kiwi building was through KIPT’s purchase of 96% of the units in Prime Property Trust which owns 50% of each. It paid $28 million for the Price Waterhouse Centre (Press, 31/10/96, "Kiwi Prop loses Auckland building from Sentry deal", p.32). Interestingly, press reports put the total paid by KIPT for the four properties at $91.5 million, not the $93 million reported by the OIC (e.g. Press, 7/11/96, "Kiwi purchase", p.30). For further information, see the August 1996 decisions. St Lukes buys cnr Customs/Albert St, Auckland, from Auckland City Council St Lukes Group, the shopping mall property spin-off from Fletcher Challenge which is listed on both the Australian and New Zealand stock exchanges but 51% owned by BT Funds Management Ltd of Australia (which is owned in the U.S.A.) has approval to buy a 0.6496 hectare property on the corner of Customs and Albert Streets, Auckland from the Auckland City Council. The price was originally suppressed, but was released in August 1997: $14,200,000. Fletcher-Mainline Downtown Ltd, a wholly-owned subsidiary of St Lukes, holds a lease of the land which expires in 2086. The site is occupied by a shopping centre and offices. "The property is situated in the immediate vicinity of the Auckland waterfront area that is targeted for development and hence any further development of the property will see an increase in employment and business opportunities which are likely to flow from any such development." Though St Lukes told the OIC that "the purchase of the freehold land will enable the company to protect the value of its investment; … a greater efficiency will be made with the streamlining of ownership and management of the centre;… the acquisition will provide the certainty of ownership that the St Lukes ‘group’ view as a prerequisite for any further development", according to news reports St Lukes is putting the Downtown Shopping Centre in Queen Street up for sale. It "leases the Downtown site (as distinct from the building, which it owns) from the Auckland City Council. It has bought the freehold to the land, with settlement due by March 1998" (Press, 19/10/96, "Shop rents upset third retailer", p.29). This casts doubt over whether it will "further develop" this Customs/Albert Streets property as promised. Also despite what it told the OIC, in September BT told the Stock Exchange it had increased its shareholding in St Lukes to 54.15% (Press, 12/9/96, "BT denies plans for changes at St Lukes", p.38). This steady increase in shareholding is something of a turn-around: BT started with 6% when St Lukes was formed in December 1993 and quickly increased its holding to 21%. It then tried to sell its entire holding to an interesting character called Clive Currie who "at the beginning of 1990 had no car and owed NZI bank nearly $3 million" and managed to get himself into trouble with a number of the authorities. True to form, he didn’t actually show up with the money for BT’s St Lukes shares and the deal fell through. BT responded by taking control of St Lukes, and some rumours circulated in 1996 that it wanted to throw out St Lukes’ management and replace it with its own, possibly at the expense of minority shareholders. "BT is one of Australia’s largest fund managers, controlling more than $A80 billion. Unlike most institutions, which tend to be passive investors, BT is very aggressive. So aggressive, in fact, that it has launched three public takeovers since 1984." (Independent, 19/4/96, "What's Bankers Trust doing to St Lukes?", p.32). BT is aggressive in other ways. The head of BT New Zealand, Gavin Walker (a BT director of St Lukes despite his lack of experience in retail property), is also head of the Government’s Foreign Direct Investment Advisory Group, which coordinates programmes to attract foreign investors to Aotearoa. He is very vocal publicly in telling us how good foreign investment is for us. Bankers Trust has been used as a consultant by the Government for some of its privatisation program (for example, it conducted the tendering process for the sale of New Zealand Rail). In 1994, Bankers Trust was in the news for fraudulent activities in the U.S.A. Major corporations, Procter and Gamble, and Gibson Greeting Cards, lost millions of dollars on financial derivatives sold to them by BT, and have sued it, charging that it misled them about the risks of the contracts. Gibson settled for $US10 million, having made losses of $US23 million on its derivatives portfolio. The U.S. Securities and Exchange Commission (SEC) enforcement chief said: "This case, simply put, involves fraud by a broker-dealer." From October 1992 to March 1994, BT Securities "misled Gibson by giving the company values that significantly understated the magnitude of Gibson’s losses". This led to BT being forced to sign an agreement with the U.S. Federal Reserve (the equivalent of our Reserve Bank) "to ensure the prudent operation of its leveraged derivatives transactions". It has put aside $US72 million to cover "non-performing derivatives transactions" (read: "losses"). Following from that, international ratings agency, Standard and Poor’s, put BT Australia and its subsidiaries in Australia (BT Australia) and Aotearoa (BT New Zealand and Bankers Trust NZ) on credit watch along with the parent company, saying derivatives were a fundamental part of BT’s business. Spokespeople for the subsidiaries in Australia and Aotearoa were quick to discount the connection with their U.S. parent, saying "the lowering has nothing to do with the financial credibility of Bankers Trust Australia" (managing director Rob Ferguson). Of course the opposite is claimed when trying to attract clients. (See CAFCA’s commentary on July 1994 OIC decisions.) It was a U.S. Bankers Trust dealer, Andrew Krieger, who claimed that in late 1987 he "played" (bet) several hundred million – possibly as much as a billion – New Zealand dollars against New Zealand’s currency, leading to a crash by 10% of the value of the New Zealand dollar ("The Money Bazaar - inside the Trillion-dollar world of Currency Trading", Andrew J. Krieger with Edward Claflin, Times Books N.Y., 1992, p.93ff). St Lukes has been berated by retailers, including Underground Fashions, Michael Hill Jewellers, and Hallenstein Glassons, for its rent increases and its turnover-based rents. "Michael Hill’s joint managing director, Howard Bretherton, called St Lukes a carnivore which did not care about its tenants." Some accused St Lukes of trying to bring Sydney-scale rents to Aotearoa. Rents were being raised from $1,300 a square metre to between $1,500 and $1,700 (Press, 19/10/96, "Shop rents upset third retailer", p.29). Housing subdivision of 67 ha. at Kelly’s Cove, Auckland Lion Holdings Ltd, owned 55% by John Gerald Darby, a company director of Queenstown, and 45% by Manukau Properties Ltd, owned by Brian Chang, a resident of Singapore, has approval to buy 67 hectares of residential zoned land at Kelly’s Cove, Auckland for $17 million. The land is being purchased through the ownership of Drinkrow Holdings Limited and Kingswood Park Limited.
Industrial subdivision by Tiongs in North Harbour, Auckland Neil Construction Ltd, owned by the Tiong family of Malaysia, has approval to buy two hectares of land zoned industrial at Paul Mathews Road, North Harbour, Auckland, for $880,000.
The land purchased in March 1994 cost Neil Construction $6.42 million. New Zealand Land of Singapore buys rest of Greenstone Lodge, Queenstown New Zealand Land Ltd, which is owned by the Pacific Development Trust, "the beneficiaries of which are associated with Messrs Tan, Sy, Tang and Pang of Singapore and Mr Horsburgh of New Zealand" has approval to purchase the remaining blocks of Greenstone Lodge, Fernhill, Queenstown for a sum "to be advised". The seller is Symphony Group Ltd of Aotearoa and Pacific Resorts (Queenstown) Ltd owned by the people named above.
"Mr Tan" is presumably Stanley or Freddie Tan who have been associated with George Horsburgh in a number of property companies, including the Pacific Group Ltd, The Habitat Group, Firle Holdings Ltd, and New Zealand Land Ltd. "Mr Tang" is probably one of the family which controls the Singaporean hotel operator, Dynasty Hotels International, and who is associated, along with the Pacific Group, with Pacific Hotel Management (Press, "Pacific Hotel Management targets Asian tourists", 22/3/95, p.36). The Symphony Group Ltd is controlled by Colin Reynolds and family. Reynolds ran the Chase group, one of the most spectacular failures in the 1987 sharemarket crash. It developed a number of apartment projects in Auckland and in January 1995 took over the Greenstone Lodge suite and apartment complex development in Queenstown from the part Taiwanese-owned Woodland Group (Press, "Queenstown apartment development", 14/1/95, p.29). The same parties were involved in the hotel/apartment "Heritage" development of the old Government Building and Carucca House in Cathedral Square, Christchurch. North Wiri Quarry, containing Waahi Tapu land, bought by Milburn Milburn New Zealand Limited, which is 72% owned by Holderbank Financiers Glaris Ltd of Switzerland, has approval to buy the North Wiri Quarry from DML Resources Limited. The quarry is on 49 hectares of leasehold land at Wiri, Auckland, and "contains an area designated Waahi Tapu". Milburn is paying $4,500,000 for the quarry, which will replace its East Tamaki quarry "which has almost completely run out of rock and is due to close in early 1997." DML Resources is a Skellerup subsidiary and is therefore U.S.-owned. Wilbow Corporation buys more land for subdivision The Wilbow Corporation (NZ) Ltd, which is owned by the Bowness Family Investment Trust of Australia, has approval to buy further land for residential subdivision in Henderson, Auckland, and in Tauranga. The Henderson land is two hectares at 192 Sturges Road, which is zoned residential. It "adjoins land already owned by Wilbow called Palm Heights" and will be developed in conjunction with that project. The Tauranga land is in two blocks being bought from Willow Park Motor Hotel Ltd and The Waipukurau Wine and Spirit Company Ltd. Both are of five hectares in Cambridge Road, one being identified as being at 217 Cambridge Road. In both decisions, the amount paid was originally suppressed but was released in August 1997: $425,000 and $2,285,000 respectively. "Wilbow has extensive experience in the residential property development sector (which to date involves a number of properties in the Auckland area)."
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