May 1997 decisions

Evergreen buys Fletcher’s forests in South Auckland and Coromandel …

Evergreen Forests Limited, "approximately 46%" owned by Xylem Fund I L.P., a U.S. limited partnership which operates as an investment vehicle for the Public Employees Retirement System of Ohio, has approval to purchase 4,294 hectares of freehold forest land, and forestry rights over 66 hectares, in the South Auckland and Coromandel areas for a total price of $26,430,000, from Fletcher Challenge Forests Ltd.

"Approximately 2,820.2 hectares of the freehold land is planted in maturing forests. A majority of the remaining 1,474 hectares is vegetation reserves and includes 770 hectares which is subject to the Tasman Forestry Accord. The Accord gives legal protection to natural indigenous forests where it is inappropriate to establish a plantation forest."

News reports differ from the above, and appear to ignore the land in reserves. For example the New Zealand Press Association reported (Press, 14/5/97, "Evergreen cleared", p.31) that the OIC had given approval for Evergreen to buy only 2,880 hectares, while an earlier report (Press, 22/3/97, "Evergreen buys forest block", p.26) put the purchase at $30 million for 3,500 hectares of "mature forests".

The land is as follows:

• the 1,196 hectare Patetonga Forest on the Hapuakohe Range, some 33 km south of the village of Maramarua, south of Auckland;
• the 966 hectare Kopu Forest at Kopu, 15 km south-east of the township of Thames on the western side of the Coromandel Peninsula;
• the 2,132 hectare Coroglen Forest located near the settlements of Coroglen and Whenuakite, 20 km south of the township of Whitianga on the eastern side of the Coromandel Peninsula, and a forestry right over the nearby 66 hectare Hamilton Forest.

With this purchase, Evergreen brings its plantations to 17,000 hectares. In order to finance the deal it placed 30 million shares at 55 cents each with mainly U.S.-based institutional shareholders and raised the remainder in loans. The New Zealand Stock Exchange waived a requirement for Evergreen to get an independent appraisal on the purchase because neither existing directors nor Xylem, the largest shareholder, were subscribing for the new shares. In general existing shareholders did not take up any of the new shares, so Xylem’s shareholding reduced from its previous 60% to the 46% the OIC reports (Press, 22/3/97, "Evergreen buys forest block", p.26; and 2/4/97, "Evergreen appraisal waived", p.30). Similarly, La Grouw Corporation, a founding shareholder whose owners opposed the merger with CBS Forests (see our commentary on the December 1994 decision), has reduced its shareholding to 4.58%, compared with 26.2% before the merger (Press, 10/5/97, "Evergreen changes", p.29).

Following this sale, Fletcher Forests sold its stake in Nelson forests to Weyerhaeuser of the U.S.A. and had already sold East Coast Forests to Glenealy of Malaysia (see the December 1996 OIC decisions). The proceeds are presumably intended to pay for Fletcher’s purchase of Forestry Corporation (see September 1996), but have allowed Carter Holt to proclaim itself the "largest forest owner" in Aotearoa, with "about 332,000 hectares, or about 23%, of the nation’s plantations" (Press, 15/7/97, "Carter Holt forecasting lift in prices", p.17).

… and in Manukau City …

Evergreen has also gained OIC approval to acquire the 554 hectares Otau Forest within the Manukau City boundary, near Clevedon, 50km south east of Auckland City, for $3,500,000. The forest is being purchased from Winestone (Clevedon) Ltd, a subsidiary of Fletcher Challenge Ltd and the Prudential Assurance Company of Australia and New Zealand Ltd. The land comprises "415 hectares of radiata pine, two hectares of Eucalyptus, five hectares of other species, one hectare of roads, 91 hectares of vegetation reserve and 41 hectares of bare land."

… and makes another purchase at Pouto, Northland

Evergreen also received approval to acquire 19 hectares of land on Schicks Road, Pouto, North Auckland, Northland, for $112,400. The block, which adjoins land held for conservation purposes, is being acquired for afforestation.

"The acquisition represents a mutually beneficial ‘land swap’ between Evergreen and their adjoining neighbours the Biddles. As part of the proposal the Biddles will simultaneously purchase from Evergreen approximately 10.6 hectares of land. Evergreen will receive better access to their forestry developments at Pouto Forest and the Biddles will receive more fertile land to enhance their farming operations."

JANZ of Japan buys world’s biggest natural sausage caser, NZ Casing Co

JANZ Investments Ltd of Japan has approval to acquire up to 89.88% of New Zealand Casing Company Ltd for a suppressed amount. JANZ is 43.26% owned by Itoham Foods Inc of Japan, 19.78% by Nippon Suisan Kaisha Ltd of Japan, 33.42% by New Zealand interests, 2.37% by Australian interests, and 1.17% by other Japanese interests. It involves assets in South Auckland and Southland.

New Zealand Casing is the world’s largest natural sausage casing company, with 700 employees, $230 million turnover and casing processing and marketing operations in Aotearoa, Australia, Japan, Canada, the U.S.A., Mexico, Britain and Germany. It was owned 60% by the family of Eddie Tonks, the former chairman of the New Zealand Rugby Football Union. The remainder was owned 29% by investment company Rangatira (also a 14.42% shareholder in JANZ), in which Tonks is also a shareholder, and about 10% by directors and senior executives of the company. It also owns 75% of Crown Meat Export, the other 25% being owned by Crown senior management.

Tonks was appointed chairman of JANZ in February 1997. JANZ also owns ANZCO, which NZPA reported was the actual vehicle for the New Zealand Casing takeover, though this is not confirmed in the OIC decision.

(Ref: Listener, 15/3/97, "The casing king", pp.30-33; Press, 13/6/97, "Anzco forges links with world's biggest sausage casing firm", p.14.)

Blue Star acquisitions continue with McCollam Printers

Blue Star Group Ltd, a subsidiary of US Office Products Company of the U.S.A., has approval to buy a further office products company, McCollam Printers Ltd, for "approximately" $67,302,710. The purchase includes McCollam’s subsidiary, Format Publishers Ltd, which it had taken over only in February 1997 for $14.47 million, and All-Mark Industries, which it acquired in February 1996 (New Zealand Company Register 1996-97, p.68). The acquisition "will enable Blue Star to provide complementary services to its clients in the area of high quality printing supplies". McCollam prints mainly high quality commercial material such as brochures, catalogues, company annual reports and targeted mailing packs according to the Company Register.

McCollam was listed in 1994, but remained 38% owned by McCollam family interests until the takeover. The takeover raised controversial issues because the McCollam family were offered a higher price for their shares ($3.00 per share, paid in US Office Products shares) than the minority shareholders (variously reported as $2.72 and $2.75 a share, in cash). At least one institutional shareholder was happy even at that rate: Southpac Investment Management had bought 1.186 million shares for between $2.30 and $2.35 the day the offer was made, making a profit of about $500,000 (Press, 20/5/97, "McCollams offered shares for holding", p.27; 27/5/97, "Blue Star acquires 9.99% of McCollam", p.29; 24/7/97, "Southpac lands instant profit from McCollam bid", p.28).

Blue Star’s last acquisition in Aotearoa was that of PC Direct in September 1996.

Malaysian companies take up to 35% of Colonial Motor Company

MBM Resources Berhad and Central Shore Sdn Bhd, both of Malaysia, have approval to acquire up to 35% of the Colonial Motor Company Ltd for "approximately $27 million".

Colonial, probably the largest independent car retailer in the country and 51st biggest company in Aotearoa by turnover (Management, December 1996), was controlled by the Gibbons family until Ron Brierley’s U.K. based Guinness Peat Group (GPG) raided in October 1995, taking advantage of a split in the family. GPG got Colonial to play one of its favourite asset-stripping tricks earlier this year: Colonial paid out a 70 cent per share capital reduction and special dividend. Since then, trading has been difficult.

GPG sold 24.88% (or 7.7 million) of Colonial’s shares to MBM, and Central Shore also picked up a further 2.79 million shares, for a 33.9% total. The price was $2.60 per share, to give a cost for all the shares of $27.27 million (Press, 27/5/97, "GPG sells 34% of Colonial Motor to Malaysian Group", p.29). Although MBM was said to be in the motor industry itself, by July, the companies had resold 1.205 million shares, reducing their holding to 30% (Press, 18/7/97, "Colonial Motor stake cut", p.23).

Onex Corporation of Canada takes over Air New Zealand’s catering services

Approval has been given to a subsidiary of the Onex Corporation of Canada to take over the in-flight catering services of Air New Zealand for an originally suppressed amount. That amount was released on appeal in September 1997: "approximately" $23 million. The purchase includes six hectares of land at 270 George Bolt Memorial Drive, Manurewa, Auckland. The takeover is through Onex’s subsidiaries Caterair Australia Pty Ltd and Bethseda Services Holding Corporation, which are in turn subsidiaries of Onex’s Caterair International Inc of the U.S.A.

Air New Zealand’s catering operations have been the source of numerous industrial disputes as it has tried to force down wages and costs. Just four days before it officially announced the takeover, Air New Zealand made 396 of its catering workers redundant in preparation for the sell-off. The staff, some of whom had served the company for 25 years, were told they could apply for work with the new caterer. Air New Zealand also took advantage of their acceptance of the redundancy to announce that it would not ratify a new collective employment contract under negotiation. In Christchurch, some of the workers were represented by an "industrial consultant", some by the Canterbury Hospitality Union (Press, 13/6/97, "Air NZ redundancies affect 53 in Chch", p.4). The action in a real sense completed the work of the Employment Contracts Act: a bitter strike by the workers was one of the first significant industrial disputes after the Act was introduced in 1991.

Air New Zealand eventually named SC International Services as the buyer. It said it operated through two subsidiaries: Sky Chefs and Caterair International. The catering business in Aotearoa would be operated by a new company, Caterair New Zealand (Press, 17/6/97, "Air NZ catering buyer", p.25).

Telecom buys out Motorola’s cellphone reseller business

MCS Cellular Services Limited, a subsidiary of Telecom Corporation New Zealand Limited, whose majority shareholders are Ameritech Holdings Limited and Bell Atlantic Holdings Limited of the U.S.A., has approval to acquire "the business of Motorola New Zealand Limited which relates to the resale of airtime by Motorola as a Telecom sales agent on the Telecom cellular network" for a suppressed amount. In plain language, Telecom has bought the cell-phone services operation of Motorola, which is concentrating on equipment sales. Motorola cellphones connect to the Telecom cellular network.

Singapore interests buy Sheraton Rotorua

The Rotorua hotel known as the "Sheraton Rotorua", in Fenton Street, Rotorua, owned by Rotorua Motor Inn Ltd and Cosmopolitan Investments Ltd is being sold to a consortium of shareholders from Singapore and Aotearoa. Fentondale Properties Ltd and Fentondale Enterprises Ltd (neither of which was yet incorporated) have approval to acquire the property for a suppressed amount. The companies’ major shareholders will be Les Holt Enterprises (of Aotearoa), Thiam Soon Ng (a resident of Singapore), Lian Seng Tan (a resident of Singapore) and Lawindale Holdings Limited (the main beneficiaries of which are Mr Tan and his "intermedia").

According to the New Zealand Press Association (Press, 12/6/97, "Sheraton Rotorua sold", p.31) the hotel has 130 rooms and the new owners plan a $5 million refurbishment.

CanWest into forestry near Te Anau

Owner of TV3, TV4 and the More FM radio network, CanWest Global Communications Corporation of Canada, is starting up a unit trust, CWF, to invest in 952 hectares of forestry development near Te Anau, Southland. The sum given is "approximately $1.8 billion", but that represents the licence premium CWF will pay over the 50 year term. It "equates to approximately $119 million at current values." The trustee of CWF is CWF Holdings Ltd, incorporated in Aotearoa, but the units of the trust are owned by CanWest itself. The arrangement is somewhat complex:

"The proposal represents the commencement of business in New Zealand by the CWF Unit Trust entering into a fifty year licence agreement with Trinity Foundation (Services No. 1) Limited to utilise approximately 952 hectares of land situated near Te Anau for the purpose of establishing a forestry operation on the land. … Under the licence, CWF will have no legal interest in either the property or the trees planted on the property. … CWF will engage Pine Plan New Zealand, a division of Wrightsons Limited, to establish the forest and subsequently provide forestry management services to CWF in respect of the property."

According to the Press (18/9/97, "CanWest plantation", p.32) the land is at Redcliffs Station, and Trinity Foundation is "an Auckland charitable foundation administered by the Anglican Church".

Other rural land sales

• Ms Jan A.K. Evans, a resident of the U.S.A., has approval to acquire 81 hectares of land at Waipu, Northland for $210,000 for (absentee) cattle farming.

"Mrs Evans has substantial business experience and acumen ranging from managing a multi-million dollar investment portfolio to a seat on the board of the Abigail Adams Bank in Washington, D.C. In addition, … Mrs Evans is a very competent farmer and is the part owner of a 1,214 hectare ranch in Virginia. … The land, the subject of this application, is infested with obnoxious weeds, run-down, and requires substantial capital and effort to transform it into an economic farming unit. Mrs Evans wishes to acquire the property for the purpose of developing it into a viable working farming unit. … The short-term plan for the property is to eradicate obnoxious weeds, stabilise the land, and repair the fences, with a proposed capital injection of approximately $250,000 over the next three years. Mrs Evans anticipates eventually building a dwelling on the land at an estimated cost of $300,000."

• The breakup of a marriage, one of whose partners is a British citizen resident in the U.S.A., has led to the U.S. resident purchasing her partner’s 19 hectare half of a block of land on State Highway 25, Whangamata, Coromandel, although the OIC decision indicates the purchase price as zero. The owners’ did not appear to lack for money:

"Since the property was purchased it has been substantially developed. Approximately four hectares of the property has been extensively landscaped. A cottage on the property was completely rebuilt to house the farm manager and his family at a cost of approximately $40,000. The main house, stables and tack room have been constructed, along with a tennis court, equestrian oval, a gravelled and cobbled drive, new post and rail fences, trees, shrubs and shelterbelts have been established on the property at an estimated cost of US$113,800. In addition it is stated approximately eight hectares of the property has been planted in pine trees. The balance of the property is used for pastoral farming by an adjoining farmer free of charge. A New Zealand farm manager has been engaged and employed on a full time basis to oversee the pastoral farming operation. The applicant advises that it is proposed to further develop the property by establishing tracks through the property, a horse riding school and camping centre."

• The Davis’ Family Trust, whose beneficiaries are the Davis family, all of whom but the father are citizens of the U.K., but are resident in Saudi Arabia or the U.K., has approval to acquire 46 hectares of land at No. 1 Road, Waitoa, Bay of Plenty for $744,010. The land

"… is described as being a rundown dairy farm having produced only 16,000 kilograms of milk fat under its present management. The Trust proposes to acquire the property with the intention of developing the property, in association with a neighbouring farm, into a more productive and viable farming unit. … It is the Davis’ family ultimate intention to return permanently to New Zealand once their children have completed their education in the United Kingdom and Mr Davis’ work commitments in Saudi Arabia have ended."

• Two residents of Australia with U.K. nationality have approval to acquire 60 hectares of land near Murchison, Nelson for $170,000. "It is currently ‘bare’ land. The applicants propose to migrate to New Zealand in approximately three years, at which time it is their intention to establish a tourist/fishing lodge on part of the property". The property not required for the lodge will be leased to a local farmer for grazing and rearing beef cattle.
• Marlborough Ridge Ltd, owned by two Australians and a New Zealander resident in Australia, has approval to buy a further three hectares of land in New Renwick Road, Fairhall, near Blenheim, for $600,000. It adjoins 107 hectares of land bought for $1,600,000 last year (see the March 1996 decisions). In 1996 the company was proposing to build "a resort hotel and village type accommodation" plus a "residential subdivision of up to 200 sections". It appears much more modest now: the 107 hectares "is currently being subdivided into 83 sections for residential subdivisions by the applicant company. The acquisition of the additional parcel of land will enable Marlborough Ridge to create a further 20 residential sections to be known as Pinehill subdivision." The new land is part of a land swap between the Marlborough Ridge and the golf club: approximately 3.5 hectares of land will be transferred back to the Golf Club. [The Marlborough Ridge project went into receivership in 1999 with 42 sections sold. No sales took place for some years because of legal issues. In May 2003, it was sold to the Smith family of Marlborough, owners of Deluxe Travel Line and former owners of Blenheim Country Lodge. They intended to sell 13 sections and develop up to 40 (Press, 27/05/2003, “Resort restarts in Marlborough”, p.C10).]
• One of the "largest importers of live sheep and cattle into Saudi Arabia, the Middle East and Gulf countries" has approval to acquire 70 hectares of land in the Geraldine Survey District, Canterbury, for $270,000 for a feedlot. It is AWASSI NZ Land Holdings Ltd, whose shareholders and directors are Hmood Al Ali Al Khalf, a citizen of Saudi Arabia, and George Antonios Assaf, a citizen of Australia. The company is buying the land, which "is currently utilised [by AWASSI] as a feedlot for its South Island live sheep export operation", from AGEX-BCC Ltd (In Liquidation). AWASSI has been operating in New Zealand since 1989. It "wishes to acquire the property so that it has continuing access to a feedlot. This will ensure the continuation of the applicant’s live sheep exports from the South Island which to-date has resulted in approximately 1,400,000 sheep with a value of $80 million being exported."
• The Nevis Fruit Company Ltd has approval to acquire 38 hectares of land in Cromwell, Central Otago for $150,000 for "horticultural research". The company is owned equally by residents of the U.S.A., Switzerland, France, and Aotearoa: David De Calo, Pascal Felley, Pierre Riou, and John McLaren respectively.

"The overseas shareholders all have extensive knowledge of and have all worked successfully in the fruit industry. … Nevis propose to utilise the land for fruit tree breeding aimed at the New Zealand export market. The proposal will allow the expansion of the only independent breeding programme for apricots and apples within New Zealand. … the proposal represents a long term investment in the New Zealand fruit industry as local growers will have the opportunity to take advantage of the new varieties and developments."