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New Zealand Government Asset Sales as at 30 September 1999 - Completed Sales

Published 30 Sep 1999

New Zealand Steel

The decision to sell the Crown's interest in New Zealand Steel was announced in 1986. In October 1987 the Government signed a contract with Equiticorp for a sale price of $327 million. The cash proceeds were received on 22 March 1988.

Petrocorp*

The Company issued the equivalent of 30% of its shares in 1987, 15% by tender and the remaining 15% by public float. The intention to sell the Crown's remaining shareholding was announced in the 1987 Budget. Following a tender and negotiation process, the Government concluded a final contract with Fletcher Challenge Limited (FCL) on 3 March 1988. Payment for the shares (in US dollars) was equivalent to NZ$801 million. The contract included a "put and call". FCL exercised the put whereby the Crown purchased 104.5 million FCL shares for $400 million on 31 March 1992. These shares were sold on 16 December 1993 (see Fletcher Challenge Limited shares).

Health Computing Service

The Health Computing Services (HCS) was a division of the Department of Health responsible for the provision of health information services in New Zealand. In 1987 the Government established a Steering Committee to review the financial viability of HCS and to recommend a future structure for the organisation. On the basis of the Steering Committee's recommendations, the Government decided in February 1988 that the business should be tendered for disposal to the private sector.

Following protracted discussions with a number of interested parties, HCS was eventually sold to Paxus Information Services Limited for $4.25 million. The sale agreement was completed on 7 October 1988 and settlement was effected on 7 November 1988.

DFC

The decision to sell the Crown's 100% equity investment in DFC New Zealand Limited, New Zealand's largest investment banking organisation, was announced in the July 1987 Budget. On 28 June 1988 a sale and purchase agreement was signed between the Crown and a purchasing consortium of National Provident Fund (80%) and Salomon Brothers (20%). The price paid was $111.28 million; settlement took place on 18 November 1988.

PostBank*

The sale of the Crown's 100% shareholding in the Post Office Bank Limited was announced as part of the 1988 Budget. Following a competitive bidding process, on 21 December 1988 a sale and purchase agreement was entered into with ANZ Banking Group (New Zealand) Limited for the Crown's shareholding. The price paid was $665.4 million; settlement date was 28 February 1989. As part of the sale, it was agreed that the purchase price would be adjusted following completion of audited settlement accounts. This resulted in a further payment to the Crown of $13.078 million on 31 October 1989.

Shipping Corporation*

The decision to sell the Corporation was announced in the 1988 Budget. Competitive bids were called, and in March 1989 the bid by ACT (NZ) Limited. was accepted. An initial payment of $18.5 million was received on 3 April 1989, and a final payment of $15 million was made on 19 March 1990, making total receipts from the sale of $33.5 million. The Crown continues to deal with liabilities arising from the time when the Corporation was owned by the Crown.

Air New Zealand*

The decision to sell equity in Air New Zealand was announced in the 1987 Budget. At the outset, the process was oriented toward sale of a strategic stake to a single (probably foreign airline) buyer, with the prospect held open for further sales over time to domestic interests. Uncertainty over the ultimate share ownership structure, however, culminated in the Government's decision in October 1988 to call off the negotiations which had started with Qantas and reopen the sale process to new bids. The new process was specifically geared toward sale of up to 100% of the equity, on the basis that 65% must remain in New Zealand hands, with 30% of the total being made available to Air New Zealand staff and the public, and the Government retaining one special rights preference share (the "Kiwi Share") to control the foreign ownership level and safeguard the airline's New Zealand identity.

An agreement for sale of 100% of the ordinary shares on the above basis, at a price of $660 million, was signed on 22 December 1988; following Commerce Commission clearance, settlement took place on 17 April 1989. The initial share distribution was: Brierley Investments Limited. 65%; Qantas Airways Limited. 19.9%; Japan Air Lines Co Limited. 7.5%; and American Airlines Inc 7.5%. As a condition of sale, BIL was required to sell down 30% of its initial shareholding to the New Zealand public, institutions and Air New Zealand staff. The offering took place on 6 October 1989 and the shares were listed on the Stock Exchange on 24 October.

Landcorp Mortgages

The Government announced the sale of Landcorp Mortgages in the 1988 Budget. The sale of mortgages was completed in February 1990. This was not strictly an asset sale by the Government, as Landcorp sold the financial instruments and then released much of the revenue to the Crown through redemption of preference shares totalling $77 million.

Rural Banking and Finance Corporation

The 1988 Budget announced the intention to sell the commercially viable parts of the Rural Banking and Finance Corporation, and to decide on the sale or reorganisation of the remaining assets so as to achieve the greatest contribution to assisting the rural sector.

As part of the preparations for sale, the Rural Bank's debt to the Public Account was written down by $1.1 billion. In March 1989 the Bank repaid $200 million of debt to the Government.

On 18 August 1989 the Government announced that it had concluded a sale to Fletcher Challenge for a cash price of $550 million, with provision for a clawback of any surplus loan loss provision in three year's time i.e., after June 1992. The claw-back has resulted in a further payment of $137.5 million on 30 September 1992, taking the total purchase price to $687.5 million in nominal terms.

In addition, the Rural Bank under its new ownership, continued its obligation to repay its remaining $454 million debt to the Crown as it fell due. The existing Government guarantee on the Bank's other borrowings will continue. Fletcher Challenge has given the Crown a counter-indemnity against default. This indemnity has now been extended to include the National Bank who have recently purchased the Rural Bank from Fletcher Challenge.

Communicate New Zealand

The intention to dispose of the assets, or the ongoing operations, of the New Zealand Tourist and Publicity Department's business units was announced in the 1988 Budget. These consist of the National Film Unit, Communicate New Zealand and the NZTP Travel Offices. On 8 December 1989 the Government announced the sale of Communicate New Zealand (CNZ) to the DAC Group Limited, a New Zealand media services business. The purchase price will be based on a formula involving revenue from contracts with existing CNZ customers during the first year of ownership by the DAC Group. Final settlement took place on 31 January 1991.

Government Printing Office

The sale decision was announced prior to the 1988 Budget. An agreement for the sale of the Government Printing Office (GPO) to Rank Group, a New Zealand publicly-listed investment company, was entered into on 24 January 1990. The offer accepted for the sale of the core business was $23 million. Settlement was effected at the end of June 1990. In addition, $20 million was received by the Crown over the previous 18 months from the sale of GPO assets, including its main building in Mulgrave Street, Wellington which was sold to National Archives.

National Film Unit

The National Film Unit (NFU), one of the business units of the Tourist and Publicity Department, was announced for sale in the 1988 Budget. On 9 March 1990 the sale of NFU to TVNZ was announced for a negotiated price of $2.5 million, $1.5 million of which was received on 23 March 1990. The balance was paid on 21 September 1990.

State Insurance Office

Following consideration of a scoping report on the future of the State Insurance Office (SIO), the Government announced on 2 November 1989 that SIO was to be sold. It was announced on 3 May 1990 that Norwich Insurance (a British insurance company) had signed an agreement to purchase SIO for $735 million. Settlement on 28 June 1990 followed the passing of legislation reconstituting SIO as a company with shares owned by the Crown.

Tourist Hotel Corporation of New Zealand Limited*

On 15 June 1990 the Government sold the Tourist Hotel Corporation of New Zealand Limited (THC) to Southern Pacific Hotel Corporation (NZ) Limited for the sum of $73.85 million. As a prior condition of sale, the Crown assumed THC's term liabilities which had a book value of about $73 million at the time and included a $100 million zero coupon bonds issue maturing in June 1993.

The sale marked the culmination of a lengthy sale process which started with the 1988 Budget announcement of planned state-owned business sales. The sales process entailed a competitive tender involving prospective purchasers from New Zealand and overseas. SPHC's bid was accepted on the basis that it provided the maximum value to the Crown.

Telecom Corporation*

The telecommunications industry in New Zealand was opened to full network competition from 1 April 1989. Over the following year, detailed studies were undertaken of the regulatory environment and Telecom's suitability for sale. On 20 March 1990, the Government announced its decision to sell the Corporation, on the basis that the shareholding of any single foreign shareholder or consortium would be limited to 49.9%, the Government would retain a Kiwi share, and at least $500 million worth of shares would be made available in a public offering on the New Zealand market, either by the Government or a new owner.

The sale process comprised two components: the negotiated sale of a "strategic stake" in the Corporation, and arrangements for a public offering of shares in New Zealand and overseas immediately thereafter, in the event that the initial sale comprised less than 100% of the shares. Following the distribution of an Information Memorandum and receipt of indicative offers, bidders undertook due diligence investigations during April and May 1990. Negotiations were held with all parties on the sale documentation. Formal offers were received in early June. Following further negotiations, the Government on 14 June 1990 signed an agreement with two major US telecommunications companies - American Information Technologies Corporation (Ameritech) and Bell Atlantic Corporation - as part of a consortium including Fay Richwhite Holdings and Freightways Holdings for sale of 100% of the shares. Initially Bell Atlantic and Ameritech will purchase 100% of the shares, with Fay Richwhite and Freightways buying 5% each over three years. The new owners will be required to offer shares publicly over a three year period to reduce the two foreign parties' holdings to 49.9%.

On 10 July 1991, Bell Atlantic and Ameritech sold some 30.9% of the shares to the public and institutions in New Zealand and overseas. Some $483 million worth of shares were purchased in New Zealand. On 13 March 1993, Bell Atlantic sold 4.6% to BZW New Zealand who onsold the shares to NZ institutional investors and overseas buyers. Ameritech sold 4.6% to Capital Group in June 1993.

The Government will retain a Kiwi share to control the ownership restrictions and ensure that the residential telephone service commitments made by Telecom remain in force.

Maui/Synfuels* (NZLFI)

The sale of the Crown shareholding in the Synfuels plant and the completion of Maui gas contracts with New Zealand Liquid Fuels Investment Limited (for use at the Synfuels plant), and with Petralgas, the Natural Gas Corporation and Electricorp, was finalised on 6 July 1990.

The intention to enter into these transactions was announced initially in December 1988 when the Crown entered into a Memorandum of Understanding with Petrocorp. The original arrangement fell through when it did not receive Commerce Commission approval. The new arrangement (which overcomes the difficulties perceived by the Commission) maintains the Crown's role as the purchaser and wholesaler of Maui gas. In aggregate the new and amended contracts generally match the Crown's rights and obligations in purchasing Maui gas from the Maui joint venture Partners (Shell, Todd and Petrocorp).

On completion date, the Crown received a payment of $254 million for gas to be used by Petralgas and the National Gas Corporation, and paid Fletcher Challenge $174 million to take over the assets and liabilities (including the Crown's contractual obligations to Mobil and the new gas contract) associated with the Crown's shareholding in the Synfuels plant.

Under the new arrangements the Crown also receives a profit element under its gas contract with Electricorp and a clawback from the Synfuels plant operations should gasoline prices be above a schedule of benchmark prices.

Forestry Cutting Rights

The decision to sell cutting rights to the Crown's commercial forestry assets was announced in the 1988 Budget.

The Crown Forest Assets Act 1989 was enacted to enable the sale to take place. The Act also deals with Treaty of Waitangi and conservation issues relating to the sale.

Treaty of Waitangi issues were resolved after negotiations between the Crown and Māori representatives. These culminated in the signing of a formal agreement which ensures security of tenure for purchasers of the forestry assets and protects Māori claims to Crown forest land. This agreement is encapsulated in the Act.

Conservation issues relating to the forests were the subject of discussion between the Crown and interested parties. These resulted in the formulation of covenants that will be registered against title to the land. Easements ensuring public access and other factors relating to individual forests will form part of the Crown forest license for each particular forest.

The sale was formally launched in October 1989, at which time a prospectus and information memoranda were released. The New Zealand Forestry Corporation was appointed in November 1988 as the Crown's agent for the sale of the forestry assets. The Treasury assumed direct control of the sale process in July 1990. The initial sales process was completed in October 1990 with 246,700 hectares having been sold and $1,027 million realised.

The decision to sell NZ Timberlands Limited, or its assets, was announced in the 1991 Budget. NZ Timberlands manages the forests outside Bay of Plenty and West Coast which were not sold in the previous sale.

The sale process was completed on 15 May 1992 with ITT Rayonier having purchased the shares of, and most of the assets managed by, the company. The Crown withheld a number of forests from the sale because of Māori grievances and environmental concerns. These included the Aorangi forests, Pureora (central block), Waipoua, Waiuku and certain other smaller forests. The price paid for NZ Timberlands Limited shares and assets amounted to $366 million.

Export Guarantee Office

As a consequence of the sale of State Insurance Office (SIO), the Export Guarantee Office (EXGO) ceased to take on the new business. On 24 September 1990, the privatised SIO acquired the commercial portfolio of EXGO for $1.25 million. As part of the transaction, EXGO paid $15 million as a dividend to the Crown on 3 October 1990. On 31 March 1991, EXGO ceased to do new business and is running down its insurance liabilities as its insurance contracts expire, and will pay the balance of its funds as a dividend to the Crown. Further payments of $2 million and $0.5 million were made on 31 August 1994 and 20 December 1996 by State Insurance.

Government Supply Brokerage Corporation (NZ) Limited*

The Government announced its intention to offer 100% of its shares in GSBC for sale in June 1991, a sale and purchase agreement was signed between the Crown and Professional Service Brokers Limited. The price paid was $3.2 million, with settlement taking place on 31 January 1992.

Housing Corporation - Mortgages

The Crown announced in the 1991 Budget that the Corporation's prime rate mortgages were to be offered for sale. The mortgages have been offered on a competitive tender/direct sale basis. The Crown received a number of bids for the mortgages and accepted a bid from TSB Bank Limited for $30 million for mortgages originating in Taranaki. In June 1992 the Crown accepted a further bid for an amount of around $500 million. This was settled on 27 July 1992. Later in that year a bid of between $350 million - $450 million of mortgages was accepted. The proceeds from this part of the sale amounted to $395 million.

In December 1994 the Crown sold a further tranche of Housing Corporation mortgages to ANZ Banking Group. The ANZ agreement provides for the sale of up to $700 million over a period of up to two years. As at 30 June 1996, $331 million has been received. Further tranches have been sold to Ichthus for $34 million, Countrywide Bank for $258 million, IHC for $30 million and Westpac for $521 million. The Crown sold further tranches to WestpacTrust, of $177.4 million in September 1998, and approximately $60 million in January 1999.

Petroleum Mining Licences (PML)

The Crown announced in the 1991 Budget that it would be selling its interests in the Tariki, Ahuroa, Waihapa and Ngaere Petroleum Mining Licences. The Crown held 100% of the Ngaere PML and a 38.36% share in the other three licences. The Ngaere was adjacent to the already producing Waihapa PML and both areas were to be set down for unitised development. The licences were sold by negotiation to the Crown's joint venture partners in the Tariki, Ahuroa and Waihapa PMLs. They were Petrocorp, Southern Petroleum, Carpentaria Exploration, Nomeco and Bligh Oil. The partners paid $118.84 million and the contract included clauses whereby the Crown receives further money should oil prices be above benchmark levels used in the valuation or if reserves prove to be in excess of the present expected reserves estimate. The Crown does not refund the joint venture should prices or values be below the estimates.

Bank of New Zealand (BNZ)

The Government announced on 21 July 1992 its intention to accept the conditional offer from National Australia Bank (NAB) for the Crown's 57% shareholding in the BNZ. NAB's offer was 80 cents per ordinary share, which represented $849.946 million for the Government's shares.

The sale was conditional on, among other things, NAB completing due diligence (completed 30 September 1992) and receiving acceptances from 90% of the BNZ shareholders by 6 November 1992. These conditions were satisfied and the transaction declared unconditional on 5 November 1992. Settlement took place on 9 November 1992. The Government has provided comfort to NAB on certain conditions relating to specified litigation and taxation risks and the final Adbro loans. The contingencies are shared among the existing BNZ shareholders in proportion to their shareholdings (Crown 57.3%, Fay Richwhite 27% and Public Minorities 15.7%). NAB has agreed to carry the portion of the contingencies on behalf of the Public Minority shareholders. The conditions relating to the Adbro portfolio have now been met, and this aspect is no longer a risk to the Crown or Fay Richwhite.

New Zealand Rail Limited (NZ Rail)*

In December 1992, the Government announced that it was offering its 100% shareholding in NZ Rail for sale.

Following a competitive sales process, a sale and purchase agreement was entered into with Wisconsin Central Transportation Corporation, Berkshire Partners III L.P., and Fay, Richwhite & Company Limited (The Wisconsin Consortium) on 20 July 1993, for $328.191 million. Whilst settlement period for NZ Rail was set at a maximum of 90 days, settlement occurred on 30 September 1993.

Prior to the signing of the sale and purchase agreement, the Government sought and received from the Wisconsin consortium certain assurances in relation to their intentions for a public share offering and the passenger network of NZ Rail. A public offering of shares is anticipated in three to five years. The Wisconsin Consortium views the passenger network as an integral part of NZ Rail's business.

Wrightsons Rights

The Government was issued with 10.4 million rights to purchase ordinary shares in Wrightsons through its ownership of Fletcher Challenge shares. The rights were sold in conjunction with those received by the FCL Employee Unit Trust at a price of 33c each.

Fletcher Challenge Limited Shares (FCL)

The Government on 16 - 17 December 1993 sold its entire stake of 104.5 million Ordinary Division shares and 26.1 million Forest Division shares in Fletcher Challenge Limited. The sale was to a number of institutional investors in various world markets. The sale price was NZ$418,059,224.

The Crown obtained the shares on 31 March 1992, when FCL exercised a put option entered into with the sale of Petrocorp in 1988.

GCS Limited*

Following a competitive sale process a Sale and Purchase Agreement was entered into with EDS Holdings (NZ) Limited, for sale of the Crown's shares for $46.991 million. Settlement of this transaction took place on 18 November 1994.

Airports

On 29 March 1996 the Crown sold its 50% shareholding in Waikato Regional Airport Limited. The sale price was $2.125 million. The new owners are Hamilton City Council, Matamata - Piako District Council, Otorohanga District Council, Waikato District Council, and Waipa District Council. All Councils held shares in the company prior to the sale of the Crown's shares.

On 30 June 1996 the Crown sold its share in Oamaru Airport. The sale price was $40,000. The new owner is the are Waitaki District Council, the previous joint venture partner in the airport.

On 1 May 1997 the Crown sold its share in Timaru Airport. The sale price was for a nominal consideration of $1. The new owner is the Timaru District Council, also previous joint venture partner in the airport.

On 30 September 1996 the Crown sold its share in Te Kuiti Airport for a nominal consideration of $1. The new owner is the Waitomo District Council, the previous joint venture partner in the airport.

On 1 May 1998 the Crown sold its share in Masterton Airport for a nominal consideration of $1. The new owner is the Masterton District Council, the previous joint venture partner in the airport.

On 1 May 1998 the Crown sold its share in Tauranga Airport for $1,060,603. The new owner is the Tauranga District Council, the previous joint venture partner in the airport.

On 1 July 1998 the Crown sold its share in Hokitika Airport for $11,000. The new owner is the Westland District Council, the previous joint venture partner in the airport.

On 29 October 1998 the Crown signed a sale and purchase agreement for it's shares in Rotorua Regional Airport Limited and Palmerston North Airport Limited for $2.5 million. The new owner of the Crown's shares in both airports is Central Avion Holdings Limited. The respective local councils hold the remaining shares in both airports. The sale of the Crown shares in these airports was conducted by competitive tender.

Auckland International Airport Limited (AIAL)

On 14 May 1998 the Government announced its intention to sell its shareholding in AIAL (51.6% of the issued capital) by way of public float. The announcement followed a scoping study and preliminary sales work that examined sale options ranging from trade sales to share floats. AIAL successfully listed on 28 July, with the Crown receiving a price of $1.80 per share on the 216,762,152 shares on offer.

Wellington International Airport Limited (WIAL)

In March 1998 the Government and Wellington City Council announced their intention to market test its shareholding in WIAL (66% of the issued capital was owned by the Crown with 35% by WCC). The Crown and WCC market tested trade sale options, with some sale options including a requirement to float a portion of shareholding in the future. The announcement followed a scoping study of the airport. A consortium successfully purchased the Crown's shareholding in WIAL on 14 August 1998.

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