No SOE shareholder will be able to own 20%

January 31st, 2011 at 10:00 am by David Farrar

Brian Gaynor writes:

The Government has to convince the public that these companies will remain majority Crown and New Zealand controlled. This should be easy to achieve because under the Takeovers Code, which wasn’t introduced until 2001, a shareholder must go from 19.99 per cent to 50.01 per cent in one step and this will be impossible to achieve if the Government has at least 50 per cent ownership.

So if I understand this correctly, even if NZers sell shares they buy to an overseas company (presumably for a higher price which means those Kiwi Mums and Dads have made a profit), no company could gain a 20% or greater stake.

Combine this with the liklihood that the NZ Super Fund will also buy significant stakes in the SOEs, and it will be harder for xenophobic opposition to be whipped up.

This won’t stop Labour trying though. Look at this blog post by Labour MP Damien O’Connor which demands the Government stop Asians from buying a private listed company – Wrightsons:

A recent announcement that Agria, an Asian company is applying to raise it’s stake in PGWrightsons from 19% to 51% is one more such move.

So Labour is now against Asians even being able to buy shares in a listed private company. At this rate, they will be able to merge with Winston First.

People must realize that the land is important but only part of our rural economy. The businesses that operate on and associated with it need also to be owned by us unless we are prepared to be servants to our future, not the owners of it.

The translation is that it is not enough that we keep our land out of Asian hands, but also our businesses.

I like how Damien talks about Wrightsons as if it is owned by the state. It is not. It is owned by private shareholders. And no one is forced to do business with it. If people don’t like its shareholders, they don’t have to deal with it.

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38 Responses to “No SOE shareholder will be able to own 20%”

  1. backster (2,000 comments) says:

    Er Damien whose party signed the free trade agreement with China and allowed them to buy an electricity distribution network?

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  2. scrubone (2,971 comments) says:

    I wonder if Labour had anything to say when PGG and Wrightsons merged? *That* would have been the time to object.

    Not that CRT is worried.

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  3. gravedodger (1,426 comments) says:

    I don’t think investing is the term I would use David, they probably only want to access strategic bits that PGG Wrightsons can offer.
    A brief perusal of history will lead to the conclusion that rural service companies are a littering of poor performance and failures.
    Dalgetys, Elders pastoral NZ, Donald Reid, Matsons, NMA, Williams and Kettle, various Farmers Co-ops, and many others that come into the orbit of entrepreneurs who fail to grasp the reality that rural service Companies are like Real estate companies , much of their value is predicated on client loyalty both buyers and vendors with the RSC only the agent and that loyalty is very fickle. After every major amalgamation and or rationalisation the net result is a fleeing of good staff and clients to opposition companies or new independents from within the industry and the departing are the brightest and best and the more financially secure.

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  4. scrubone (2,971 comments) says:

    I’m struggling to understand how a rural servicing company is going to somehow be affected by being partially owned by foreigners. Even if they were foolish enough to put in people who don’t know what they’re doing, they would simply destroy their own company, and farmers would go elsewhere.

    Heh, isn’t it great that political parties have blogs where MPs can make fools of themselves.

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  5. m@tt (535 comments) says:

    I don’t want to see a company like Wrightsons go to >50% foreign ownership. However I’d be more than happy for one or more New Zealanders of foreign origin, to own 100% of the company if they so wish.
    If a consortium of NZ’ers moved to Australia, permanently, then tried to buy >50% of Wrightsons, I’d be against that.
    It’s nothing to do with race, it’s the fact that if they are not domiciled in NZ, have a controlling stake in a significant NZ entity and will be extracting profit from the country.
    Trying to paint me, and all the other new Zealanders that want to see primarily NZ ownership of our land, assets and large corporations, as xenophobic and you won’t win over any hearts or minds.

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  6. Manolo (12,624 comments) says:

    Today’s Wellington Dom Post publishes a number of letters to the editor all opposed to selling any state assets, proving the point the socialist mindset has already won over too many people.

    It doesn’t bode well for our country.

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  7. Pete George (21,806 comments) says:

    Or – a band with socialist mindsets is trying to win over people.

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  8. Adolf Fiinkensein (2,668 comments) says:

    Ahaaah David. You’ve actually identified the soon to be new leader of the Labour Party. Winston Peters

    Now people might understand why PM John Key has released this policy so early. He has allowed plenty of time for the dingbats in Labour and their media slaves to demonstrate to voters what a gang of idiots they are. By the time we get to October, this minor transfer of capital from gummint to private citizen will be seen for what it is.

    Eminent and essential good sense.

    The best analogy I can think of is the householder who realises debt levels are too high and improves his position by selling off the investment property which once looked attractive but now brings only a marginal return.

    Blenglish needs to set out in plain language the real effects on households of an S & P credit downgrade – inevitable should Labour’s spend and tax policy ever see the light of day

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  9. Jimbob (639 comments) says:

    Wrightsons is a crap company. It has a history of treating it’s clients like sheep and they only like to deal with the large clients. It is a wonder the company is still solvent.

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  10. jcuknz (648 comments) says:

    I don’t mind the Kiwi Mums and Dads making a profit just the consequences of them selling those shares overseas … the sending of profits out of the country to worsen our balance of payments problem. That is plain stupid in my book.

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  11. Shunda barunda (2,964 comments) says:

    No Manolo, people remember the shit that happened the last time we did it.
    There is nothing irrational about learning from experience, and certainly nothing ‘socialist’ about it.

    National will loose the election if they stick with this, it is as simple as that.
    I have not seen this strength of opposition to a govt at a grass roots level since the anti smacking issue.
    The only question is whether National is going to pull the trigger, though I would suggest much of the damage has already been done, people’s memories of the nineties still seem very, very sharp.

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  12. Shunda barunda (2,964 comments) says:

    Blenglish needs to set out in plain language the real effects on households of an S & P credit downgrade – inevitable should Labour’s spend and tax policy ever see the light of day

    It is inevitable anyway! selling the family silver won’t make a pinch of difference.

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  13. Pete George (21,806 comments) says:

    I have not seen this strength of opposition to a govt at a grass roots level since the anti smacking issue.

    Another hissy fit over bugger all?

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  14. s.russell (1,486 comments) says:

    Since when has logic stopped the Labour Party from making arguments against a National policy?

    They know they can’t win the argument so their effort goes into painting the proposal as something it isn’t – which they can argue against more effectively.

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  15. philu (13,393 comments) says:

    so..never any chance of 2+ of those stakeholders getting together and doing a hostile takeover then..?

    how cd you possibly guarantee against that….?

    …that 20%-chinese-wall cd be ripped down in the blink of an eye…

    ..it is utterly meaningless…

    ..and wd only reassure the most gullible…eh…?

    those able to be wowed by fast words and flashy figures/graphcs..?

    ..the ‘mum’s and dad’s’..?..as it were…?

    phil(whoar.co.nz)

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  16. tvb (3,939 comments) says:

    This is the political price we have to pay to get public support for asset sales. No doubt the treasury die hards in favour of trade sales will give Ministers information on how much this will all cost. Next these people will give Government the costs of democracy and say alternative forms of Government are cheaper.

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  17. mjwilknz (606 comments) says:

    Come on, DPF. Labour learnt that, effectively, it could behave as if it owned privately-owned companies when it blocked the purchase of a stake in Auckland International Airport to a Canadian pension fund. However wrong that decision was (and I do believe it was appallingly wrong), Damien’s approach just reflects Labour’s experiences with it.

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  18. Danyl Mclauchlan (1,049 comments) says:

    O’Connor’s race-baiting aside, the problem is not so much as control by overseas companies, but the dividends being paid to overseas companies having a negative outcome on our balance of payments, which will happen irrespective of the actual ownership mix.

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  19. philu (13,393 comments) says:

    and mr farrar…

    you have no problems with the vertical takeover of our countries’ means of primary-produce..?

    ..overseas interests owning everything from the field to the table…

    and all the profits from them..therefor flowing offshore…?

    ..and the roles/ambitions that leaves us..?.

    …serfs..?…waiters….?

    ..will they be our choices…?

    you think this is good for both the short-term and long-term future of our country…?

    ..i don’t…

    ..we are a small/vulnerable country…

    ..in some areas we need protection…

    ..(and i don’t mean warships…)

    phil(whoar.co.nz)

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  20. Shunda barunda (2,964 comments) says:

    Another hissy fit over bugger all?

    No, people that aren’t blinded by right wing ideology just see the size of the strap on National is going to unleash on us.
    I’m not into that sh!t, and neither are a lot of others.

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  21. Shunda barunda (2,964 comments) says:

    By the way, it won’t be “Mum and Dad” investors, they have no money to invest.

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  22. davidp (3,319 comments) says:

    Danyl McL>but the dividends being paid to overseas companies having a negative outcome on our balance of payments

    The initial investment will have a positive outcome on our balance of payments, so it all balances out to zero. So I’m wondering what you’re worrying about. Is this some juche thing?

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  23. philu (13,393 comments) says:

    “…This is the political price we have to pay to get public support for asset sales…”

    wot..?..guaranteed defeat at the next election….?

    ..and you know what..?

    even if key u-turns on this before the election…

    ..nobody will believe him….

    ..(they might remember ‘closing the gap with aust’/helping the underclass/4,000 bike-trail jobs..

    …and all the other screaming howlers key has already told us…eh..?..)

    …and will think that you still wd do it..if re-elected….

    …(and they wouldn’t be wrong..eh..?..)

    ..i reckon you’ve cashed in yr election-chips….eh..?

    ..and i reckon yr polling will bring this ever so sharply into focus for you…

    phil(whoar.co.nz)

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  24. mjwilknz (606 comments) says:

    Danyl Mclauchlan, I agree with what davidp says and add that I kind of like when people from overseas spend their money here to invest in stuff – it means more jobs for us, right?

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  25. Pete George (21,806 comments) says:

    All this speculation is hypothetical – all NZ investors are very unlikely to flick all their shares on to overseas interests. The only thing that’s guaranteed is a mixture of things happening. And if they are offered deals to good to refuse then there’s a likelihood they will re-invest at least partly in NZ shares.

    Sounds like too many worst case scenarios are being bandied about.

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  26. Shunda barunda (2,964 comments) says:

    Sounds like too many worst case scenarios are being bandied about.

    Probably because too many worst case scenarios have materialised in the past!

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  27. Whafe (652 comments) says:

    Shunda, you seem to have all the answers, tell us how the government gets the NZ economy out of the toilet, taking into account that your pinko buddies helped with putting the country so far into the toilet in the first place…

    No wonder there is nil respect for pinko’s, they seem to just talk shit…. There is no way that John Key would be selling off the “Silver” as many put it if in fact we didnt need to… So you would be happy with borrowing 400 mill per week to carry on as it is???

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  28. MosesNZ (54 comments) says:

    Under the Takeovers Code a shareholder could go over 20% with shareholder approval – which would therefore effectively require government approval, as the majority shareholder.

    Additionally, the Code uses the concept of “associates” to aggregate the holdings of shareholders who are aligned or acting in concert – so if you had two 15% shareholders acting together, their holdings would be combined and they would be in breach of the 20% limit, requiring either shareholder approval (i.e. government approval) or a sell-down to under 20%.

    Of course, the government could also legislate that x% of the SOE’s shares have to be beneficially held by NZ nationals – perhaps an option to look at.

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  29. Bevan (3,965 comments) says:

    I have not seen this strength of opposition to a govt at a grass roots level since the anti smacking issue.

    Nice analogy – now remind me, which government was removed from office due to opposition to the anti smacking law?

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  30. Bevan (3,965 comments) says:

    ..we are a small/vulnerable country…

    ..in some areas we need protection…

    ..(and i don’t mean warships…)

    I hear ya phil! We need Fighter Jets!

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  31. ben (2,386 comments) says:

    Explain to me how it is not racist for Labour to refer to the racial origin of the purchasers here. Unless they wish to explain the link between skin colour and performance as owners and ability to pay, then race is as relevant as the colour of the sky in Damian’s world.

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  32. bchapman (649 comments) says:

    Sooner or later be it in 5 or 20 years these assets will end up in the hands of the Australian or Canadian pension funds or whoever wants a government guaranteed return. Thats how globalisation and free trade works.

    As for the Takeovers Code- does anyone think it will survive a US free trade deal under a Republican Congress- good luck negotiating that one in for US investors.

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  33. Paulus (2,296 comments) says:

    Who is Damien O’Connor – wasn’t he once an MP. Suppose his comments are being picked up the the so called media to draw attention to himself.

    Shunda – I have term deposits with an Aussie Bank and I will consider transferring to these NZ enterprises. I am a mum and dad who already has AirNZ shares and will buy more. Stupid comment Shunda – stop dreaming.

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  34. Shunda barunda (2,964 comments) says:

    I am a mum and dad who already has AirNZ shares and will buy more. Stupid comment Shunda – stop dreaming

    Hermaphrodites aside, most other families are struggling to pay the mortgage let alone buy shares in air NZ (which they already own anyway)

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  35. Lance (2,309 comments) says:

    @ Shunda
    Any WHY are they struggling to pay for those mortgages?

    I’ll give you a hint. Unrestricted and mindless property investment has brought the world to near ruin.
    If those (collective) same people put their money into something that actually produces something we would all be far better off now.
    So here comes an opportunity to invest in something that actually produces something, looks like a chance at sanity to me.

    I like the way lots of people were quoting Mark Twain “buy land young man, they aren’t making any more”, this from a man who went bankrupt multiple times.

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  36. Bevan (3,965 comments) says:

    …. let alone buy shares in air NZ (which they already own anyway)

    Really? So as a NZer I can list my stake in AirNZ, Mighty River Power, Genesis Energy etc when I fill out my mortgage application?

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  37. Inky_the_Red (718 comments) says:

    When Air NZ was privatised there were restriction against foreign ownership. However these rules were clearly broken when BIL bought the shares and then BIL became foreign owned. Everyone turned a blind eye until they almost went broke and the government bought it back.

    No matter what rules are written some one will break them.

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  38. expat (4,048 comments) says:

    Hi Danyl old boy, when you say “O’Connor’s race-baiting aside, the problem is not so much as control by overseas companies, but the dividends being paid to overseas companies having a negative outcome on our balance of payments, which will happen irrespective of the actual ownership mix” I think you need to consider the fact that PGG Wrightsons is so cash strapped they are having trouble with lines of credit so would you rather they receive some direct foreign investment to allow them to continue trading or do you think that it’s preferable that they fold and lay off loads of staff? Not being smart however dividend payment direction only seems to be a problem when the right are in power, when the left are in the driving seat everyone prattles on about creation of Kiwi jobs and public-iwi partnerships to stimulate economic growth in deprived local economies, or maybe I’m just jaded with the lefts’ continuous drone of economic stupidity.

    Oh, and PhilU, what the f*ck are you talking about????

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