The New Zealand First leader Winston Peters is pledging to block the sale of UDC Finance to a Chinese conglomerate, if he is in government.
ANZ has agreed to sell New Zealand’s largest asset financing company to the HNA Group – a giant on an acquisition spree – for $660 million.
Yet Peters says the government should “draw a line in the sand” and use its powers under the Overseas Investment Act 2005 to stop the sale.
“We have outsourced our financial sovereignty at great harm to the economy,” he says.
“It is one of the reasons why the Reserve Bank admits its Official Cash Rate is largely an irrelevancy. Foreigners are calling most of the financial shots and enough is enough. Until a majority of the sector comes back into Kiwi ownership there must be no further such sales.
“This financial utility has a potential New Zealand buyer and plainly it should be going before the Overseas Investment Office (OIO) to ensure that the potential New Zealand purchaser gets a fair run.”
The sale will in fact go before the OIO as ANZ is seeking to sell a New Zealand business asset worth more than $100 million to an overseas investor.
The potential New Zealand buyer Peters is referring to is Heartland Bank, which has a sharemarket capitalisation of $783.69 million.
Asked how confident he is Heartland actually has the funds/capacity to make the purchase, Peters doesn’t provide a clear answer.
He says: “Anyone who has been following UDC since its sale was first mooted knows that Heartland has been especially keen, with TSB also reported as a potential suitor.
“Then again if ANZ wanted to prevent a domestic competitor from growing, selling out to China’s HNA Group makes a lot of sense.”
“HNA Group turns the plotline of the movie, The Big Short, into real life. Here is a company which slices and dices its finances so complexly, no one truly knows the real picture. What is for certain is it has access to free money with Bloomberg revealing interest on its billions of debt is 0.1%.
“What happens when that House of Cards collapses? New Zealand First is not against inwards investment but unlike this government we’re against being used and we need to take back control.”
Under the Overseas Investment Act, the Finance Minister has the ability to give the final sign off on a decision before the OIO.
Asked on which basis he would decline HNA’s application to buy UDC – if Finance Minister – Peters says: “Section 18(b) of the Overseas Investment Act stipulates that an applicant must show demonstrated financial commitment to the overseas investment.
“HNA Group is a byzantine conglomerate that is engaged in highly leveraged transactions across a disparate range of industries and resembles a House of Cards.
“Section 18(a) of the Overseas Investment Act requires experience in managing New Zealanders but its track record is that of the financial wild west and the antithesis of UDC.
“In December 2016 it paid 25% above the market rate in Hong Kong for residential land (at HK$13,600 a square foot) and these sort of dealings here could expose UDC and New Zealand to risk.”
Yet Peters says: “Given the OIO’s record they would probably rubber stamp any deal against New Zealand’s interest or not and not be held accountable by the government because these politicians are in the thrall of foreign ownership…”
Asked whether he believes the Act needs to be reformed, or simply interpreted differently, Peters says: “The OIO Act is a buggers muddle. It does not require a floor for overseas ownership of any industry or sector and seems to operate like an honesty box with little money to verify claims or data.
“The $100m test for business assets is ridiculous and we’d drop that because the chips are heavily stacked in favour of the investor and in the case of business assets, there is not even an NZ interests test as there is with land.
“Frankly there needs to be prominent advertising of any asset, be it land or a business and if a New Zealand entity can buy it, then they should get a fair-go. If the offer is too low there are alternatives especially with business assets that include listing on the NZX. Selling overseas is too easy and is a default option.
“Finally the OIO needs to be resourced to police the conditions that it sets.”