Hong Kong investor in multi-million dollar NZ forestry buy-up

Photo / Alan Gibson

Greenheart Group, a forestry investment company, plans to issue new shares in Hong Kong a part of a US$77 million buy-up of Mangakahia forestry assets in New Zealand's Northland region.

Hong Kong-listed Greenheart plans to raise US$37 million through a share issue to buy 11,000 hectares of radiata pine forests once-owned by Carter Holt Harvey, from its own major shareholder, China's Sino-Forest.

The US$40 million balance will be funded through a loan either provided by or guaranteed by Sino-Forest, the company said in a statement on Monday.

As part of the agreement, Greenheart has the option to sell up to US$210 million worth of timber products to Sino-Forest over the next three years, but isn't obliged to if it can achieve better prices elsewhere.

Canadian-listed Sino-Forest has some 726,000 hectares of tree plantations across China, and the deal will look to leverage the Chinese company's sales and marketing clout in the world's most populous nation.

That will leave Greenheart to focus on building a forestry portfolio that it will own and manage.

It currently owns forests in Suriname, in South America.

"China's demand for New Zealand radiata pine has increased significantly with New Zealand being the second-largest exporter of softwood into China after Russia," Greenheart chief executive and Sino-Forest vice-chairman Judson Martin said in a statement.

"Bringing these New Zealand assets into our portfolio is the first major initiative of our profitable investment and sustainable growth strategy for 2011."

Log, wood, and timber exports surged almost 25 per cent to $2.87 billion in the 12 months ended November 30, according to government data released yesterday.

Strong demand in China has underpinned New Zealand's increased offshore earnings, as have rising timber prices amid increased export tariffs on Russian softwood logs.

This is Sino-Forest's second attempt at partial ownership of the Mangakahia forest, after the joint venture with Taumata Plantations Ltd., which bought most of the CHH forestry assets in 2006, ended last year.

Sino-Forest took a majority 59 per cent in Greenheart, formerly Omnicorp, last year, and a further 1 per cent is held by Hong Kong private equity fund managers General Enterprise Management Services International (GEMS), which holds a seat on Sino-Forest's board.

While foreign ownership of local farmland has been a touchy issue as the ill-fated bid by Hong Kong's Natural Dairy (NZ) Holdings to buy the Crafar family's dairy portfolio roused nationalistic sentiment, forestry sales have been relatively ignored.

The opposition to the Crafar farms sale forced the government to do a U-turn in its review of the Overseas Investment Act, resulting in Ministers having the power to veto large scale ownership of farmland and vertically integrated companies in primary production.