US giant likes our big ideas

By PETER GRIFFIN

Despite Brunswick Corporation's multi-billion-dollar turnover and 160-year history, few New Zealanders would ever have heard of it.

That was until the US giant took a shine to some of our best companies.

After spending $56 million on a 70 per cent stake in Navman, a North Shore-based developer of electronic navigation devices, Brunswick has bought a minority holding in boatmaker Rayglass.

And with Brunswick reserving the right to move to full ownership of Navman by 2005, control of one of the country's best up-and-coming IT exporters will head to Illinois.

The American company's chairman and chief executive, George Buckley, said ownership was a "moot point". Navman had been "adopted by a rich parent" and would prosper as a result.

"There's no reason to be negative about it. It would be different if this company was bought and hauled off to some foreign land."

That, said Buckley, is not going to happen. Instead, with access to Brunswick's huge sales channel, Navman could push revenue from $100 million to $1 billion and employ thousands of people locally.

Brunswick spent more than US$100 million ($171 million) on research and development last year and plans to put development money into Navman. "We make 40,000 boats a year capable of having Navman's products in them," Buckley said.

But the chief executive of the Stock Exchange, Mark Weldon, said New Zealand's "latent potential" would never be realised if our best companies were "picked off" early in their development.

The NZX was trying to counter the acquisition of the country's intellectual property by making it more attractive to raise funds through public listings.

"If New Zealanders think that on average companies here that get bought out are going to be sustained and nourished here, they're kidding themselves," said Weldon.

He pointed out that the big IT, biotechnology and pharmaceuticals companies were increasingly getting out of core development, instead building portfolios of acquired companies and their intellectual property.

"New Zealand is at the top of every multinational's cherry-picking list. They want to buy intellectual property when it's cheap and retain the value."

Investment New Zealand helped broker the Navman deal, Brunswick making contact with the body's New York office and meeting the then New Zealand Ambassador to the US, Jim Bolger.

That would appear to satisfy Investment New Zealand's strategy of attracting foreign direct investment but undermine the Government's overall vision of creating 100 new IT companies with revenue of $100 million or more by 2012.

Investment New Zealand director Ross Campbell said companies could not expect "globalisation to work one way" and had to get used to the fact that foreign investment was essential to their growth.

"It's what built Ireland and is happening in Eastern Europe and Asia," said Campbell.

Investment New Zealand had a preference for joint ventures and would be unlikely to assist a foreign company looking to divest its stake in a New Zealand company.

Brunswick, which has turnover of more than US$3.7 billion, moved into the marine industry in the sixties, becoming one of the world's biggest boatmakers with a series of acquisitions.

Buckley said boats were increasingly becoming "floating condominiums" and electronics systems merging GPS, radar, sonar and communications with satellite links, internet access, TV and music systems would become standard.

The grand scheme for Brunswick is to shift its merged communication technology to automobiles - a true mass market.

Navman's attraction as an acquisition target partly sprang from the fact that it had already produced detachable GPS units for cars.

"The products experience relatively low volume [in marine]," said Buckley. "The obvious move is to bridge into the automotive world. Our friends at Navman have taken the first steps into that. The next step is putting it in the dashboard."

The executive director of agritech company Tru-Test, Keith Aitchison, said his company had managed to develop a global distribution model on its own while maintaining New Zealand and Australian shareholdings.

"Only time will tell" if Brunswick would stay true to its word, said Aitchison.

"$100 million to $200 million in revenue is big from the New Zealand perspective. It's difficult to get the next step up the rung and the buying party can bring a lot to the table."

While Buckley is set on keeping Navman in NZ, he refers to the tax regimes other countries design to lure multinationals to their shores.

"You can argue whether it's right or wrong, but other countries do it. Companies like [Brunswick] have the choice and other countries in the region, Australia, Malaysia, Indonesia give incentives. New Zealand will end up at a disadvantage."

While a sizeable investment by New Zealand standards, the sum paid for the 70 per cent stake in Navman is fairly ordinary for Brunswick, which made a profit last year of US$78.4 million.

Buckley will not say how good a deal he made.

"I've too many Scottish genes to answer that."