Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
Japan-Australia M&AYear in Review 201518 NOVEMBER 2015
Agenda
Session 1:Overall trends in Japan Australia
cross-border M&A
Session 2:
Key legal updates
Session 3:
2016 M&Apredictions and
deal opportunities
Japan-Australia M&A Year in Review 20152
Session 1OVERALL TRENDS IN AUSTRALIA JAPAN CROSS-BORDER M&A
Japan-Australia M&A Year in Review 20154
Image taken from http://www.dfat.gov.au/fta/jaepa/snapshot/ on 10 November 2014
2015 M&A trends in Japan
Japan-Australia M&A Year in Review 20155
Source: Thomson Reuters, 2015.
Highlights of 2015
15 Jan•JAEPA commences•JAEPA commences
28 May• Japan Post acquisition of Toll Holdings completes (announced 18 February 2015)• Japan Post acquisition of Toll Holdings completes (announced 18 February 2015)
May• Bald Hills Wind Farm commences operations• Bald Hills Wind Farm commences operations
16 Jul• All Nippon Airways announces resumption of flights to Australia from December 2015• All Nippon Airways announces resumption of flights to Australia from December 2015
4 Aug•BTMU celebrates 30th anniversary of banking operations in Australia•BTMU celebrates 30th anniversary of banking operations in Australia
5 Oct•TPP is agreed•TPP is agreed
28 Oct• Nippon Life announces acquisition of 80% of Australian life insurer MLC• Nippon Life announces acquisition of 80% of Australian life insurer MLC
Japan-Australia M&A Year in Review 20156
Commencement of JAEPA
Japan-Australia M&A Year in Review 20157
Previous thresholds
• $248 million for business investments
• $54 million for developed non-residential commercial real estate (not heritage listed)
• $5 million for developed non-residential commercial real estate (heritage listed)
Previous thresholds
• $248 million for business investments
• $54 million for developed non-residential commercial real estate (not heritage listed)
• $5 million for developed non-residential commercial real estate (heritage listed)
Current thresholds under JAEPA
(commenced 15 January 2015)
• $1,094 million for business investments
• $252 million for business investments involving prescribed sensitive sectors
• $1,094 million for developed non-residential commercial real estate
Current thresholds under JAEPA
(commenced 15 January 2015)
• $1,094 million for business investments
• $252 million for business investments involving prescribed sensitive sectors
• $1,094 million for developed non-residential commercial real estate
Signed on 8 July 2014 – commenced 15 January 2015
JAEPA is the first comprehensive EPA between Japan and a major trading partner – including in-roads in to Japan's protected agriculture sector.
Japan Australia M&A deals in past 12 months
Japan-Australia M&A Year in Review 20158
Sector Deal Date
Business & professional services
• Recruit Holdings Co.'s acquisition of PeopleBank• Recruit Holdings Co.'s acquisition of Chandlers Macleod• Nikken Sekkei's global business alliance with the Buchan Group architectural
practice
• January 2015• April 2015• September 2015
Finance / Insurance
• Mitsui & Co., Ltd's acquisition of a 20% interest in Westbourne Capital Management Ltd
• Nippon Life's acquisition of an 80% shareholding in MLC, National Australia Bank's life insurance business announced
• May 2015• October 2015
Construction / Real Estate
• MIRAIT Technologies Corporation's acquisition of 51% of CCTSTelecommunications Construction Pty Ltd
• November 2014
Power / Energy and Resources
• Eurus Energy Holding's acquisitions of a majority interest in CBWF Holdings which is developing the Coonooner Bridge Wind Farm and of an interest in Kennedy Windfarm
• Mitsui & Co., Ltd's acquisition of Kipper field from Santos
• April 2015
• November 2015
Transport & Logistics
• Japan Post's acquisition of Toll Holdings Ltd • May 2015
Food and Beverage / Agriculture
• Warrnambool Cheese & Butter's acquisition of Lion Dairy's everyday cheese business
• Murray Goulburn's acquisition of Mitsubishi's 24.1% interest in Tasmanian Dairy Products
• March 2015• October 2015
Automotive • VT Holdings Co Ltd's acquisition of Scotts Motors Artarmon from Marubeni
Automotive Holdings
• November 2014
Manufacturing • Fujikura's acquisition (through AFL) of AFC Group a manufacturer of fibre
optic cabling
• May 2015
Notable trends in Japan-Australia M&A
Shift in sector focus
Acquisition of mature businesses
Australia as a profitable
market
Strategic alliances
Mega-deals in developed economies
Asset recycling
Japan-Australia M&A Year in Review 20159
Session 2KEY LEGAL UPDATES
FIRB - Agribusiness
February 2015 announcement
Increased scrutiny of foreign investments in Agricultural Land and Agribusiness outlined
Permitted by JAEPA under a carve out
$15M "Rural Land" screening threshold now in place but likely to be amended to refer to "Agricultural Land" which will have a broader application
$55M "Agribusiness" screening process was also flagged by the Government
Foreign ownership register for Agricultural Land to commence in 1 July 2015
Japan-Australia M&A Year in Review 201511
JAEPA
Community concerns
Japan-Australia M&A Year in Review 201512
• While the Government welcomes foreign investment because it plays an important and beneficial role in the Australian economy, there are community concerns regarding foreign direct investment in agriculture in Australia.
• It is important for the government to strengthen scrutiny, accountability and transparency around foreign investment in agriculture and protect Australia’s interests and providing assurance to the community.
Welcoming foreign
investment in agriculture
Community concerns
ADM bid for Graincorp
Japan-Australia M&A Year in Review 201513
• On 29 Nov 2013, the Australian Treasurer blocked a proposed acquisition by ADM of GrainCorp, an Australian grain business with a network of storage and port facilities in Australia
• “Australians can have confidence that investments into agriculture will be scrutinised to ensure that they are not contrary to the national interest,” : Treasurer Joe Hockey in Parliament on 20 Aug 2015
What's new?
Japan-Australia M&A Year in Review 201514
• New "significant action" and "notifiable action" regimes
• Some new key definitions
• Fees
• Penalties – strengthening enforcement
• New "significant action" and "notifiable action" regimes
• Some new key definitions
• Fees
• Penalties – strengthening enforcement
Foreign Acquisitions and Takeovers Legislation Amendment Bill and Regulation 2015
• Registration system under which ATO collects information
• Obligation to notify
• Registration system under which ATO collects information
• Obligation to notify
Register of Foreign Ownership of Agricultural Land Bill and Regulation 2015
"Significant Action"
• An action to acquire interests in securities, assets or Australian land, or otherwise take action in relation to entities and businesses, that have a connection to Australia (broad meaning)
• Change in control (agriculture – not required)
• The threshold test
• A foreign person is not obliged to inform the Treasurer that they are proposing to take a significant action unless the action is also a notifiable action(that is, only certain significant actions are also notifiable actions)
• However, the Treasurer has power to make a broad range of orders in relation to a ‘significant action’
• Significant actions may be notified to give investor certainty
Japan-Australia M&A Year in Review 201515
"Notifiable action" - Conditions
Japan-Australia M&A Year in Review 201516
• Kinds of action (any of the following)
(a) to acquire a direct interest in an Australian entity or Australian business that is an agribusiness;
(b) to acquire a 20% (up from 15% in the current Act) (=substantial interest in) of an Australian entity;
(c) to acquire an interest in Australian land (which includes residential, commercial or agricultural land or a mining or production tenement).
• The threshold test
• kinds of entities covered
– an Australian corporation that carries on an Australian business, whether alone or together with one or more other persons; or
– an Australian unit trust; or
– an Australian entity that is the holding entity of an entity mentioned first and second
• action taken by a foreign person
"Notifiable action" - Obligations
Japan-Australia M&A Year in Review 201517
• A foreign person who proposes to enter an agreement to take a notifiable action must give a notice to the Treasurer before entering the agreement.
• A foreign person who gives a notice above must not enter the agreement mentioned above before the earliest of the following days:
– the day that is 10 days after the end of the decision period (that is, 30 days after the day the Treasurer receives a notice from the person about the proposed significant action which is a notifiable action unless the person requests in writing that the Treasurer extends the period);
– if an interim order is given to the person—the day specified in the order;
– the day a no objection notification is given to the person.
Key thresholds – entity/business
Japan-Australia M&A Year in Review 201518
Action Value Threshold test
Acquisition of a substantial interest in an Australian entity (not agribusiness) through share acquisition
The higher of:• total asset value for the entity
or • the total issued security value
$1.094 million
Acquisition of a substantial interest in the assets of an Australian entity (not agribusiness)
The value of the consideration for the acquisition
$1.094 million
Acquisition of a direct interest in an Australian entity that is an agribusiness
The total of the following:• the value of the consideration
for the acquisition;• the total value of the other
interests held by the person, alone or together with one or more associates
$55 million(except for investors from USA, New Zealand, Chile)
Key thresholds - land
Japan-Australia M&A Year in Review 201519
Action Value Threshold test
Acquisition of an interest in prescribed land – eg residential, vacant commercial, mining or production tenements
N/A No threshold
Acquisition of an interest in agricultural land
The total value of land held by the foreign person in aggregate
$15 million (except for investors from USA, New Zealand, Chile or an enterprise or national of Singapore or Thailand)
Acquisition of an interest in any other land
The value of the interest in the land
To be prescribed
Associate
Japan-Australia M&A Year in Review 201520
Relevant to:
• "substantial interest"
• "direct interest"
• value threshold for acquisition of Agribusiness
• "foreign person"
• "foreign government"
Broad definition BUT an associate of a person will no longer be an associate of that person's associates
Person
Acting in concert
Associated formally or informally
Business partner
A holding entity
A corporation in which the person holds
20%
A corporation
in which holds 20%
in the person
Scheme of avoidance
"Foreign person"
Japan-Australia M&A Year in Review 201521
Individual non-resident
Corporation in which non-resident individual, foreign corporation,
foreign government holds substantial interest
Corporation in which 2 or more persons, each of
non-resident individual, a foreign corporation or
government, hold an aggregate substantial
interest
A foreign government
"Direct interest"
Japan-Australia M&A Year in Review 201522
Interest of >10%
Interest of >5% plus legal arrangement relating to the business
Interest of >1% where > 5% already held (12 month period)
Interest of any percentage if acquirer has influence, participation, control
"Agribusiness"
Japan-Australia M&A Year in Review 201523
Division A
All agriculture
All forestry
All fishing
Division C
All food manufacturing
Specific exceptions
• Will be prescribed in regulations. Likely to be a business that carried on wholly or partly in the following classes of the Australian and New Zealand Standard Industrial Classification Code:
• Diversified businesses are agribusinesses if value of assets or revenue/profits derived from agribusiness > 25% of the total
Beef/chicken/dairy production and manufacture
• Agribusiness
– cattle farming
– poultry farming
– meat processing (eg abattoir)
– poultry processing
– milk and cream processing
– cheese and other dairy product manufacturing
• Not agribusiness – manufacturing:
– cured meat and smallgoods
– ice cream
– cereal, pasta and baking mix
– bakery product
– confectionery
– potato, corn and other crisps
– prepared animal and bird feed
Japan-Australia M&A Year in Review 201524
Forestry
• Agribusiness
– Forestry
– Logging (including hewing or rough shaping timber or cutting firewood in forests)
– Forestry Support Services
Japan-Australia M&A Year in Review 201525
• Not agribusiness
– Log Sawmilling and timber dressing (wood chipping, or timber re-sawmilling and dressing)
– Investing in any of the above activities
– Distilling eucalyptus oil
– Other wood product manufacturing (Prefabricated Wooden Building Manufacturing, Wooden Structural Fitting and Component Manufacturing, Veneer and Plywood Manufacturing, Reconstituted Wood Product Manufacturing, Other Wood Product Manufacturing)
"Agricultural land" vs "Australian rural land"
Japan-Australia M&A Year in Review 201526
Agricultural land
Land in Australia that is used, or that could reasonably be used, for a primary production business
Australian rural land
Land situated in Australia that is used wholly and exclusively for carrying on a business of primary production
"Primary Production Business"
Japan-Australia M&A Year in Review 201527
"Primary production business" in the definition of Agribusiness has the meaning in the Income Tax Assessment Act 1997 (ITAA)
Cultivating/propagating plants
Maintaining animals for sale or for meat
Manufacturing dairy produce
Felling trees in plantation or forest
Transporting trees to mill
Agricultural land – "could reasonably be used"
Japan-Australia M&A Year in Review 201528
The facts and circumstances
of the land
The primary uses allowed on the land under its zoning
Land use history
Land characteristics
Lease or licence
conditions or limitations
Case studies
• Windfarms are often located in rural areas or on properties which are zoned for primary production – high likelihood that that land will be considered to be Agricultural Land
Japan-Australia M&A Year in Review 201529
• Forestry – squatter example – under previous definition, where there was a mixed use, the land would not be "rural" but for Agricultural Land, no longer relevant since it is sufficient if part of the land can be used for primary production
Fees
Japan-Australia M&A Year in Review 201530
Fees for giving notice of notifiable actions
If the notifiable action is… the amount of the fee is…
a) to acquire a direct interest in an Australian entity or Australian business that is an agribusiness
b) to acquire a substantial interest in an Australian entity
a) if the consideration for the acquisition is $1 billion or less—$25,000; and
b) otherwise—$100,000.
to acquire an interest in agricultural land
Purchase price number x $10 000purchase price number is the amount worked out using the following formula, rounded down to the nearest whole number:
The proposed consideration for the proposed acquisition1 000 000
a) if the consideration for the acquisition is $1,000,000 or less—$5,000; and
b) otherwise—worked out in accordance with the formula.
Penalties
Japan-Australia M&A Year in Review 201531
Amendment
Divestment orders
Criminal penalties
Civil penalty
Current law
Divestment orders Criminal penalties
Register of Foreign Ownership of Agricultural Land Bill 2015
Japan-Australia M&A Year in Review 201532
A foreign person who hold, at the start of 1 July 2015:
(a) a freehold interest in agricultural land; or
(b) a right to occupy agricultural land under a lease or licence whose remaining term (including any extension or renewal) was (at the start of 1 July 2015) reasonably likely to exceed 5 years
MUST• give notice of the holding to the Commissioner • in the approved form (www.ato.gov.au/aglandregister)• before the end of 30 days starting on the day the law commences
(December 31st 2015)
Initial issues
Japan-Australia M&A Year in Review 201533
•Stocktake of current holdings of Agricultural land
•What land interests are held?
•Are the interests held through a company?
•Which entity holds them?
Understanding current land interests
•Who is responsible for ensuring that proper records are maintained of land interests?
•Who is responsible for reporting to the ATO?
•Centralised system or divisional?Reporting obligations
•Are the types of businesses in which you will invest agribusinesses? Do they involve the acquisition of an interest in Agricultural Land?
•Can you take advantage of FTAs which are more favorable for investors?
•Can you overcome the $15 million cumulative threshold for Agricultural Land by acquiring through new subsidiaries?
Approach for future investments
•Should you also apply where there is a significant action but it is not notifiable?
•When should you apply? Proposed transaction or signed?
Application process strategy
Session 32016 M&A PREDICTIONS AND DEAL OPPORTUNITIES
2015FY M&A Results
Japan-Australia M&A Year in Review 201535
2016 M&A: on the way up
Japan-Australia M&A Year in Review 201536
Low $A
Low inflation and interest rates
Global recovery (led by US and Europe)
FTAs/ EPAsand TPPsigned with key trading partners
Energy & Resources – Asset divestment in the Australian coal sector
• Continued depressed coal prices
• Major players looking to sell-down or exit coal portfolios in Aus: Rio Tinto, Vale, Peabody and Anglo American
• Medium players struggling for survival
• End user opportunities: steel makers and power companies
Japan-Australia M&A Year in Review 201537
Japan-Australia M&A Year in Review 201538
Australian Agribusiness
Inputs
•Seed, Fertiliser & Spray
•Machinery & Equipment•Research & Development
•Financing
Logistics
•Roads, Rail & Ports
•Upcountry Storage •Trading & Futures
•Shipping & Export
Processing
•Grain Milling
•Dairy Processing•Fibre & Textile
•Food Processing
Agricultural Competiveness White Paper
• Road and Rail Infrastructure – efficient and cost-effective transport infrastructure
• Reduced Regulation – streamline regulation (reduce "red" & "green" tape)
• Foreign Investment – increasing transparency
• Education & Labour – strengthening education and labour availability
• Water – development of water infrastructure projects
• R&D – supporting and improving R&D and implementation
• International markets – improving systems and market efforts
Japan-Australia M&A Year in Review 201539
Policy objective – improve competitiveness in the Australian agriculture sector and its supply chain
Opportunities – Pre-Farm Gate
Japan-Australia M&A Year in Review 201540
•Succession planning
•Need for capital to support growth
•Consolidation and efficiencyFamily Farm
•A$15 million thresholdFIRB
•Existing stations or holdings
•Consolidation Opportunity?
Opportunities - Processing
Japan-Australia M&A Year in Review 201541
•Capital investment
•Creation of "export" commodity
Food & Processing
•A$55 million thresholdFIRB
•Strategic stakes
•Greenfields with local partnerOpportunity?
Opportunities - Infrastructure
Japan-Australia M&A Year in Review 201542
•Efficient and effective transport
•Storage
•Sustainable water managementProjects
•Access regime
•Possible higher FIRB threshold Legal issues
•Regional corridors
• Ports – stakes & purpose built
•Northern AustraliaOpportunity?
Other
Japan-Australia M&A Year in Review 201543
•Trucks, Tractors and Headers
•Product storage
Plant & Equipment
•Traditional "Stock & Station Agents"
•Contract servicesAg services
•Net importer of fertiliser
• Pesticides & Veterinary products
• Fuel Other Inputs
Natsuko [email protected]+61 3 9679 3833
Arabella [email protected] +61 3 9679 3012
Geread DooleySenior [email protected]+61 2 9258 6625
237392054
© Ashurst 2015
These materials are for training purposes only
and are not intended to be a comprehensive
review of all developments in the law and
practice, or to cover all aspects of those
referred to. Please take legal advice before
applying anything contained in these materials
to specific issues or transactions. For more
information please contact the presenters or
your usual contact.