By Paul McBeth
Nov. 26 (BusinessDesk) - Fulton Hogan has got Overseas Investment Office approval to sell forestry estates in Otago as it looks to flog off non-core assets in a bid to strengthen its balance sheet.
The Christchurch-based company sold 3,013 hectares of forestry land to Forestry Fund 9 NZ, a subsidiary of global investment manager GMO, after completing a sale and purchase agreement in June. The OIO granted approval on Oct. 18 for an undisclosed sum, according to a decision summary.
Fulton Hogan told shareholders in its annual review the contract was completed after "a lengthy period of due diligence" and was conditional on OIO approval. That sign off and settlement of the purchase price was expected in December.
Managing director Nick Miller told BusinessDesk the company was selling non-core assets, including its forestry estate and some land blocks, to bolster its balance sheet and repay debt after buying out its partner in Victoria-based Road Pioneer Services and buying back 37 percent of shares held by Shell New Zealand.
"We've done a review of non-core activities in Fulton Hogan, and in the report you will note that we have divested our forestry business, which we determined is not core," Miller said. "We're taking advantage of a strong market in that sector, and have concluded a sale."
The privately-held construction firm is also selling land that it has built up over the past 80 years, which will also go toward strengthening its books.
"We've divested some of that surplus land in NZ and certainly two or three blocks in Oz that's surplus to our needs that we intend to divest over the coming year," Miller said.
Last year, the GMO fund bought 1,149 hectares near Taupo to plant pinus radiata. As a condition of the purchase, Forestry Fund 9 entered into a nitrogen management deed with Lake Taupo Protection Trust so that is has a nitrogen discharge allowance of 5kg, or less, of nitrogen per hectare per annum for the land for 999 years. The pine forest is expected to meet that requirement.