Subsidy off the table, Toll told

By PAM GRAHAM

Finance Minister Michael Cullen's message in Parliament yesterday to Australia's Toll Holdings was clear: Don't assume a subsidy from the Government if you buy Tranz Rail.

A Toll takeover of Tranz Rail would trigger conditions in the track buyback deal between Tranz Rail and the Government, scuttling it.

That deal assumes a $20 million annual subsidy to rail and $100 million over five years from the Government to improve the track.

"I wish to point out that if Toll Holdings' takeover bid succeeds the conditions in the Heads of Agreement will be triggered and the subsidy in that Heads of Agreement will not be forthcoming," Cullen told Parliament.

He reiterated that Toll had an opportunity for a joint approach with the Government but pursued its own bid.

"We have signalled very clearly to Toll Holdings that they can't expect to come in and pick up a subsidy," Cullen said.

Toll managing director Paul Little said Toll's preferred option would be for the Government to own the track, with an agreement covering access fees and rights.

"That is our preferred option. If, however, we can't do that then we are happy and willing to retain the network and run it.

"We're not relying on getting a subsidy as part of our financial assumptions," he said.

The National Party's associate transport spokesman, John Key, said Toll and the Government should get round the negotiating table and "sort it out".

"All this 'he said, she said' stuff is a red herring".

The Government wanted the guaranteed rights to rail that it had lost when selling Tranz Rail without a Kiwi Share, said Key.

Toll is offering 95c each for Tranz Rail shares, which closed yesterday at 91c.

It already owns 10.1 per cent of the company.

The offer will be mailed to shareholders from Monday.

One scenario being contemplated by analysts is that Toll could have control of Tranz Rail before shareholders consider the Government plan.

A shareholder meeting was originally expected on July 11 and the company has since said it will be no later than August 8.

Advisers are working on the details of the Government bid and they could be available to the market by early next week, allowing analysts to put a per-share valuation on the plan which can be compared with Toll's offer.