Fay, Richwhite exit rail stake

By DANIEL RIORDAN transport writer

Tranz Rail shares took a pounding yesterday after Fay, Richwhite sold its 14.5 per cent stake in the company.

The merchant bank sold to institutions for $3.60 a share, an 8 per cent discount on Thursday's close of $3.92, realising $63 million.

Shares fell 27c yesterday to $3.65.

Fay, Richwhite put its stake on the market 15 months ago, when the share price was around $3.80, although it was understood to have been looking to sell at $4.50 several months earlier.

American rail operator Wisconsin Central, which owns 24 per cent, said it was a seller at the same time, but both parties struggled to find buyers. Wisconsin Central is now owned by Canadian National Railway.

A week before Christmas, David Richwhite told the
Business Herald his company's stake was no longer for sale, and Fay, Richwhite was keen to remain an investor in Tranz Rail, at least until the rail operator had finished its restructuring.

In a brief announcement to the stock exchange yesterday, Mr Richwhite said that "the company keeps its investments under constant review. An opportunity arose to realise our stake and as a result we decided to sell."

Fay, Richwhite and Wisconsin were part of a consortium which bought NZ Rail from the Government for $400 million in mid-1993. The merchant bank paid $34 million, or 16c a share, for its original 31.8 per cent stake but has since sold down.

Although the stock was hammered yesterday, it is expected to rebound now that one of the major overhangs has been removed.

But Fay, Richwhite's sale will make it more difficult for Canadian National to offload its stake, as many of the institutions that had bought shares will probably settle for what they have.

One of the buyers was Tower Asset Management. Tower's equities head, Wayne Stechman, said Tranz Rail remained a turnaround story with healthy prospects, once it had finished stripping to its core assets, a process started in October 2000.

Tranz Rail said last week it expected to finish that restructuring process by June, allowing it to start the next financial year with a clean slate. On Thursday it reported an abnormals-driven profit of $43.3 million for the six months to December 31. Operating profit was down 20 per cent.

Fay, Richwhite's 8 per cent discount compares with the 6 per cent discount Changi Airport Enterprises settled for when it sold its 7.1 per cent stake in Auckland International Airport to institutions in December. Changi sold at $3.58 compared with a market price of $3.80.

Auckland Airport shares took a dive immediately after that sale was announced, tumbling 14c to $3.66, but have since recovered, closing yesterday at $3.90.