Fund managers still say no to Toll

By KEVIN TAYLOR and PAM GRAHAM

Big fund managers with shares in Tranz Rail have not wavered from the view that Melbourne-based Toll Holdings' takeover offer is too stingy.

Some of them met Government officials yesterday to discuss the Government's involvement in the deal.

Alliance Capital portfolio manager Andrew Bascand said it was an excellent meeting, but nothing was revealed that changed the valuation of Tranz Rail, for which Toll is bidding 95c a share.

"We would still hold the view that we most likely won't be selling to Toll at 95c," Bascand said.

Simon Botherway, of Brook Asset Management, said: "We are happy with our position. We won't be accepting the 95c and we consider there are a number of alternatives."

Together the two fund managers own about 9 per cent of Tranz Rail.

Toll is going for 90 per cent of Tranz Rail - effectively a full takeover because it can then compulsorily acquire the rest - after unveiling a deal with the Government last week in which the taxpayer would buy the rail network back for $1 and pour $200 million into upgrading it.

If Toll's takeover bid fails, the Government still has its original deal with Tranz Rail, also involving a track buyback, but with features widely seen as inferior to the deal it offered to Toll.

Toll managing director Paul Little said yesterday that there would be no change to the 95c a share offer, nor the 90 per cent acceptance level.

"Toll's valuation at the 95c per share offer relied heavily on securing the benefits of total control, successfully executing satisfactory track access arrangements with the New Zealand Government and urgently recapitalising Tranz Rail," he said.

The statement contrasts with Toll's position on June 13, when it raised its offer from 75c to 95c a share without requiring 90 per cent or a deal with the Government on track ownership and access.

Meanwhile, Toll and Tranz Rail continue to argue about the state of the rail operator.

Little said the potential for the takeover bid to drag out was of grave concern, because Tranz Rail continued to face "enormous operational and financial risks which will cause shareholder value to further deteriorate".

Tranz Rail snapped back that Little's comments were inaccurate.

Tranz Rail chairman Wayne Walden told the stock exchange the board wanted to reassure shareholders that the company's financial situation was stable.

"The recent deposit of $44 million by the Government has significantly strengthened Tranz Rail Holdings capital position and, in fact, our available banking facility at the end of June was in excess of $20 million."

He urged all shareholders to wait until the board received an independent report from Grant Samuel on the new Toll offer before making any decisions about it.

"The board of Tranz Rail is disappointed that Mr Little continues to make misleading statements to the market," he said

Tranz Rail shares closed yesterday down 3c at 97c.