Genesee vague on rail bid

By PAM GRAHAM

US railroad company Genesee & Wyoming was neither ruling out nor signalling the pursuit of Tranz Rail when briefing analysts on its second-quarter earnings late last week.

When asked why they were interested in a company with "warts", unless it was cheap, executives told an analysts' briefing that the initial attraction of Tranz Rail was its value.

As the situation evolved, the warts had been addressed, making it a more straightforward business.

Genesee's joint venture, Australian Railroad Group, is managed by Mike Mohan, an American former chief operating officer of Southern Pacific Transportation, the sixth-biggest US railroad before being taken over in 1996.

Tranz Rail yesterday mailed its target statement, responding to Toll Holdings' 95c a share offer, advising shareholders against accepting.

The Takeovers Panel also met to consider a complaint from shareholder Infratil, which says the exclusivity of the planned deal between Toll and the Government breaches the Takeovers Code.

Directors were doing what they could to encourage superior offers and alternatives, Tranz Rail chairman Wayne Walden said.

However, Toll managing director Paul Little has called Tranz Rail's advice to shareholders irresponsible.

"Telling shareholders to turn down 95c on the off-chance that directors can magic up another bidder ... is nonsense," he said.

Tranz Rail believes Genesee & Wyoming owned 1.14 per cent of its shares at July 11 through a company called Nessock Custodians, Grant Samuel said in the independent report mailed yesterday with Tranz Rail's statement.

Nessock is controlled by Wellington-based McDouall Stuart Securities, which will not say whether it is advising Genesee.

The Takeovers Panel is expected to make a statement by tomorrow on Infratil's complaint. Infratil is annoyed that while Toll's offer is open the Government cannot make other deals. Rule 38 of the Takeovers Code prevents directors of a target company frustrating offers, and Infratil is arguing that Toll acted effectively as a shadow director of Tranz Rail when it struck a track buyback deal with the Government.

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