Irony as Tranz Rail ex-chief agitates for sale

By DANIEL RIORDAN

Local analysts and investors are seeing a rich irony in former Tranz Rail chairman Ed Burkhardt's plans to regain control of Tranz Rail's biggest shareholder, Wisconsin Central, and sell its 23.75 per cent stake in the New Zealand company.

Wisconsin Central's largest shareholder, Southeastern Asset Management, said yesterday that it would support Mr Burkhardt's push for a vote on his reinstatement.

Southeastern, which owns 14.4 per cent of Wisconsin Central, said in a US securities filing that "shareholder value is more likely to be enhanced" by Mr Burkhardt, who is claiming support from investors owning about 70 per cent of Wisconsin Central.

He wants Wisconsin to sell its poorly performing international assets, including its Tranz Rail stake.

A former Wisconsin chairman and chief executive, he was ousted by his board in July last year, stepping down as Tranz Rail chairman soon after. He still owns 7 per cent of the US rail operator.

He went on the offensive last week, criticising Tranz Rail's restructuring plan, labelling it the handiwork of merchant bank Fay, Richwhite, Tranz Rail's second-largest shareholder with 17.5 per cent.

Yesterday, he said it was foolhardy of Tranz Rail to think of divesting its passenger services and to contract out maintenance services.

He said there was "tremendous value" in an integrated railway, but that was not a view shared by the present Wisconsin Central board or the Tranz Rail board, which shared Fay, Richwhite representatives.

But some local investors and analysts say it is extremely rich for Mr Burkhardt to criticise the company's performance when it finally appears to be emerging from a long period of stagnation under his chairmanship.

A source close to the company said it was ironic that Mr Burkhardt was pointing the finger when he was the key culprit behind Tranz Rail's long period of underperformance, something that was being addressed with the restructuring overseen by Michael Beard, managing director since May.

But, even if Mr Burkhardt regains control of the Wisconsin board, the US company might not be an automatic seller of its Tranz Rail stake, given the present share price and low New Zealand dollar.

One analyst said Wisconsin had been looking to sell its stake for some time.

"It's been a question of price. They've been looking for 450c and I don't think they're suddenly going to exit now with the share price at 340c and the kiwi dollar at 40USc."

Another analyst said Wisconsin Central was not seen as a key driver of the company's restructuring, and its departure from the share register would make little impact as the changes were being driven by management.

Tranz Rail director Leigh Davis said a sale would be a loss to the company but declined further comment.