Shareholder in for long haul

By PAM GRAHAM

Don't hold your breath for a takeover bid for the rest of rail company Toll NZ.

The US fund manager that owns nearly a third of the 17 per cent of shares left in public hands is in no hurry to sell to Toll Holdings, the Australian company in control of the former Tranz Rail.

"This company [Toll NZ] is going to be the growth engine of Toll Australia, I absolutely believe that," said Amit Wadhwaney, a portfolio manager of New York-based fund manager Third Avenue International Value Fund.

Third Avenue is the investor intriguing the New Zealand sharemarket. In the past month substantial security holder notices in New Zealand have revealed Third Avenue as a 5.2 per cent shareholder in Toll NZ and a 5.05 per cent shareholder in investment company Rubicon. Its funds also own shares in Telecom.

Wadhwaney draws a comparison between the fund and Sir Ron Brierley and Guinness Peat Group, a team he rates highly.

"We seem to be looking under the same rocks as they do," he said. "Our paths often cross."

Third Avenue likes companies that are asset rich, cheap and, often, "under-managed".

Third Avenue started investing in Tranz Rail when the shares were under $1 and the company was "under-managed".

Wadhwaney said 75c a share offers by Rail America and then by Toll were ludicrously low and "investment fatigue" was all that led shareholders to accept Toll's eventual $1.10-a-share offer.

As Third Avenue saw it, the company now had a very good manager - plus a boost from Government investment in the track.

"Toll have an opportunity to build an amazing transport company. We're very happy to be partners of theirs. We would be quite happy owning it for years," he said.

He would not disclose his valuation of Toll NZ and said if Toll Australia made a high offer Third Avenue would have to consider it.

Wadhwaney said he had been assessing investments in New Zealand since the 1980s, following Fletcher Challenge from before its breakup, investing in Fletcher Energy, Fletcher Forests and then Rubicon.

Third Avenue thinks the Rubicon management have done a good job of realising value.

Telecom was not the perfect business but it was "so cheap".

"Theresa Gattung has done all of the right sort of things," he said.

The company was an entrenched encumbent. It faced challenges but was managing costs and controlling capital expenditure.

The sum of its parts was well above the share price when Third Avenue invested, he said.

Third Avenue invests mostly through its international value fund, which kicked off on December 31, 2001, and a global value fund that began in September 1996.

"We have been quite happy with our investments in New Zealand over the years," said Wadhwaney.

There was no particular trigger for selling investments, though the fund would sell if a stock became wildly overvalued.