Takeovers Panel to investigate bids to buy Tranz Rail

1.20pm

An agreement between the Government and Australian company Toll Holdings in relation to Toll's takeover bid for Tranz Rail may breach the stock exchange's Takeovers Code, an industry watchdog says.

The Takeovers Panel today said it would meet on August 4 to decide if Toll has breached part of the code relating to a director's actions in potential takeover situations.

"The panel considers that Toll, by entering into the agreement with the Crown, may not have complied, may not be complying, or may not intend to comply with rule 38 of the code," the panel said.

"The panel has decided not to issue any restraining orders," it said, but noted that it would decide at the August meeting whether to "exercise its powers".

Tranz Rail institutional shareholder Infratil called for the panel to decide on the issue.

Infratil alleged the exclusive nature of the heads of agreement between Toll and the Government could result in "an offer for Tranz Rail being frustrated", while shareholders could be "denied the opportunity to decide on the merits of an offer".

Furthermore, Infratil said, Toll was "acting on behalf of the directors of Tranz Rail or is a director of Tranz Rail itself" under the code.

The complaint was related to the nature of Toll's deal with the Government for the possible takeover of Tranz Rail.

Under the deal, Toll would sell Tranz Rail's rail network and other rail assets to the Government, which would commit to making improvements to the rail network.

The deal contains a clause that neither the Government nor Toll would enter into negotiations or arrangements with other parties that were inconsistent with its terms.

"...in particular no alternative to the revised heads of agreement will be negotiated or entered into by either party," the panel said.

A spokeswoman for Finance Minister Michael Cullen declined to comment on the issue.

The panel is the second apparent hurdle to appear in 19.99 per cent Tranz Rail shareholder Toll's way in the past two days.

Yesterday, independent advisor Grant Samuel & Associates issued a report that valued Tranz Rail's shares well above the 95 cents a share Toll is offering.

Grant Samuel valued Tranz Rail shares between $1.34 and $1.62 each if the deal between Toll and the Government was successful.

However, if the Government's earlier bailout proposal went ahead instead, then the rail operator's shares were worth between $1 and $1.11 each.

"As the Toll offer of $0.95 per share is below Grant Samuel's assessed value range for Tranz Rail-Crown or Toll-Crown proposals it is considered not fair," the report said.

The advisor said the Toll-Crown offer was the better of the two offers, and that Toll should "pay a price equivalent to the full underlying value of Tranz Rail".

At 12pm, Tranz Rail shares were unchanged at $1.04, a level not seen since late March when the company's shares were spiralling towards a low of 35 cents on April 16.

Institutional shareholders have long maintained that Tranz Rail was worth more than $1 a share, possibly about $1.30 a share.

Walker Capital Management spokesman Stephen Walker today said Toll need to get realistic with its bid price.

"It's too far out of the market in terms of what people think this business is worth," Mr Walker said.

But Toll's managing director, Paul Little, was adamant the offer price would stand at 95 cents a share.

"We won't be changing anything in our bid at this stage... I hope shareholders understand this is not a bluff," Mr Little said.

"This is serious. We have walked away before on many occasions and we'll do it this time if we have to, but we don't want to."

He disputed the Grant Samuel valuations of Tranz Rail, describing the share prices as "over-valued" and "wrong".

- NZPA