Toll buyer in strong position

By PAM GRAHAM

Third Avenue Management, Tuesday's mystery buyer of former Tranz Rail shares, has lifted its stake in the company to 7.1 per cent.

This makes the New York fund manager a powerful minority shareholder in that it can influence the price of takeovers and call the shots in some shareholder votes.

Third Avenue now has nearly half of the 16 per cent of shares not owned by Toll Holdings of Australia, giving it the power to control the outcome of any shareholder votes that Toll Holdings cannot vote on.

Such votes occur on transactions between Toll Holdings and Toll NZ.

The obtaining of waivers from the NZX from votes has become more important. Also, an independent review of the price of any bid that takes Toll past the 90 per cent compulsory acquisition trigger can be forced if less than 50 per cent of shareholders accept.

Analysts said that at Third Avenue's previous holding of 5.2 per cent, it had a strong position because not all shareholders were active, but at 7.1 per cent its control was indisputable.

Toll managing director Paul Little said the company was "not intimidated by or happy about the holding, but we are just getting on with running the company".

Toll cannot buy any more shares in Toll NZ for 12 months from its bid last year unless it makes a new offer to all shareholders.

It owns 84.2 per cent of the company and, at 90 per cent, can force remaining shareholders to sell.

Toll's full takeover of the company at $1.10 a share was thwarted by big and small shareholders who thought the price was too low.

Third Avenue bought stock last year at under $1 and has continued buying. A mystery buyer swooped on Tuesday to pick up shares at $1.98 each, and yesterday Avenue notified its increased holding to the NZX.

Third Avenue portfolio manager Amit Wadhwaney said last week that his funds were happy owning Toll NZ for years because Toll Holdings had an opportunity to build an amazing transport company. The fund manager had regarded the $1.10 a share bid as too low.

Third Avenue invests in companies that are asset-rich and trading below valuation. The fund compares itself with Sir Ron Brierley in investment style, and said its valuations were conservative. It also invests in Rubicon and Telecom here.

Toll Holdings has effectively become Toll NZ's banker since it took over. Tranz Rail was in breach of its bank covenants last year and was struggling to stay solvent, even though it was making profits.

Toll NZ shares rose 5c to $2.05 yesterday with just under 500,000 shares trading, down on the 2.67 million traded on Tuesday.