Toll goes unconditional on Tranz Rail despite share shortfall

7.00pm

Australian logistics company Toll Holdings has gone unconditional in its takeover play for Tranz Rail after its bid for 90 per cent of the rail operator fell short.

At New Zealand Exchange's close today, Toll had secured 85 per cent of Tranz Rail, but extend the offer for another 30 days.

Toll has offered $1.10 a share, equating to a $231 million bid for the cash-strapped Tranz Rail.

Toll managing director Paul Little said the shortfall was somewhat disappointing.

"But we're still extremely confident," he told National Radio today.

"It (the shortfall) will slow the process down but it certainly won't stop us (from taking Tranz Rail over)," he said.

Toll went unconditional on the takeover this afternoon so it could extend the offer by another 30 days, Mr Little said.

"The Government is very, very keen for Toll to achieve the 90 per cent as are we," he said.

The 90 per cent shareholding mark allows the compulsory acquisition of minority shareholders.

But, "...there are one or two New Zealand-based institutions that have been playing games over the last day or two."

Mr Little declined to name the institutions, saying however major institutions had been co-operative.

Meanwhile, Finance Minister Michael Cullen said Toll's move today meant New Zealand was on track for a better and safer rail system.

"The purchase will activate the heads of agreement negotiated between the Crown and Toll in July," Dr Cullen said in a statement.

The agreement included Toll selling the Government the national track network for $1 and commitments by both to an extensive capital investment programme.

Under the joint offer by Toll and the Government, the latter would abandon its play to take a 35 per cent equity stake in the beleaguered rail operator.

It would instead buy the rail network for $1 plus $50 million for track leases, and spend $100 million immediately plus $25 million a year over four years on upgrades.

Toll would spend $100 million on rolling stock and locomotives, while there would be incentives for it to increase freight volumes.

A Government entity, called TrackCo, would be set up to maintain and control the track.

"The Government will now soon be in a position to release the first $100 million," Dr Cullen said.

Work on the network would initially be focused on improving safety and efficiency.

Meanwhile, Toll has already lined up a new chief executive to replace current chief executive Michael Beard, and a replacement chief financial officer (CFO) .

Former CFO John Loughlin stepped down at the end of September, and group financial controller Brian Fouhy is acting as CFO.

Mr Little believed Tranz Rail would take a number of years to meet Toll's profitability targets, but a rebuilding programme would help achieve that.

Toll posted a record net profit of A$106.1 million ($123.5 million) for the 2002/03 year, and has reaffirmed forecasts of record earnings in the current year.

Tranz Rail expects an operating profit of $48 million for this financial year, which would be $8 million better than last year.

Tranz Rail shares closed today at the offer price of $1.10.

- NZPA