Toll picks up Tranz Rail reins

Toll Holdings executives arrived for work at Tranz Rail's head office without fanfare yesterday as a tail of intransigent shareholders wagged at the Australian company.

David Jackson, the new chief executive, and Austen Perrin, the new chief financial officer, walked into the company's North Shore offices after 9am, started working on laptops and declined interviews.

As they took up the reins, Tranz Rail shares rose to $1.13, or 3c above Toll's $1.10 offer price, suggesting the Australian company has opposition in reaching the 90 per cent level that triggers compulsory acquisition of remaining shares and a share market delisting.

ABN Amro upgraded its recommendation on the stock to buy from hold yesterday. Documents filed during the day showed Toll owned 82.7 per cent of Tranz Rail.

Toll's options are to make friends with the 17 per cent of shareholders who have not accepted its offer, live with a minority shareholder base, or make a new higher offer to remaining shareholders after this offer closes. Its offer was declared unconditional on Friday and is being extended.

Toll wants total control so it can access cash flow, save head office and stock market listing costs and absorb Tranz Rail's road, rail and ferry businesses into its own structure.

Under takeover rules, Toll can extend the bid for up to 60 days and can buy shares on market at $1.10 and less. After an offer closes a bid to all remaining shareholders has to be made if shares are bought in the next year.

After a year, 5 per cent a year can be bought under creep provisions.

Funds that are passively managed - that is linked to an index - have not accepted for technical reasons. They do so when a share falls out of their index.

The theory is that one or more shareholders who are seeking a higher price are holding out and will try to pick up shares owned by passive funds as they are released.

The funds sell the day a stock falls out of their index at the highest price available. If the shares are trading above Toll's bid price they will sell on market.

Accident Compensation Corporation and New Zealand Guardian Trust confirmed yesterday that they had not accepted Toll's offer.

According to the latest annual report, ACC had 0.68 per cent of Tranz Rail shares at September 11 and one Guardian Trust fund had 0.74 per cent. David Lloyd Investments, the investment vehicle for the Richwhite family, is understood to have accepted last week. It owned 2.07 per cent.

Toll managing director Paul Little said the company was looking at options for getting to 90 per cent.

He said there would be some acceptances in the system and it was still determining where it finished. Because it did not achieve full control it has to defer integration plans.

An interim board chaired by Toll's most senior operations executive, Mark Rowsthorn, was named yesterday.

Tranz Rail chief executive Michael Beard resigned last Friday and will stay on to help on the handover. Roger Armstrong and John Loughlin remained as directors and the rest stepped down.