Toll takes cautious stance on Tranz Rail assets sale

By PAM GRAHAM

Toll Holdings, the Australian transport company that has signalled its expansion plans in New Zealand, is taking a wait-and-see stance to assets being sold by Tranz Rail.

Tranz Rail has appointed ABN Amro Craigs to sell the truck, freight-handling, warehousing and logistics service that feed its rail network under the TranzLink brand.

"Toll would normally look at anything that is offered for sale," said Paul Little, Toll's managing director. "We would look at TranzLink but at this stage I can't tell you if TranzLink is of particular interest. It is at very early stages. We haven't received any information memorandums or anything like that."

He said the TranzLink businesses were not very profitable and it was not clear how they would be separated from Tranz Rail.

"Operationally it is not going to be easy because of the common use of many of the facilities they use around the country."

Analysts say the rail services group that encompasses the TranzLink businesses made about $500,000 in the first half and is forecast to earn $2.2 million before interest and tax in the full year. A rule of thumb of 10 times earnings before interest and tax suggests a $20 million price tag.

Analysts say Mainfreight and Owens might be interested in the business. About 80 per cent of TranzLink's customers feed on to the rail network, so TranzLink would interest anyone who thinks the current policy debate will result in increased use of rail.

Toll rarely uses advisers on mergers and acquisitions. It has a railway joint-venture in Australia with Patrick Corp. That venture has never had talks with or seen the books of Tranz Rail as a whole.

"If you look at the current stock market value of Tranz Rail and the margin it produces, I'm not sure that Toll or anyone else would look at it and say it looks like an outstanding investment," said Little.

Tranz Rail's shares rose 1c to 95c on Friday, after falling as low at 90c last week.

The company carried out a rights issue last year that allowed it to pay down loans and provide security to bankers for a lease on the Aratere ferry.