Toll takes time to talk turkey

By PAM GRAHAM

Toll Holdings is extending its bid for Tranz Rail by a further two weeks while it negotiates with the company to try to get a recommended bid.

The extension of the current date of September 26 will be notified today, Toll's managing director Paul Little said at his company's briefing on its record annual profit in Melbourne yesterday.

Toll's 95c a share cash bid has been rejected by shareholders and the board, and was not supported by an independent valuation.

"We have been looking at ways of trying to meet the requirements of shareholders in our bid and it would be fair to say we are examining a number of things, in the main using the leverage of the Toll balance sheet perhaps to unlock value that may not otherwise be there.

"At this point in time I can't say anything more about that, other than we are continuing to have what I think is very productive talks with the company and we are striving as hard as we can to try to get [their] support."

The talks are believed to be focusing on Tranz Rail's option to exit its lease on the Aratere ferry.

It allows Tranz Rail to buy the Aratere back for $71 million, unlocking $10 million of foreign exchange gains and releasing $30 million of funds held as security, according to Grant Samuel. The option expires on September 30 and may be terminated if control of Tranz Rail changes.

The suggestion is that Toll would lend the money for the ferry purchase, and the gains from the transaction would help to support a higher bid. The deal is complex, particularly its tax aspects, and not assured.

Little said the offer would remain a cash offer and walking away was still a possibility.

Toll had been eyeing businesses in New Zealand for years, including Mainfreight and Owens, which he described as "underperforming".

Tranz Rail was attractive because it owned a stake in the rail operator in Tasmania, a market that was strategically important to Toll.

"What you are seeing in the New Zealand market is not dissimilar to ... the Australian market. Rationalisation needs to occur."

Toll was not negotiable on the 90 per cent acceptance level on the bid because it planned dramatic changes at Tranz Rail.