Toll warns the fence-sitters

By PAM GRAHAM

Toll Holdings is warning Tranz Rail shareholders it may walk away if its bid comes up short when Friday's deadline expires.

There is still a "real chance" that the takeover of Tranz Rail will not proceed, Toll managing director Paul Little says.

Toll's $1.10 a share cash offer is conditional on 90 per cent of shareholders accepting.

Little has said throughout that Toll wanted total control to achieve efficiencies.

Yesterday, it had acceptances totalling 41 per cent, plus its 19.9 per cent existing stake.

AMP is transferring another 4 per cent owned by actively managed funds, and 2 per cent more held by passive funds will follow.

That takes the total to 67 per cent with three days to run.

The process of collecting acceptances from small institutions in Europe and arbitrage investors has been slow.

Small shareholders' intentions remain the wild card. Some want the company to remain New Zealand owned, and others are betting that Toll will live with less than full control, giving them a ride as minority shareholders.

|"If we ended up with 80 per cent, that would be very disappointing and we'd have to seriously look at what we are going to do," Little said.

Toll would take final view on the 90 per cent acceptance condition on Friday.

The company could creep to total control if it got between 85 per cent and 90 per cent under rules that allow 5 per cent to be purchased each year.

One theory is that if Toll accepted being a majority owner, Tranz Rail would hold a rights issue to restore the balance sheet after the track was written down and tax credits were lost in the sale.

That could be a mechanism to further boost Toll's stake.

Little said there was no point in commenting on theories.

Toll's deal to sell the track to the Government takes effect if it is successful, or if it waives the 90 per cent condition.

Toll is making plans for the company, although Little said that was not a signal that it would proceed no matter what.

David Jackson, the general manager of long distance railfreight forwarding business Toll STD, had been tapped as chief executive and Austin Perrin from the company's logistics business would be chief financial officer.

The two men would run the rail, road transport and freight forwarding business and local managers of the Interisland line would report to Toll's shipping business in Melbourne.

Toll plans to expand its information technology system to cover Tranz Rail were well advanced, and work had also been done on marketing, legal and property issues.

If Toll is successful, Mark Rowsthorn, the operations executive who built up Toll with Paul Little will be in New Zealand next week with chief financial officer Neil Chatfield to work on the integration.