Toll's plan runs into price snag

By PAM GRAHAM


Toll Holdings has a problem. The price the Australian company will have to pay to buy out remaining shareholders in rail operator Toll NZ has gone through the roof.

A buyer swooped on Toll NZ shares yesterday, paying $2.25 a share for 2.55 million shares in the company once known as Tranz Rail.

Market talk said the Third Avenue Management fund, of New York, was the buyer, increasing its stake to about 8.3 per cent.

Traders are speculating that Third Avenue is after a 10 per cent holding to block Toll from compulsorily acquiring stock and effectively dictating the price of buy-out offers.

The fund is believed to want $3 a share to sell out.

Toll owns 84.2 per cent of the company after bidding $1.10 a share last year. It cannot buy any more shares until October unless it makes another takeover for the company.

Third Avenue said this month that it was a long-term stock-holder, and that Toll had an amazing opportunity to build its NZ business.

Toll's managing director, Paul Little, was not available yesterday, but he has said the company will not be intimidated by the US shareholder and will just get on with day-to-day running. Third Avenue started buying Tranz Rail shares last year below $1 and was believed to be the buyer of 2.5 million shares at $1.98 this week. The seller was the Accident Compensation Corporation.

Brokers said yesterday's seller was most likely to be Tyndall Investment Management New Zealand, the renamed Guardian Trust.

Tyndall equity manager Rickey Ward said the company still owned Toll NZ shares, but would not say if it had sold some.

Brokers are wondering if Toll NZ will fall below the 500 shareholder requirement for listed companies.

Toll's full takeover of Tranz Rail last year was thwarted by small and large shareholders who held out.

If it had been successful, it would have delisted the company and run it as a wholly owned subsidiary.

Transport company Owens was also set to leave the market, but Toll blocked Mainfreight from a complete takeover of that company.

SIZE AND SCOPE

Third Avenue Management

Home town: New York

Founded: 1972

Philosophy: Buy safe and cheap stocks

Investment Strategy: Buy and hold

Clients: Rich individuals, institutions

Other New Zealand holdings: Rubicon, Telecom