KEY POINTS:
Toll Holdings' sale of its train and ferry operations to the Government will give it a war chest for aggressive growth through acquisition in New Zealand, managing director Paul Little said.
Toll is retaining its freight forwarding business, Tranzlink.
It sold the assets for $665 million or $235
million above book value.
"When we bought [the rail and ferry] business 4 1/2 years ago it was a mess," Little said.
"Now it's profitable, so the value should be different."
Under Toll the railway had attracted 74,000 truckloads a year of freight off the roads.
"We will be announcing this week the acquisition of a business to fold into our Tranzlink operation, which again will move freight off the road on to rail," Little said.
"Through merger and acquisition activity generally we hope to grow our business aggressively. We now have a war chest to allow us to do that."
The Government said that, when adjusted for the value of the road transport and warehousing businesses Toll was retaining, the price it was paying equated to about $3.16 a share.
That was not out of line with the $3 a share Toll paid to buy out its minority shareholders last year.
"The Government is paying a premium because it gets the opportunity to create a stronger rail system," Finance Minister Michael Cullen said.
"If traffic moves off rail on to roads the Government is up for other costs, in terms of the impact on roading and Kyoto obligations. We were always in the business of having to subsidise rail operations in one form or another for the long term. The purchase allows us to take an overarching or integrated view of rail operations and have a strategic approach that integrates better with other transport modes."
Little said Toll would have preferred not to sell.
"But we have been unable to reach agreement with the Government on a raft of issues. The climate for further investment by Toll was a clouded one," he said.
"Rail desperately need an injection of capital. We felt we needed more security around the access agreement and we were not able to get that. But we are determined to stay in New Zealand."
To move to a higher level of efficiency investment in longer, faster, more powerful trains was needed, Little said.
Cullen said further capital investment by the Government was likely to run into hundreds of millions of dollars. The Government had not yet decided whether the rail and ferry operations would be put into a separate state-owned enterprise or into one which included the rail network owner Ontrack, but with Telecom-style operational separation.
When asked about the possibility of competition on the railway he said we might see some dedicated operators but a full-scale competing operator was unlikely to appear.
