Tranz Rail shares continue to soar as Toll reveals stake

9.45am

Tranz Rail shares continued to soar today as Australian transport and logistics group Toll Holdings disclosed a strategic 6.1 per cent stake in the troubled rail operator.

Toll managing director Paul Little said yesterday Toll bought the shares on market so it could participate in Tranz Rail's anticipated sale process.

"This involvement with Tranz Rail is seen as an opportunity to further complement Toll's existing operations in New Zealand and in line with Toll's strategic growth ambitions within the region," Mr Little said in a statement to the Australian Stock Exchange.

Tranz Rail shares jumped another 10 cents today to 96 cents, adding to yesterday's 7 cent gain -- a 20 per cent gain in two days and 84 per cent above their level before RailAmerica revealed its 75 cents per share bid last week.

Melbourne-based Toll, a trucking company has grown by acquisitions into a $2.26 billion transport major. It has a joint venture rail business in Australia with Patrick Corp, half owner of discount airline Virgin Blue.

Meanwhile, RailAmerica today met Transport Minister Paul Swain to introduce the company to the Government.

Marinus van Onselen, managing director of Freight Australia, RailAmerica's Australian business, said he was delighted to discover New Zealand had a pro-rail transport strategy in contrast to Australia's pro-road stance.

"The realisation that rail is to play a major role is a very good first step in ensure that something occurs with this railway," he said.

No substantive discussions were held on Government ownership of tracks, subsidies or line closures.

The Government made it very clear that it did not intend to interfere with a private transaction, he said.

"The minister recognises this is a transaction between two private companies. The primary purpose of my visit is to establish our bonafides and that our interest is as rail operators, rather than financial engineers."

Asked if 75 cents/share was RailAmerica's top offer, he said: "75 cents is our offer, and we have our offer on the table and it is a serious offer."

"I'm interested to see what the Tranz Rail share will be at the time our offer closes (June 14). I think inevitably speculators step in to markets and seek to gain some advantage."

He said he was surprised it had taken so long for others to show interest but found it interesting that "financial speculators" were now saying Tranz Rail was now worth several dollars where "the day before we made our offer the shares were trading at 52 cents".

"The question is are they real bidders or are they financial speculators?... If they are real bidders, I would like to understand their track record in running and turning around railways as opposed to ours."

Asked if RailAmerica was open to Government ownership of the track, Mr van Onselen said: "I think it's far too early for us to have any discussion about that issue but I think we offer fundamentally three things -- proven rail expertise, an ability to basically stabilise the financial position of Tranz Rail and no baggage and a blank sheet of paper."

Mr Swain said it was important to remember that RailAmerica was a bidder, not an owner, and the Government did not wish to interfere in a private transaction.

"What happens now is open to the market. These are two private companies, one making an offer for another, (it is) highly inappropriate for the Government to get involved in a discussion about that."

The Government was looking at a range of options including track ownership.

"The purpose of today was just to talk about the importance of the strategy," Mr Swain said.

The Government was open to talk to other potential bidders.

Mr van Onselen said it was too early to determine if the Government needed to be involved in upgrading tracks.

RailAmerica's experience in Victoria was that some lines needed a level of public support because of their commercial unviability weighed against the public benefit of getting freight off roads, Mr van Onselen said.

Most of the 49 railways that RailAmerica had been involved in ran without government support and Mr van Onselen said if anyone could run a railroad company without subsidies, then his firm could.

RailAmerica had no experience at running ferries, a substantial part of Tranz Rail's business, and it would consider contracting ferry operations out.

Last month, Toll indicated it was interested in buying Tranz Rail's trucking and distribution business TranzLink.

Mr Little said that Toll had been analysing Tranz Rail for months as key assets in the company were complementary to Toll's operations in New Zealand and Australia.

Last May, Toll acquired BHP Transport and Logistics in New Zealand.

- NZPA