Tranz Rail shares rise on promise of Government bailout

By PAM GRAHAM

Tranz Rail's share price rose as high as $1.02 before closing at 92c yesterday because the Government bailout removed a risk of collapse and meant assets would not be sold in a firesale.

While the price rise suggested a positive reception for the Government's plan to buy the track and support the operating company, the big institutions that will swing the deal said they needed more information.

In the meantime, the company's road transport and logistics business, TranzLink, remains for sale but analysts said they had been told Tranz Rail no longer regarded itself as a forced seller.

Owens Group chief executive David Ritchie said the original deadline for bids was Monday and he understood they were now due this week. His company was still interested.

He said the country needed a stable and reliable railway system and Tranz Rail's service levels had been improving.

The company's largest shareholders are holding back until a vote on the Government deal on July 11.

They need to see a valuation of the operating company that will be created and how much return on capital it will be allowed to make in a formula to calculate the access fee paid to the track company.

The biggest investors include Alliance Capital, AMP Henderson and Tower Asset Management. Infrastructure investor Infratil is also a 7 per cent shareholder and it had no comment yesterday.

The share price remains above the 75c a share being offered by Australia's Toll Holdings which said it was still pursuing Tranz Rail.

Investors speculated on whether Toll would revise its bid, buy more shares on market or just wait. It owns 10.1 per cent of Tranz Rail but that will be diluted if the Government plan to buy new shares goes ahead.

Nat Vallabh at AMP Henderson said the details of the deal were important, especially the valuation of the assets in the operating company and what return would be allowed on them. Toll would have to make the same analysis.