Tranz Rail shares up in expectation of better bid

By PAM GRAHAM

Tranz Rail shares traded as much as 5c above Toll Holdings' 95c offer yesterday as investors bet on a higher offer.

The Australian company's bid, conditional on 90 per cent acceptance and with a $250 million Government track buyback deal attached, will be dispatched from next Wednesday.

Institutional shareholders have said Toll is getting all the benefit of its Government deal and that they preferred Tranz Rail to stay listed with Toll as a majority shareholder.

Toll chief financial officer Neil Chatfield said Toll wanted full control so it could use its balance sheet to refinance Tranz Rail and embed Toll resources into the business without issues of intercompany transactions.

"We want to try to present to shareholders that at 95c it is a pretty good result to them and for them to understand the value that we are placing on the company to get to 95c means we need to have control."

One institutional shareholder is seeking a meeting with the Government to discuss the difference between buyback plans struck with Tranz Rail and Toll and scenarios should Toll not win 90 per cent acceptance. A spokeswoman for Finance Minister Michael Cullen said the minister would not meet institutions but officials would.

The suggestion is that institutional shareholders might provide new capital if the Government offered the same buyback deal to Tranz Rail it had cut with Toll. The Toll deal's access fee structure is less regulatory and easier to understand.

The difference arose because Toll viewed the business as viable with investment in the track and sought investment upfront. The first plan assumed that Tranz Rail would need an ongoing subsidy from the fee structure, a person familiar with the deals said.

Brokers said the shares were trading above 95c because investors were betting there was more to come in the corporate saga. They closed at 99c.

Several brokers were buying yesterday, including First NZ Capital, JBWere, Citigroup and ABN Amro Craigs.