Cullen clobbers rail rival

By PAM GRAHAM

Toll Holdings is in Finance Minister Michael Cullen's bad books.

The Australian company bidding for Tranz Rail could have done a joint deal with the Government, Cullen said yesterday, so it should not have been surprised when the Government produced its Tranz Rail rescue plan.

Cullen said he told Toll executives last Tuesday that they were on a "collision course" with the Government.

"My officials talked further to them and they came hurrying back from the airport to talk with officials about some kind of joint approach where they would withdraw their offer and we'd cease our negotiations and we'd talk with them about a joint approach," he said.

He said a joint approach did not happen because "they didn't want it", and Toll issued its formal notice of takeover the next day.

"There wasn't a sticking point; they didn't want it," Cullen said.

He said the Government was not prepared to stand aside and be in a weak position if Toll took over Tranz Rail.

"I have some considerable suspicions about what their intentions are. Are they really after increasing rail or after getting a trucking company?"

He said any offers from Toll would have to be "damn good" to interest him.

The Government wants to buy the track and provide capital by buying new shares in Tranz Rail that would give it a controlling 35 per cent stake and seats on the board of the enlarged company.

The deal is subject to shareholder approval, but a $44 million down payment this month gives Tranz Rail money to meet looming payments.

Tranz Rail shareholders and customers said the devil of the Government deal would be in the detail on access arrangements covering fees and "use it or lose it" criteria.

Cedric Allan, of the Rail Freight Action Group, said the Government could step in if volume fell to 60 per cent of current volumes.

"We think that is not enough. The whole purpose of Government intervention was to get rail freight volumes increasing.

"If you are going to pay out all that money and watch rail freight volumes fall before you do anything, it is a waste of time."

Cullen said that until now, if Tranz Rail stopped a service, the Government had only 90 days to find an alternative supplier before Tranz Rail could rip up the track.

"What we get by owning the track is that first of all, it can't be ripped up."

Secondly there was the chance of improving it, and $20 million a year has been set aside for five years.

"Do we have an absolutely accurate fix on the amount of money to be spent? No we don't."Only a full survey would give provide such a figure and that was expensive.

The Government is effectively subsidising rail under the deal because the access fee will be about $20 million less than the estimated costs.

But Cullen balanced this against "what would happen if rail became unusable and a huge amount of traffic was diverted to the road".



The Government will buy in at 67c a share, against the 75c Toll is offering.

But the figures are not comparable because the Government is buying new shares, increasing the number of shares on issue and making remaining shares worth less.

"We don't see ourselves necessarily as long-term shareholders," Cullen said.

"If the opportunity arises then we have no objection to selling out or others acquiring shares."

The Government had talked to many parties about Tranz Rail, including some potential bidders who had not been publicly identified.

"There is a national interest involved in rail transport," he said, "and what we are learning is that in a small country the Government can't withdraw from everything and leave it to the market."