Freightways a juicy target on investor radar screens

By PAM GRAHAM

Courier and freight company Freightways is likely to pop up on investors' radar screens again - the Dutch bank that owns it is not in for the long haul.

Sydney firm ABN Amro Capital, which bought Freightways' Australian parent Ausdoc last June, said private equity companies typically held investments in private ownership for three to five years and left them by trade or public share sales.

Freightways was put up for sale separately last year after Ausdoc decided against floating it on the sharemarket.

A cash buyer was negotiating with Ausdoc before the group's eventual sale to ABN Amro Capital.

The private equity firm is not saying how, or when, it will sell Freightways.

The company has $60 million of preference shares listed in New Zealand held by 2800 investors. The shares can be redeemed each October.

It is a business any sharemarket would love to have on its main board.

The company has 40 years of earnings history, stable management and no need for large amounts of capital.

It is in a growing market - businesses running low inventories need quick deliveries of many items - and new customers are served by an established transport and information technology network that competitors find hard to replicate.

"The business has been resilient to competition, to the economy, to most external factors and to changes of owners," said managing director Dean Bracewell.

"It is an old-established business relevant in today's world."

Bracewell has been with the company for 18 years, stepping up to managing director in 1999.

There are no promised benefits of restructuring and no major acquisition plans, rather the prospect of more of the same.

The company is doubling operating earnings every five years. In the year to last June 30, revenue rose 6 per cent from a year earlier, earnings before interest and tax rose 15 per cent and so did cashflow.

Freightways' origins are captured in a 1960s photograph displayed in the boardroom of six cleancut owner-drivers in polished leather shoes beside cars used to deliver documents to businesses.

Today, 900 owner-drivers in running shoes deliver most products capable of being handled by one person.

In Auckland, the company owns rather than leases its main Penrose site because of its strategic importance. Trucks take parcels from there to smaller depots, to shorten the distance travelled by couriers and to avoid the traffic.

One of Freightways' main assets is its brands - New Zealand Couriers, Poste Haste and Castle Couriers, SUB60 and Security Express - which are segmented for speed and price.

The biggest rival is NZ Post, which has just under 50 per cent of the courier and express freight market compared with Freightways' 38 per cent.

Fieldair Holdings fills in Freightways' network in the air and Parceline Express on the roads.

Business mail division DX Mail is not achieving profit expectations and has to compete with growing use of the internet.

The company also owns Online Records Management, Data Security Services and Document Destruction Services.

Freightways has sold its logistics division Stocklink to Dunedin's Wickcliffe but has an agreement to keep the courier business it generates.