French operator eyes Tranz Rail

By DANIEL RIORDAN

French multinational transport operator Transdev is interested in a controlling stake in Tranz Rail.

At the same time, a local consortium featuring port companies and headed by investment group Infratil has been tipped as a potential buyer for the 38 per cent stake being sold by Tranz Rail's two biggest shareholders, Wisconsin Central and Pacific Rail (the investment vehicle of Fay, Richwhite).

At Tranz Rail's closing share price yesterday of $3.80, the stake is worth $175 million.

Transdev's Australian director, Jean Pierre Soulie, said the Paris-based company was considering buying the stake, even though ownership of a fully integrated railroad would be new to the company.

"We are very interested in looking at [Tranz Rail] from close-up and seeing its profitability," said Mr Soulie.

Transdev has been talking with city and regional councils in Auckland and Wellington about operating passenger rail and bus services.

The company operates more than five light rail and more than 90 bus networks in Europe and Britain. It also operates one of Melbourne's tram networks, under a 12-year franchise.

Part of the Caisse des Depots Group, Transdev last year had turnover of more than $600 million (Tranz Rail's turnover was $594 million in the year to June).

Mr Soulie said none of Tranz Rail's restructuring plans had been implemented, and it would be easy to halt its breakup should Transdev take control. "We would like to keep it together."

Wisconsin and Fay, Richwhite told the Stock Exchange yesterday that they were "exploring the possibility of selling their shares" and had engaged Deutsche Bank as financial advisers.

Wisconsin owns just under 24 per cent of Tranz Rail and Fay, Richwhite owns 14 per cent.

Tranz Rail spokesman Fred Cockram said Wisconsin and Tranz Rail chairman Bob Wheeler had indicated a sale was not definite.

"But because of developments in the United States and the need for the Wisconsin board to realise assets in the interests of their shareholders, this is one of the things they are considering."

The timing of the move caught most in the market by surprise.

It seems likely Wisconsin has been forced into a corner by Ed Burkhardt, former chairman of both Wisconsin and Tranz Rail, and is trying to move quickly to satisfy some shareholders so they will not go across to Mr Burkhardt's camp.

Mr Burkhardt, ousted as president and chief executive of Wisconsin in July, has set up a shareholder committee of dissatisfied Wisconsin investors keen to regain control of the company.

Fay, Richwhite, rumoured to be considering getting out of the company for some time, may be taking the opportunity to piggyback on the bigger premium per share the 38 per cent sale would offer.

CS First Boston analyst Andrew Mortimer said he was not surprised the big shareholders were looking to sell but he was surprised at the timing of Pacific Rail's move, given that David Richwhite had recently been in the country and professed full support for Tranz Rail's managing director, Michael Beard, and the company's restructuring efforts.

Another analyst said Wisconsin and Fay, Richwhite had put out feelers to the market several months ago, looking to sell at $4.50 a share. He said Wisconsin in particular must be feeling considerable pressure from Mr Burkhardt to consider selling with the share price at $3.80 and the kiwi at 40USc.

Interest within New Zealand was probably limited to port companies and 7.2 per cent shareholder Infratil.

While 38 per cent would be too big a bite for Infratil, which owns 24.6 per cent of Port of Tauranga, it could be part of a consortium with port companies such as Lyttelton, Tauranga and Auckland, analysts said.

Infratil managing director Lloyd Morrison had no comment last night.