Infratil bites the bullet on rail

By STAFF REPORTERS AND NZPA

Infratil yesterday booked a $21.5 million writedown on its 7 per cent stake in Tranz Rail - but managing director Lloyd Morrison did not sound keen on selling into Toll Holdings' planned 75c-a-share takeover offer.

"I think it will be hard for them to make progress at that level," he said.

The infrastructure investor bit the bullet on its worst investment as part of its result for the year to March 31. Acquired at an average of $2.42 per share, the stake now sits on the books at 98c a share, while the Tranz Rail share price yesterday closed at 84c.

Morrison's comments matched brokers' that the Toll offer was pitched too low. Stephen Wright, of ASB Securities, said: "The institutions are looking for a higher price and there are a load of punters who paid higher than 75c and they don't want to lose money straight away."

Wright said: "Toll's strategy will be to hope there is more bad news coming out and hold in there."

One analyst predicted Toll was likely to finally make an offer of 90c to $1.

Talking of the write-down of its Tranz Rail stake, Infratil said: "Infratil invested in expectation of being able to partner with other industry investors as Wisconsin and Fay Richwhite sold out.

"When no credible partner arose, Infratil did not invest further (other than to take up its rights) but looked to exit. Infratil's understanding of publicly available information had not pointed to the share price decline that has now occurred."

Morrison said the nature of Tranz Rail - a large regional railway at the bottom of the world - explained why it had been difficult to find a co-investor.

Trans-national railways overseas had exited regional lines, and Tranz Rail was a big and out-of-the-way asset for a regional operator.

"It's not a business that a lot of offshore people think, 'Hey, I would like some of that'."

Morrison said Infratil would stick to investments closer to its core operational skills. Infratil boosted its March-year net profit after tax by a quarter to $28.13 million and will pay an imputed dividend of 4c per share on June 27. It got a one-off net gain of $41.5 million by selling half its 20 per cent stake in Port of Tauranga.

"We are seeing satisfactory, and growing, returns from each of TrustPower [28 per cent-owned], Wellington International Airport [66 per cent-owned], and Glasgow Prestwick International Airport [67 per cent-owned]," chairman Kevin O'Connor said.