Interest in rail assets but shares shunned

By DANIEL RIORDAN

Tranz Rail's biggest shareholders are facing an uphill battle as they try to sell their 38 per cent stake in the company.

The two - Wisconsin Central (24 per cent) and Fay, Richwhite (14 per cent) - appear to have met with scant response from potential buyers since putting their holdings on the market four weeks ago.

But Tranz Rail's efforts to sell its passenger and refrigerated freight operations seem to be bearing more fruit.

French transport operator Transdev remains the most prominent potential bidder for several of the assets on offer.

Tranz Rail is understood to have had several expressions of interest in its Tranz Link refrigerated freight operation, which analysts picked from the outset as the business likely to prove most attractive.

The company is expected to release further details soon.

Bids for Tranz Rail's long-distance passenger services, Tranz Scenic, close on December 15. The business is advertised in the latest issue of the Economist as "a unique opportunity to capitalise on projected New Zealand industry growth."

Tranz Rail spokesman Mike Booker said the company had received a "good breadth"of expressions of interest, including some from overseas, but would not say what Tranz Rail considered a good price for a business that last year had revenues of $23 million.

Tranz Rail is also making progress on plans to sell commuter rail operations in Auckland and Wellington.

The Auckland region's six councils have endorsed a proposal to pay Tranz Rail $112 million to lease the city's rail corridors and use them for public transport, probably in partnership with private sector operators.

Tranz Rail will pay back $2 million a year to use the lines for freight trains.

Transport Minister Mark Gosche will meet most of the region's mayors today to discuss the deal. Many important details still need to be worked out, including the level of Government funding.

In the capital, the Wellington Regional Council wants a stake in the commuter rail business.

Overseas rail companies and local bus companies are also keen to own and run the network, but Tranz Rail says it needs to reach agreement with the council on how the service should be run before opening negotiations with other parties.

While Tranz Rail negotiates with potential bidders for several of its diverse businesses, Wisconsin Central and Fay, Richwhite are having less success.

When the two put their combined stake on the market it was worth $175 million, based on Tranz Rail's share price of $3.80.

Yesterday, with the share price down to $3.25, it was worth $149 million, although the sellers would expect more with a premium for control.

Wisconsin Central's website says that Deutsche Bank is trying to sell the 38 per cent stake to New Zealand buyers, but analysts reckoned there was no obvious buyer and anyone who might be interested had already been approached.

Investment company Infratil, which owns 7.2 per cent of the company and is regarded as a potential linchpin in any local consortium, is maintaining its silence on the issue.

Transdev's Australasian boss, Jean Pierre Soulie, was in France yesterday and could not be reached for comment, but Transdev's local spokesman, Bruce Kohn, said the company's interest in several of Tranz Rail's businesses, including the Auckland and Wellington commuter operations and the Tranz Scenic business, continued to be high.

Transdev was also interested in the 38 per cent stake offered by the big shareholders.

"Basically, they want to get in, and they're committed to being a long-term player. How they get in has yet to be decided."