NZ Post-DHL link annoys rivals

State-owned New Zealand Post has spurned rivals to sell its courier businesses into a joint venture with Deutsche Post-owned DHL.

The sale was condemned as a partial privatisation of a state business without a contestable process to find out if anyone else wanted to pay more.

New Zealand-owned Freightways was annoyed that it did not get a look in despite asking for the chance several times.

Also excluded was Toll Holdings of Australia, which has started a small courier business in New Zealand to exploit cross-selling opportunities from its road and rail businesses.

"We just wanted a level playing field," said Dean Bracewell, managing director of Freightways.

He condemned yesterday's deal as lacking transparency - no financial details were disclosed.

Toll chief financial officer Neil Chatfield said the company was disappointed it did not get an opportunity to be involved.

He said it was a strange way to sell a public asset.

Rivals have no idea what NZ Post's courier business is worth because no accounts have been published.

NZ Post is selling shares in holding company Express Couriers, which owns Courier Post, Pace!, SkyRoad and Contract Logistics, to DHL to set up a 50/50 joint venture.

The price, a multiple of the earnings in the June 2005 year, will be disclosed when finally set.

Freightways estimates the business has just over 40 per cent of the New Zealand express package market but until recently was not turning a profit.

Freightways, which has a similar market share and runs the NZ Couriers, Castle Parcel and Post Haste brands, earned $6.5 million last year.

Yesterday, it had a market capitalisation of $380 million. Its shares have risen to $3.10 from the $1.60 paid by investors when the company floated in September last year.

NZ Post chief executive John Allen cautioned against valuation comparisons with Freightways.

He said Express Couriers was a hard business to value. It had faced challenges but was now profitable.

"It's only in the last 18 months that we have seen the growth that is possible in this business."

The deal changes a contractual relationship - NZ Post used DHL as an international courier - to a partnership.

Analysts said it solved a problem DHL had with an airfreight network inside New Zealand and put Deutsche Post in the box seat for any future full privatisation of NZ Post.

Allen denied that the deal was designed to raise cash for NZ Post's Kiwibank.

Decisions on what to do with the money from DHL would be made after talks with the Government, but NZ Post was looking at investing in technology for its letters and data businesses.

Allen said DHL was a good cultural fit. Several New Zealanders worked for the company at senior levels and some were coming home to be part of the joint venture.

"DHL is particularly appealing because of its presence in Asia. It is the pre-eminent player in the Chinese market."

Gary Edstein, DHL's director for Oceania, said Deutsche Post had also bought domestic operations in India and the United States.

NZ Post chairman Jim Bolger will chair the new joint venture from its start on January 1.

Bolger is a former Prime Minister and, ironically, his Finance Minister, Bill Birch, is on the board of Freightways.

The joint-venture board will have three people from NZ Post and three from DHL.

Allen said DHL offered international systems, procedures and experience that would improve the service offered to domestic customers.

"What we're trying to achieve is the establishment of a business that has real capability to sustain the growth it has achieved over the last 12 months and grow further."

He said a contestable sales process was not the only way of unlocking value.

"DHL was prepared to take a risk on the future of the business. They may not have been prepared to do that with a conventional tender."

Some of the cash would be retained by the courier business and some would go to NZ Post.

"Clearly we're investing as the bank tends to grow."

Fleet logistics

NZ Post's Express Couriers has:

* 30,000 customers.

* Delivers 32 million courier parcels every year.

* 1275 employees, 840 contractors.

Main units

* Pace! - same-day courier with fleets in Auckland, Wellington, Christchurch.

* Courier Post - overnight courier with a nationwide fleet and 24 courier branches.

* SkyRoad - business-to-business courier.

* Half-owner of AirPost, with a fleet of eight aircraft.