Stinging words for Toll Holdings 'scorpions'

By PAM GRAHAM

Mainfreight's executives confronted the "smiling scorpions" at Toll Holdings at the Owens Group annual meeting in Auckland yesterday.

It was a gentlemanly and inconclusive 20-minute encounter, with the biffo, all verbal, occurring in after-match media interviews.

Toll, the Australian logistics company that controls Tranz Rail, blocked Mainfreight's full takeover of Owens in October to position itself for the next round of consolidation in the New Zealand transport sector.

"Don't underestimate the smiling scorpion from Australia, he is looking for some advantage," said Mainfreight managing director Don Braid.

Chairman Bruce Plested said he kept a scorpion on his desk to remind him about the Australians.

Lead scorpion Paul Little, Toll's managing director, went up to Plested before the meeting and shook his hand.

"Being aggressive and trying to interfere through hostile shareholdings does not get business done in New Zealand," Braid said.

There has been no pow-wow about what happens next since Toll blocked Mainfreight so Toll turned up en masse yesterday.

Little, chief financial officer Neil Chatfield and company secretary Bernard McInerney were all on the team sitting in the second row that quizzed the Mainfreight-controlled Owens board on the profitability of the business, its strategy going forward and the plans for cash realised from asset sales.

Mainfreight cannot access the cashflow from Owens with its shareholding or use the cash from Owens asset sales to pay down its own debt.

"I don't think you can say can't [access the cash]. There are a number of opportunities available to us," said Braid. These were being explored.

Little said: "Some of these [Owens] businesses are generating revenue of 80 and 90 million and making no ebit [operating profit] at all. It is unacceptable.

"There is no strategy for reducing that trend, no timetable for return to profitability and no real understanding about whether any future asset sales will occur."

Braid said: "I'm not sure we're about to divulge our strategy to a competitor.

"You can rest assured that Mainfreight, as owners of Owens, has some good strategies in place to bring about profitability in Owens."

Tim Preston of ASB Securities, which advised Mainfreight on the takeover, stood during the meeting to congratulate the Owens board on "swiftly getting the company back on track".

Braid said Owens was in serious trouble when Mainfreight acquired 79.6 per cent of the company last November.

"Of concern was the disparity between the operating companies and the accounting issues which have required significant writedowns."

Sales of businesses brought in $24.6 million and $1.3 million more is in escrow as final sales processes are completed.

"We now have a business solely focused on, and operating in the New Zealand international and domestic freight forwarding and transport sectors," said Braid.

Rural transport, container services and shipping agencies were sold.

"While these changes reduce the size of our company, they will provide a defined strategic direction and long term profitability," said Braid.

Toll wanted to know when the return to profitability would be and did not get an answer.

The best way to get alongside New Zealand companies was to "offer very good service at competitive rates, shake hands and get around the table", said Braid.