Talk of merger keeps shares on the move

By SIMON HENDERY

Shares in transport firms Mainfreight and Owens Group have rocketed this week amid speculation the two companies are considering merging in a deal which could also involve competitor Tranz Rail.

The three companies have a combined market share of about 30 per cent.

Analysts said mergers among them would make sense because of the efficiency gains that would result.

However, Owens yesterday denied a deal was brewing with its competitors. Mainfreight said it was not talking to Owens but would not comment on Tranz Rail.

And a Tranz Rail spokeswoman said she was unaware of any discussions.

Shares in Mainfreight closed at $1.31 yesterday, up 13c from where they closed last week. Owens shares traded as high as $1 yesterday before closing at 98c a rise of 11c since last Friday.

Tranz Rail shares were up 25c for the week at $4.45 yesterday 5c off the year high it reached on Wednesday when the Government announced it would make a decision on the sale of the Auckland rail corridor today.

Market sources said Tranz Rail had been talking to Mainfreight in recent months about the sale of its freight arm, Tranz Link.

The sources said Owens and Mainfreight were also talking about forming a defensive alliance against Tranz Rail.

Because of the larger number of players in the freight market, and their relatively low market share, a potential merger would be unlikely to attract resistance from competition watchdog the Commerce Commission.

Mainfreight managing director Bruce Plested yesterday denied his company was working on a deal with Owens.

"We don't see a lot of synergies between the two companies [Mainfreight and Owens]. We look as if we're in the same business but there are large parts of it that are quite different."

He put the recent share price rise down to growing confidence in the company following the release of its June quarter result last week.

He would not comment on whether Mainfreight had been in discussions with Tranz Rail but said Tranz Rail had headhunted several Mainfreight staff in recent months.

Owens chairman Norman Geary denied deals were being considered between the company and Mainfreight or Tranz Rail.

He said the company's recent share price increase was due to the company's strong trading in recent months revenue for the four months to July was up 20 per cent on the same period last year, with August and September results also expected to be strong.

Meanwhile the Governments decision on the sale of the Auckland rail corridor, due today, could be a factor behind the company's recent share price rally.

Tranz Rail is in a strong bargaining position because the Government is committed to the $261 million Britomart project to improve transport in the Auckland region.

The Wellington rail corridor was likely to be on the block soon, analysts said.

The Government has not ruled out buying back the national rail corridors, which would include Wellington.

Tranz Rail has been restructuring its operations to focus on its freight business and looking to get out of commuter transport, recently selling its long-distance passenger service Tranz Scenic to Australian company West Coast Rail.