Toll aims low with rail offer

By PAM GRAHAM

Australia's Toll Holdings yesterday announced a full takeover for Tranz Rail at 75c a share - 13c below yesterday's closing price of 88c and the same price as a bid from RailAmerica this month.

Tranz Rail had no comment on the bid from its 10.1 per cent shareholder but fund managers who own chunky parcels of Tranz Rail said 75c a share was too low when RailAmerica offered it, and it was still too low.

They value the stock at between $1.30 and $2.

RailAmerica withdrew its bid after Toll bought into Tranz Rail.

Toll said it would lodge a takeover notice next week and that its offer would be conditional on, among other things, regulatory consents, Tranz Rail not disposing of any of its businesses or assets, entering any joint venture or altering its existing debt or capital structure.

The RailAmerica bid had been highly conditional and included a condition of obtaining 90 per cent of the shares, the level at which compulsory acquisition of all shares kicks in. Toll said its bid would depend on majority control.

Toll may be trying making an open bid and waiting for the valuation report to set parameters for negotiation.

"They will pick up some shares. I don't know if they will get control," one analyst said. The stock plunged as low as 30c on April 16 when a fund was selling and details emerged of how the company needed to sell assets this quarter to meet lease payments and repayments of debt required by bankers.

Wayne Stechman at Tower Asset Management said he valued the shares around $1.50 and he was surprised at the level of the bid.

Nat Vallabh at AMP Henderson said he was not attracted at 75c and would wait for the independent valuation report and directors' recommendation.

It would cost Toll $158 million to buy all Tranz Rail's shares. Toll would also assume debt and lease obligations. RailAmerica estimated these at $236 million, taking the total value of its bid to $394 million.

Toll does not need to call on its own shareholders for money.

"The proposed acquisition is to be fully funded by debt," managing director Paul Little said.

"This is an exciting opportunity for Toll and its shareholders in both a strategic and financial sense. It will complement Toll's existing operations in New Zealand and is in line with Toll's strategic aspirations in the region."

Toll believed the offer was fair.

The company can buy up to 20 per cent of Tranz Rail before dispatching its takeover offer. Offers are sent 14 days after intentions to bid are made and remain open for 30 days.