Toll offer for Tranz Rail assessed as fair

10.20am

Toll Holdings' 95 cents a share offer for Tranz Rail was today assessed as "fair", by independent valuers Grant Samuel & Associates.

Grant Samuel assessed the value of Tranz Rail shares, without the $226 million Government bailout in place, as worth between 67 cents and 86 cents. This is for all of Tranz Rail and includes a premium for control.

Grant Samuel assessed that if the Crown proposal was to be accepted by shareholders, the value of Tranz Rail shares would be in the range of 97 cents to $1.03 per share.

However, Grant Samuel goes on to say that, "given the significant negotiations that are yet to be concluded between Tranz Rail and the Crown, and the uncertain financial outcomes of the track access charge, it is not possible at this time to say the Crown proposal will provide a better outcome than selling to Toll."

Tranz Rail directors recommended shareholders not accept the Toll offer until certain conditions of the offer are waived.

These included the condition relating to Toll's financiers, one relating to trading and one relating to certification of Tranz Rail's interim report by Tranz Rail's directors.

Tranz Rail directors said they had "previously made it clear that they will not provide the certification required to satisfy this condition".

"Until these conditions are waived, the offer remains highly conditional and uncertain," Tranz Rail noted.

"However, the directors of Tranz Rail recommend to Tranz Rail shareholders that once these conditions have been waived, they accept the offer."

The Grant Samuel appraisal report on the Toll offer is being mailed to shareholders today.

Grant Samuel is due next week to put out a report on the Government bailout offer, which includes a $76 million cash injection through the purchase of new shares at 67 cents each that would give the Crown a 35 per cent stake.

The issue is likely to be further complicated this week, with news leaked on Friday that a third bidder, probably US railroad operator Genesee & Wyoming (GWI), is likely to launch a bid at above 95 cents a share.

Shares in Tranz Rail rose 4 cents to 96 cents on heavy volume on Friday.

The bidder wanted to acquire some shares, and was said to have a more favourable view of Tranz Rail than Toll, NZPA understands.

There was speculation GWI was interested in a management contract, if the government railtrack buyback plan succeeded. But the suggestion is being denied by all involved.

Bringing in a reputable rail operator would strengthen the Government plan because shareholders are tired of profit downgrades from Tranz Rail's managers.

GWI fits the bill, although RailAmerica also signalled when it pulled its bid for Tranz Rail last month that it was still interested in opportunities in New Zealand.

Treasury officials valued the Government's $226 million package as valuing Tranz Rail shares at $1.30 each.

Like RailAmerica, GWI is already in Australia. It has a joint venture with Wesfarmers that bought privatised assets.

- NZPA