Toll's bid on knife edge

By PAM GRAHAM

Auckland company Mainfreight is declaring an interest in Tranz Rail's future as Australia's Toll Holdings decides whether to bid against the Government or walk away.

Toll is on the brink of either improving its bid or abandoning its attempt to buy Tranz Rail.

Mainfreight managing director Don Braid said he was "very happy to be part of options" for Tranz Rail.

Finance Minister Michael Cullen said this week that the Government had talked to several parties about ways of approaching a takeover of Tranz Rail in which the Government would keep the track. He did not identify them.

Mainfreight, with a market value of $105 million, is not regarded as having enough money for a bid by itself but it could be a cornerstone shareholder.

Toll has a market value of $2.4 billion and has made 36 acquisitions in the past 14 years in Australia.

It now finds itself in a public battle with a disgruntled New Zealand Government and a 75c cash bid well below the market price.

Brokers said Tranz Rail's share price rose to 96c yesterday when Toll managing director Paul Little indicated in a radio interview that a revised bid was possible by the close of business tomorrow.

It fell to 91c after he told Dow Jones it was a 50-50 bet between revising the bid or walking away.

"We have three options," he told the Herald. "One is to continue what appears to be an unwinnable fight to negotiate with the Government.

"The second is to put in a revised bid and the third is to leave.

"We have to make a decision pretty quickly. I don't see any point in delaying."

Analysts expect Toll to raise its bid because it has invested management time in pursuing Tranz Rail, which would be a foundation for a New Zealand empire.

It already owns stevedoring and warehousing operations here and bought 10.1 per cent of Tranz Rail to block RailAmerica's earlier 75c-a-share bid.

Cullen has said Toll had a chance to negotiate with the Government and was warned it was on a collision course.

Little sought a meeting this week and Cullen suggested one after the shareholder vote on the Government plan scheduled for July 11.

The Government wants to buy the track and associated assets for $50 million and take new shares in Tranz Rail, giving it a 35 per cent stake in the company.

Its $44 million downpayment will ease Tranz Rail's short-term cash crisis and remove pressure to sell assets in a fire sale, but the deal has to be approved by shareholders.

Managers of funds which hold shares have said that before they decide, they need to see details of the formula to set fees for access to the rail network and the rules under which exclusive access can be lost.

Access is the crux for many. Toll has said it does not want the track but exclusivity is important.

Cullen has said he was not prepared to stand aside and have Toll present him with a fait accompli on the track later.

Transport Minister Paul Swain said yesterday the Government's plan was comprehensive and it would not increase its bid if Toll did.

But the Government needs a viable operating company and analysts note it is careful not to have a day-to-day role in Air New Zealand.

Little said any revised Toll bid would rethink price and conditions.