Tranz Rail agrees to suspend asset sales

12.40pm

Stricken Tranz Rail Holdings, being courted by Australia's Toll Holdings and the Government, today agreed to suspend asset sales until the suitors' respective offers had been resolved.

Chairman Wayne Walden said it was important to have the final bids on the table for the trucking company Tranz Link so they could make an evaluation and ensure maximum flexibility for shareholders.

Tranz Rail has signed a $226 million heads of agreement bailout with the Government whereby the Government gets a 35 per cent stake at 67 cents per share for $76 million. The deal involves the Government buying the track network for $1 and spending $100 million upgrading the tracks over five years. The Government would also agree to buy another $50 million of assets.

Meanwhile, Toll, a 10 per cent shareholder, is bidding 95 cents a share but has told Tranz Rail it does not want more assets sold.

Mr Walden said Tranz Rail would have the independent evaluation from merchant bankers and corporate advisors, Grant Samuel & Associates regarding the offers to shareholders by mid July.

Meetings with key institutional shareholders were also planned for next week.

Mr Walden confirmed Tranz Rail had received an initial $44 million from the Government this week, which will convert to a short-term loan repayable on June 30 next year if shareholders reject the government deal.

Tranz Rail made an 11th hour payment on debt relating to its rolling stock which has been sold and is leased back.

"I can further confirm that the payment of $20 million due to our rolling stock leaseholders was made last night," he said.

Toll, which is not ruling out increasing its takeover bid, is understood to be gathering institutional support for its $200 million bid.

Toll managing director Paul Little yesterday repeated earlier comments that Toll would drop its bid if Tranz Rail proceeded with a plan to sell Tranz Link, saying the division was a very important part of Tranz Rail.

Meanwhile, Tranz Rail is getting pressure from the other side, with Finance Minister Michael Cullen warning that the Government would not subsidise rail operations if its bid to take control was thwarted.

"If Toll Holdings' takeover bid succeeds, the change of ownership provision in the present heads of agreement with Tranz Rail will be triggered and the subsidy implicit in that heads of agreement would not be forthcoming," Dr Cullen told Parliament yesterday.

Tranz Rail shares were down one cent at 90 cents today.

- NZPA