Tranz Rail backs Toll's bid after offer raised

1.00pm

UDPATE - Toll Holdings is now confident it will win control of Tranz Rail after an increased offer was supported by the railroad company's directors and major shareholders.

Tranz Rail directors reversed their previous advice for shareholders not to accept the bid after the Australian logistics company today raised its bid 16 per cent to $1.10 per share from 95 cents.

Toll managing director Paul Little said he believed that now Toll had the support of the Government, the Tranz Rail board and the company's major shareholders "we can now set about closing this deal and start to improve the rail services offered in New Zealand".

ABN Amro Craigs broker James Lock said it looked like the bid would now be successful.

"What's the clincher is that the directors have advised to accept the new offer," he said.

"The decision to raise the offer price comes following Toll's further due diligence of Tranz Rail, including their audited annual results which were released last week," Mr Little said.

"Further analysis has given Toll the confidence to increase its price, while still making it a financially viable transaction for the company and Tranz Rail shareholders.

"We are pleased that both the Tranz Rail board and major shareholders are supporting our new offer and believe we have overcome the final obstacle to a full takeover of the company."

Major shareholders, who collectively own more than a quarter of Tranz Rail, have indicated their intention to sell their shares to Toll at the new price, Mr Little said.

They are Infratil Limited, Tower Asset Management, AMP Henderson, Brook Asset Management, and Alliance Capital Management.

Brook Asset Management's Simon Botherway said that although the increased offer was still well shy of what independent adviser Grant Samuel valued the company at, it was the best available.

Grant Samuel previously said Tranz Rail shares were worth between $1.34 and $1.62 if a deal Toll has agreed with the Government over ownership and upgrading of the track network proceeds.

It estimated the shares are worth $1 to $1.11 if an earlier Tranz Rail/Crown deal proceeded and 97c to $1.03 if both flopped.

Tranz Rails shares rose to 7 cents to $1.07 on market today.

Mr Botherway said Tranz Rail and institutional shareholders had sought alternatives to Toll's bid but none had emerged and Toll's was the best offer.

"The company needs expertise in terms of management and direction, capital, and Toll brings all those things to the party," Mr Botherway told National Radio. "So $1.10 was the best available alternative."

Toll, which owns 19.9 per cent, yesterday extended its offer, which is conditional on obtaining 90 per cent control, to October 10. It would disclose what percentage of shareholders had agreed to accept the offer.

Mr Little said once the takeover bid was successful, Toll would be seeking a dual listing on the New Zealand Exchange.

"We are responding to many New Zealand investors who have indicated they would like to share in the upside of Toll's ownership and management of Tranz Rail and a dual listing on the New Zealand stock exchange will make it easier for them to do that".

Tranz Rail's shares rose seven cents from yesterday to $1.07 shortly after the announcement.

Toll yesterday announced a net profit for 2002/03 of A$106.1 million ($120.8 million) -- up 43 per cent.

Excluding the contribution from rail operator Pacific National, which is jointly owned by Toll and Patrick Corp, revenues grew 26 per cent to A$2.57 billion for fiscal 2003 and ebit (earnings before interest and tax) rose 26 per cent to A$128.5 million.

- NZPA