US consortium looks at full bid for Tranz Rail

By DANIEL RIORDAN transport writer

A Californian entrepreneur living in Taihape has put together a consortium of US investors considering buying Tranz Rail.

The group is also talking to what point man Tom Smith says is a top 10 New Zealand company about joining any bid.

Short-listed bidders for Tranz Rail's long-haul passenger line and its refrigerated trucking business are doing due diligence, and the eventual ownership of other parts, including commuter train lines in Auckland and Wellington, is also under scrutiny.

But the US group says it would be interested in the whole company, starting with the combined 38 per cent stake being sold by Tranz Rail's major shareholders, Fay Richwhite and Wisconsin Central (about to become part of Canadian National Railway).

Mr Smith says he is still finding out about Tranz Rail and is poised to sign non-disclosure agreements with the company in return for information on its operations.

The group has yet to talk to Fay Richwhite or Wisconsin Central.

Mr Smith's major American partner is Colorado Railcar Manufacturing, which makes luxury glass-domed passenger cars for the tourism rail market.

"We're in step one of 100. We've heard what's going on and we're interested," says Tom Janaky, vice-president of Colorado.

Also involved is Wayne Hatton, recently retired vice-president of Burlington Northern Santa Fe Railway, which operates one of the largest rail networks in North America. Mr Hatton has been consulting to Colorado since he retired. The group is also meeting next month with Canadian Pacific Railway, and is keen to tap its expertise in freight movement.

Mr Smith, aged 65, has been living in Taihape for 18 months on a long-term business visa, looking after a herd of low-cholesterol cattle he sent to NZ as embryos.

He runs a herd of around 700 cattle in Nebraska but says he's spent a lifetime starting deals and would like to see New Zealand's rail network kept intact and servicing small communities.

Colorado, based near Denver, has made luxury railcars for 25 years. The company makes four to eight railcars a year, each of which sells for between $US2.5 million ($5.7 million) and $US3 million ($6.8 million). They are used by rail tourism operators in the Canadian Rockies and Alaska.

The double-decker cars have kitchens and dining below, and touring seats above with a bar and other amenities.

Mr Janaky has known Mr Smith for 30 years. "He was telling us about the train operation down there. We knew about Wisconsin Central, we knew what had been taking place and we were interested in finding out if there were any opportunities, so Tom started doing some of the legwork."

Colorado is looking to expand internationally and the New Zealand market looks promising, said Mr Janaky.

"I've just got back from Russia and there are so many stumbling blocks - manufacturing plants, railroads - we're 10 to 20 years away from doing something there.

"New Zealand is a much more secure market. People are used to going down there and there aren't the language and trust problems to deal with."

Asked if Colorado had considered buying just Tranz Scenic, the long-haul passenger line up for sale, Mr Janaky said he only recently become aware of its availability.

He said they would bring someone else in to run non-rail aspects such as the ferries.

Tranz Rail's share price closed yesterday at $3.85, valuing the sellers' 38 per cent stake at $179 million and the whole company at $470 million.



No one is putting their hands up for the major stake in Tranz Rail. Australia's Lang Corp and French company Transdev have been mentioned in dispatches but both say they are not interested in the major stake. Australia's West Coast Railway has declared its interest in Tranz Scenic.

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Colorado Railcar