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Toll offer heading to the wire as deadline looms

By Duncan Bridgeman

Friday 3rd October 2003

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Toll Holdings managing director Paul Little believes takeover acceptances for Tranz Rail have reached 75%, a week out from the offer deadline.

Officially, the Australian company owns about 57% of shares in Tranz Rail under its $1.10 a share takeover, which is conditional on 90% acceptances.

Mr Little said yesterday he was confident of reaching the threshold although expecting the bid to go right to the wire.

"Obviously the big challenge for us over the next week is the retail sector and that still has 20-25% outstanding.

"By the time we get the institutions that we're spoken to we're sort of up near that 75% mark unofficially. We haven't got an institution that I know of that is not selling into the bid."

Toll already holds a 19.9% stake in Tranz Rail while the big institutions collectively own 25% of the company.

On Wednesday Axa Asia Pacific notified the New Zealand Exchange that it had increased its holding from 8% to 9.36%.

Mr Little said Axa's holding had been promised into the bid and the extra shares in Axa's parcel would probably add to the acceptance calculations.

He said Toll would be upping its marketing campaign over the weekend and into next week to try to capture more of the retail market.

Toll was already offering incentives to brokers and had begun a telemarketing and national advertising campaign to try to sway retail investors who were traditionally the most difficult.

"We're doing whatever we can at our end," Mr Little said.

"We are still confident we'll get very close to the 90%. But it's down to the wire really."

Toll had gathered about 5% of small shareholders and Mr Little expected another 5-10% would sell into the bid before the end.

In the Toll deal, the government has agreed to buy the rail network for $1 and upgrade the track by investing $200 million over five years. Toll would invest $100 million in rolling stock.

"If we are knocking on the door of 90% then clearly we'll be comfortable with that and, if we are a long way short, we will be disappointed."

At press time yesterday Tranz Rail shares traded at $1.08, up 1c for the day.

The rail operator this week confirmed forecasts of an operating profit of $48 million, before tax and unusual items, for the 2004 financial year.

The company recorded a net loss of $2.6 million last financial year, largely due to a $32 million tax bill.

Achieving total control of Tranz Rail would give Toll the opportunity to cut head office costs, estimated by independent adviser Grant Samuel at $36 million for next financial year.

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