Unanswered questions remain over Toll deal

Michael Cullen has left a huge vacuum of unanswered questions over his decision to squander $665 million of taxpayer money on a new train set, says National's Transport spokesman, Maurice Williamson.

"After gifting the Australian shareholders of Toll Holdings a cool quarter of a billion dollar profit, Dr Cullen should tell taxpayers who will operate this election-year purchase. Obviously, its success will stand and fall on the quality of the operator. Taxpayers will want to know."

Mr Williamson says Labour's lack of business nous is also drawing comment in Australia.

"Other freight companies are looking on in envy at the deal Toll has done with Labour.* Australian media are now crowing that Toll's rivals across the Tasman are looking for their own 'Helen moment'. After the recent Auckland Airport debacle, New Zealand is fast gaining a new and not so favourable reputation among the business community.

"Alongside the quarter of a billion dollar gift that Michael Cullen has handed to Toll shareholders, he has also given the Australian-owned company a competitive advantage over other freight companies by agreeing to rent-free depot space in prime locations next to rail depots.

"I'm hearing that other freight companies aren't so pleased about this aspect, which effectively hands a major competitor a big advantage.

"At a time when a record number of Kiwis are leaving the country for greener pastures and when households are struggling to make ends meet, the rolling stock purchase will do nothing to fix that.

"The more we see the fine-print of this deal, the more it looks like the Kiwi taxpayer has been taken for a ride."

Australian media clippings on Toll 

Matt O'Sullivan, Brisbane Times, May 6
Ticket to profit You only get one Helen Clark in your life.
Toll Holdings's chief stationmaster, Paul Little, was on the first plane out of wundy Willington yesterday after getting the Kiwi Prime Minister to buy back the nation's trains and ferries for a whopping $NZ665 million ($554 million) from the transport operator.
Remember, Little has taken a beating lately after failing to sell Toll's stake in Virgin Blue, just as it begins to hit headwinds in the form of surging jet fuel prices.
But Little's deal across the ditch shows he hasn't lost his dealmaking nous. After all, Toll valued New Zealand's rail and ferry assets at about $NZ231 million back in 2003 when it launched a takeover for TranzRail.
Five years on, he's sold most of the assets back for almost three times their value (and a considerable premium to their latest book value of $NZ430 million). Little even took some credit for delivering the assets back to Clark after "improving the efficiency of rail freight movements within NZ".
Though this isn't quite how Clark and her minions see the rail system after a decade in private hands. "The selling-off of our public rail system in the early 1990s and the running-down of the asset afterward has been a painful lesson," the Finance Minister, Michael Cullen, said.
Little's former trucking pal, Mark Rowsthorn, continues to ponder how he can engineer his own "Helen moment".

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The Australian
Copyright 2008 News Limited

May 6, 2008

Section: Finance1 - All-round Country

Toll's Paul Little has done a great trade collecting $NZ665 million ($553 million) from the New Zealand Government for a rail business that hardly made a cent and over which he constantly bickered over access charges.

He has kept the freight-forwarding business and will quickly use the proceeds to buy more Kiwi freight businesses.

The Government gets the capital-intensive assets and says it is pro-rail on environmental grounds, so now it has to put up more money to actually invest in the network.

Little gets to keep the value-added business and will plough the profits back into expanding it.

Title: Toll sells Tranz Rail back to NZ Sydney Morning Herald, The, 03126315, May 06, 2008
Database: Australia/New Zealand Reference Centre Toll sells Tranz Rail back to NZ
Edition: First, Section: Business, pg. 21 TRANSPORT ~~~~~~~~ Scott Rochfort
PHOTO: Mind the gap ... NZ has reclaimed its rail system. Photo: Bloomberg TOLL Holdings has sold Tranz Rail to the New Zealand Government for $NZ665 million ($554 million), which is about three times the value of its 2003 takeover bid for the then loss-making rail and ferry business.
…
In another bonus for Mr Little, Toll will keep its freight-forwarding business, Tranzlink, and get six years free rent on the freight depots its uses in New Zealand. The sale will reflect Toll's demerging of its debt-laden Asciano port and rail operations in Australia last year, when it disposed of its capital-hungry "hard" assets and kept its high-growth logistics business.
Mr Little said Toll maintained its interest in building a presence in New Zealand, hinting that his company was already eyeing several possible acquisitions.
…
Title: Toll offloads NZ rail and ferry operations for $554 million Age, The (Melbourne), 03126307, May 06, 2008
Database: Australia/New Zealand Reference Centre Toll offloads NZ rail and ferry operations for $554 million
Edition: First, Section: Business, pg. 3

Toll shares rose 35¢ to $8.38, as investors welcomed the sale, which will act as a consolation given the transport company's recent failure to dispose of its 63% per cent stake in Virgin Blue, which continues to fall in value.