Toll gets out of jail in NZ with $200m

Toll Holdings managed to get out of its rail obligations in New Zealand that were going to cost it $200 million, making a tidy profit in the process.

Toll Holdings announced the sale of its New Zealand rail and ferry operations to the New Zealand Crown. Toll managing director, Paul Little said, “The disposal of the rail and ferry operations to the New Zealand Government, will give rail in New Zealand the opportunity to move forward in an environment with greater clarity and ability to better plan its development.

“The sale will result in Toll retaining Toll Tranzlink, the company’s rail and road forwarding  business, together with warehousing and contract logistics operations. We support the  Government’s objective of boosting capital spending on rail and our New Zealand freight  businesses will continue to be major users of rail capacity.

“While we had not been looking to sell the rail operating business back to the Government, the sale has enabled us to re-focus our efforts on accelerating growth in our road and rail forwarding and logistics businesses, and this will include acquisition-based growth.

“New Zealand remains a vital and attractive market for Toll both from a domestic and cross border viewpoint” said Mr Little.

The sale involves payment of NZ$665 million for equity plus a six year rent free period on existing premises with Toll retaining the Tranzlink business. It is expected that settlement will occur by 30 June 2008 with a management transition period. The estimated book value of assets disposed of is NZ$430 million.

According to Mr Little, Proceeds from the disposal will enable to aggressively pursue acquisition-based growth consistent with its Asian region growth strategy.

The Business Spectator’s Stephen Bartholomeusz has described the deal as a "very attractive and timely exit" for the company as Toll NZ was required to make track access payments and underwrite the cost of running the network .

"Having got to the end of its access holiday, Toll and the government have been engaged in an increasingly tense stand-off over the level of payments Toll was being asked to make for access to the network and the amount of capital the government wanted it to commit to upgrading the network," he wrote. 

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