ONMAY 15 the Board of Tranz Rail confirmed that RailAmerica Inc had offered to acquire the share capital of New Zealand’s freight operator, which leases and manages the national network. According to their statement, the directors had ’considered, in particular, the condition [of the offer] relating to the company’s ability to continue its asset sale programme.’ Chairman Wayne Walden assured shareholders that it was in the company’s best interests to pursue ’all strategies to resolve Tranz Rail’s current liquidity situation including recently announced asset sales’ (p370).

As a very experienced operator managing 49 railways, RailAmerica has set up a bidding subsidiary, Rail New Zealand. At NZ$0·75 a share its offer is valued at around US$90m. In addition, RNZ would assume or refinance about US$135m of Tranz Rail’s existing lease obligations and debts outstanding at December 31 2002, net of cash. But on May 20 Australia’s Toll Holdings bought a 6·1% stake in Tranz Rail, driving the share price up to NZ$0·97.

The bidding war comes a decade after Ed Burkhardt launched Wisconsin Central on a worldwide buying spree, taking over the government-owned Tranz Rail with 6000 staff in September 1993. Two years later, the payroll was down to 4500 and Burkhardt declared the railway profitable. After Wisconsin disposed of his empire, and Tranz Rail got into trouble financially, the story was that the assets had been run down because Tranz Rail had not been making sufficient profit to replace them.

Today a drastically slimmed down Tranz Rail employs only 1200 people, and is trying hard to clinch the sale of its road-based Distribution Services Group to provide cash for debt and lease payments due at the end of this month. Wellington’s commuter trains were put on the market on March 17. This will leave two distinct operations for the winning bidder to take over: a trainload freight business, and the ferries that carry wagons, cars and lorries across the Cook Straits between North and South Islands.

Tranz Rail reported an NZ$30m operating profit in the nine months to March 31. It is seen by President & CEO of RailAmerica Gary Morino as representing ’a significant opportunity for our shareholders’. Toll Managing Director Paul Little said the company saw ’an opportunity to further complement [its] existing operations in New Zealand.’ Despite its current problems, Tranz Rail is clearly seen as having potential.