Toll directors lose out in 'con job of the century'
The Toll Holdings directors who bought shares in their company ahead of the announcement of the sale of rail assets to the New Zealand government have now lost money on the purchase.
The sale of the business to the Crown announced on May 5 has been called the "con job of the century" by unnamed sources because the Toll Holdings share price spiked higher on the exit from "a pig of a business".
The sale at $690m is seen by analysts as "a good out" by the Australians. They had earlier sold the track to the Government for $1. The track is now in government-owned Ontrack's books at $NZ10.6 billion.
Competitors are also upset that Toll is getting a rent holiday at rail sites for its continuing trucking and freight forwarding business and it is suspected cheaper rates on rail for that business. Competitors want to see any detail on this when the deal goes through on June 30.
Disclosures to the Australian Stock Exchange showed that Toll Holdings managing director Paul Little bought 129,000 shares at $A7.67 on April 22 and 131,500 at $A7.6224 via Namarang Investments.
Toll chief financial officer Neil Chatfield bought 5000 at $A7.58 on April 16, director Barry Cusack bought 10,000 at $A7.66 on April 22 at $A7.66, Ray Horsburgh bought 9600 shares on April 27 and Harry Boon bought 5100 shares at $A7.83.
The purchases came in the days after Toll's shares plunged 15 percent in a day after a profit warning by Virgin Blue, the airline Toll has a 62.7 percent stake in.
After the signing of the Heads of Agreement with the government on May 5 Toll Holdings shares rose to $A8.78 on May 6, creating a paper profit of $A300,000 on Namarang's April share purchases.
However, the ownership of the airline stake at a time when airlines are under severe pressure from rising fuel costs is continuing to weigh on Toll's share price which closed on Friday at $A6.49. Also, investors are steering away from transport companies while fuel prices sky rocket even though they pass price rises on. Toll's share price has plunged from around $A11 at the start of the year. Virgin Blue's shares have plunged more than 70 percent this year.
At Friday's close Mr Little is out of the money to the tune of $A300,000 on his purchases in April.
Mr Little has been managing director of Toll Holdings for 19 years and has always been a substantial shareholder in the company he bought with other managers in 1983.
In the 2007 annual report he had a 5.61 percent stake in the company which made an EBIT of $A734 million last year.
There is likely to be further controversy in the rail deal over the salaries the New Zealand government is paying four Australian executives staying on for eight months in the transition period. This cost is part of the $25 million of costs in the deal.
The remuneration of Toll managing director David Jackson is disclosed in the Toll annual report because he has remained an employee of that company. The 2007 report disclosed total remuneration of $A1.935 million. This was boosted by a one-off payment of $A912,000, essentially a golden handcuff to stay on when Toll split into two companies in Australia this time last year. His base pay is $A502,000.
The documents supporting the splitting of the two companies in Australia mentioned that the Toll Rail business would have gone with the rail and ports business that became known as Asciano but it couldn't happen because Toll didn't own 100 percent of Toll NZ at the time.
A Grant Samuel report at the time of the split calls rail and port businesses heavy asset businesses and the trucking and freight forwarding businesses light asset businesses. The ownership of the heavy asset businesses was constraining the ability to invest in the light asset businesses going forward, Grant Samuel said.