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SHOULD anyone from Citigroup ever get around to calling Don Braid, he will be happy to have a chat. Braid is managing director of Mainfreight New Zealand and, according to the schedule for next week's second annual Citigroup tour of Toll New Zealand, he is due to meet a swag of Aussie analysts on Friday at about 2pm. Only trouble is, no one has told Mainfreight that the Australians are coming. And, anyway, Braid is going to be in Australia for the whole of next week. Which is a shame really, because Braid, a major customer and regular sparring partner of Toll, has something to tell anyone who is prepared to listen.
Braid admits some surprise that Mainfreight would be on anyone's list of potential happy Toll customers. In the past he has described Toll as "smiling scorpions from Australia" and "crocodiles who just have to keep feeding".
"I haven't heard from Citigroup about a visit, but I have some things to tell them. Like, that we cannot get any (rail) wagons here tonight. They (Toll NZ) can't tell us why, but they just don't have the wagons to move our freight. We have big problems right now. We have got one of the ferries out here today. We have got freight heading down to the South Island which should be taking 2-3 days and instead it is taking 5-7 days to get to the customer. We are seeing delays and service delivery that is worse than it has been for years. We know they took over a business in a difficult shape and they have not had it that long. But we wanted to see improvement. Instead we are facing sending more and more freight by road rather than by rail. And that is just not what we want to do."
While Braid railed about the lack of wagons in Auckland, Toll's Paul Little attempted to refocus the investment community's attention from the fireworks of his bid for Toll back to business rationale. Twice in a little more than 24 hours Little has delivered speeches that dip back into the rhetoric the Toll boss used to launch his $4.2 billion offer.
It has been a tough week for Little. Monday's board meeting of Pacific National, the rail company Toll owns jointly with Patrick, was a disaster. Not that it was necessarily Little's fault. But he is the current chairman of PN, so the legal pressure of the collapsing process rests with him more than any other.
PN's four directors emerged from a four-hour verbal brawl without sign-offs for the company's annual accounts or even for the minutes of the September board meeting. Plans for replacing the departing chief executive remain in limbo and next Friday an arbitrator meets to consider whether the company should be broken up. Last night, PN requested an extension of the deadline for filing its annual results while the deadlock over the board minutes is no closer to settlement.
If Black Monday wasn't tough enough, on Wednesday The Australian revealed the damaging contents of the national rail regulator's confidential submission to the ACCC. David Marchant of the Australian Rail Track Corp accused PN of misusing market power to lift prices despite reducing the quality of service on the vital east-west rail freight corridor.
The ARTC submission claimed the direct financial benefits of new government investment in Australian rail tracks was being absorbed by the rail companies and recommended that the ACCC require the sale of the Melbourne port and rail terminal and enforce serious structural separation across the rail sector before Toll could be cleared to pursue Patrick.
Little wonder Little wants to get people's minds back on strategy. The Little story, especially when Little tells it, is pretty compelling. Toll has delivered growth on almost every measure. It has a strategy to take its expertise and assets to the new markets of Asia and it needs Patrick, not because it makes Toll bigger but because it creates a full-length supply chain through which Australian customers can reach Asian customers and vice versa.
Yesterday, Little noted that importers now deal with 10 separate providers in moving a container between Asia and Australia. With Patrick, Toll reckons that could get down to two or three.
It is clear that the vision thing is the arena in which Little feels he can beat Patrick's Chris Corrigan. He told an audience in Melbourne yesterday: "With that opportunity before us I can only describe as 'myopic' the strategy outlined in the Patrick Corp target's statement, for an Australia-focused business. Patrick's 'lack of vision' would have it expand down-stream into freight forwarding - probably Australia's most competitive sector - and turn its back on the growth opportunities created by changing technology and trade growth with Asia. There has been no recognition of the influence China and India in particular, and Asia generally, will have on Australian Logistics. Patrick have also failed to recognise that future competition within our industry here in Australia will come increasingly from global heavyweights."
The ACCC is likely to hear more of this "national champion" sort of stuff. That a failure to consummate a bid for Patrick would dent Toll's international aspiration will have no bearing on Graeme Samuel's thinking on the deal. The ACCC insists that it considers only domestic markets when making its determination on takeovers.
But Little's view that the viability of a competitive Australian-owned freight industry swings on the sort of growth and vertical integration wrought by a Toll-Patrick deal might give the regulator some cause for reflection.
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