Editing Tranz Rail (section)

==History==
{{Main|Rail transport in New Zealand}}
The New Zealand railway network<ref>{{cite web
 |url=https://railnewzealand.com/
 |title=Rail in New Zealand 
 |publisher=railnewzealand.com
}}</ref> was initially built by [[Provinces of New Zealand|provincial government]]s, starting with the [[Ferrymead Railway]] in 1863. From 1880, a central Government department, the [[New Zealand Railways Department]], was responsible for operating most of the growing railway network. A few private lines were built, but only one, the [[Wellington and Manawatu Railway Company]] (W&MR) achieved any measure of success. The W&MR was nationalised in 1908. In 1931, due to increasing competition from road carriers, the [[Transport Licensing Act 1931]] was passed, restricting road cartage and giving the railways department a monopoly on long-distance freight. In 1982, the same year the land transport sector was deregulated, the Railways Department was reconstituted as the [[New Zealand Railways Corporation]], a statutory corporation (later a [[state-owned enterprise]] from 1986). The Railways Corporation restructured the operations of the railway network substantially during the 1980s, reducing staffing levels, closing workshops, and introducing a number of measures to increase productivity, such as removing guard's vans, increasing train lengths and introducing new, heavier bulk bogie wagons.

=== Formation ===
[[image:NZR Dc4726 Leaving Avondale Rail Station (14460778931).jpg|thumb|left|DC4726 in New Zealand Rail livery at Avondale in the 1990s]]
The [[Fourth Labour Government of New Zealand|Fourth Labour Government]] passed the New Zealand Railways Corporation Restructuring Act 1990 on 28 August of that year.<ref>{{cite web|url=http://legislation.govt.nz/act/public/1990/0105/latest/DLM222631.html?search=ts_act%40bill%40regulation%40deemedreg_Railways+Corporation+Restructuring+Act+1990_resel_25_a&p=1|title=New Zealand Railways Corporation Restructuring Act 1990|publisher=[[New Zealand Government]]|accessdate=18 August 2014|archive-date=19 August 2014|archive-url=https://web.archive.org/web/20140819084007/http://legislation.govt.nz/act/public/1990/0105/latest/DLM222631.html?search=ts_act%40bill%40regulation%40deemedreg_Railways+Corporation+Restructuring+Act+1990_resel_25_a&p=1|url-status=live}}</ref> Two months later, on 28 October 1990, the New Zealand government removed core rail transport and shipping operations from the New Zealand Railways Corporation, creating a separate entity called '''New Zealand Rail Limited''', a Crown Transferee company created under the Act. At the same time, the [[Rail Heritage Trust of New Zealand]] was formed to protect heritage assets that New Zealand Rail planned to dispose of, especially heritage rolling stock, stations and other equipment.

The government wrote off [[NZD|NZ$]]1.08 billion in debt acquired by the company from the Railways Corporation (mainly for the electrification of the [[North Island Main Trunk]], a [[Think Big]] project), and injected a further $300 million in capital.<ref name="lookingback">{{cite web|url=https://businessdesk.co.nz/article/the-life/looking-back-alex-van-heeren-tranz-rail-and-legal-humiliation|title=Looking back – Alex Van Heeren, Tranz Rail and legal humiliation|author=Brian Gaynor|publisher=Business Desk|date=27 June 2021|accessdate=29 June 2021|archive-date=29 June 2021|archive-url=https://web.archive.org/web/20210629004016/https://businessdesk.co.nz/article/the-life/looking-back-alex-van-heeren-tranz-rail-and-legal-humiliation|url-status=live}}</ref> [[Fay Richwhite|Fay, Richwhite and Company]], financial advisers New Zealand Rail, argued the company had a better future with minimal debt.<ref name="lookingback" />

Despite this capital injection, the company remained only marginally profitable, reporting after-tax profits of $36.2 million in 1992 and $18 million in 1993. The Railways Corporation retained ownership of the land beneath the railway tracks and yards, which New Zealand Rail paid $1 per year to lease.<ref>{{cite web|url=http://www.justice.govt.nz/publications/global-publications/d/directory-of-official-information-archive/directory-of-official-information-december-1997/alphabetical-list-of-entries-1/r/railways-corporation-new-zealand |title=Directory of Official Information |date=December 1997 |accessdate=18 August 2014 |publisher=Ministry of Justice |url-status=dead |archiveurl=https://web.archive.org/web/20130223054227/http://justice.govt.nz/publications/global-publications/d/directory-of-official-information-archive/directory-of-official-information-december-1997/alphabetical-list-of-entries-1/r/railways-corporation-new-zealand |archivedate=23 February 2013 }}</ref>

New Zealand Rail re-branded, introducing a new logo similar to the Railways Corporation but with blue and yellow as colours instead of red and black, and a blue livery on locomotives, rolling stock and buildings.

===Privatisation===
The [[Fourth National Government of New Zealand|Bolger National government]], elected following the defeat of the fourth Labour government in [[New Zealand general election, 1990|elections held in October 1990]], [[privatised]] New Zealand Rail Limited in 1993. The [[New Zealand Treasury]] supported privatisation of the company, even though it stated Fay Richwhite had an unfair advantage over other bidders.<ref name="lookingback" /> Business journalist Brian Gaynor noted that New Zealand Rail was an attractive investment because of its strong balance sheet.<ref name="lookingback" />

Six consortiums made bids to buy New Zealand Rail Limited:<ref>{{cite news|publisher=[[The Dominion (Wellington)|The Dominion]]|date=23 June 1993|title=Lining Up For A Slice of Transport History}}</ref>
* Freightways and the Noel Group: Freightways is a major New Zealand freight operator, Noel Group was a US-based investment company with investments in railways in the United States.
* [[Fay Richwhite]] and [[Wisconsin Central Ltd.|Wisconsin Central]]: consortium made up of Fay Richwhite (31.8% via the investment company Pacific Rail, later renamed Midavia Rail), the American railroad [[Wisconsin Central Transportation|Wisconsin Central]] (27.3%), [[Berkshire Partners]] (27.3%), Alex van Heeren, the owner of Huka Lodge,<ref name="lookingback" /> 9.1% and Richwhite family interests, 4.5%.
* [[Sea Containers]], [[Anschutz Corporation]]: Sea Containers was particularly interested in the ferry business, and the rail operations as well. Anschutz owned [[Southern Pacific]] and the [[Denver & Rio Grande]] railways in the US (both later acquired by [[Union Pacific]]). 
* [[Mainfreight]], [[Brierley Investments]] and [[Railroad Development Corporation]]: Mainfreight is a major NZ Rail customer, but Brierleys was seen as having an interest as it was a part shareholder of the Union Shipping  Group. RDC was a minor owner of railroads in the US and Argentina. 
* [[Port of Tauranga]] and [[Port of Lyttelton]], [[China Navigation Company|Pacifica Shipping]], [[National Mutual]] and [[AMP Limited]]: At the time Port of Tauranga took 25% of rail freight, and Lyttelton was important for coal traffic. Pacifica saw the acquisition complementing its coastal shipping operation, and the insurance and investment firms were there for the later stock float.
* [[Ports of Auckland]] and [[CentrePort Wellington|Ports of Wellington]], Sofrana-Unilines and [[Stagecoach]]: Mirroring Port of Tauranga for competition, Auckland saw the investment as strategic. Wellington saw NZ Rail as its biggest customer with the Interislander. Stagecoach was seen as wanting to complement its bus business in Wellington. Sofrana was a French shipping line.

The company was sold to the Fay Richwhite-Wisconsin Central consortium for $328.3 million<ref name="gaynor_tough_case" /> through an entity named Pylorus Investments Limited, shortly afterwards renamed '''Tranz Rail Limited'''. The sale was completed on 30 September 1993.<ref>{{cite journal|periodical=[[Rails (magazine)|Rails]]|title=Rail sale completed|date=November 1993|publisher=Southern Press Limited|issn=0110-6155|page=80}}</ref> Tranz Rail Limited raised funds to buy New Zealand Rail by borrowing $223.3 million, and its shareholders contributed $105 million to the acquisition price through the purchase of 105 million Tranz Rail shares at $1 each.<ref name="gaynor_tough_case" />

In 1994 the company sold its 15% stake in [[Clear Communications]] for $72.6 million, $20.1 million above book value.<ref name="gaynor_tough_case" /> The company had gained its shareholding by selling its fibre optic network along the [[North Island Main Trunk]] to Clear.<ref>{{cite journal|periodical=Rails|title=NZ Rail Annual Report|date=November 1993|publisher=Southern Press Limited|issn=0110-6155|page=90}}</ref><ref>{{cite web|url=http://canterbury.cyberplace.org.nz/community/CAFCA/cafca94/sept94.html|title=September 1994 decisions|publisher=[[Campaign Against Foreign Control of Aotearoa]]|access-date=19 June 2009|archive-date=27 September 2011|archive-url=https://web.archive.org/web/20110927043016/http://canterbury.cyberplace.org.nz/community/CAFCA/cafca94/sept94.html|url-status=live}}</ref>

===Rebranded Tranz Rail===
<!-- Deleted image removed: [[File:TranzRail DQ.jpg|thumb|200px|[[NZR DQ class|DQ 6324]] at Palmerston North in Tranz Rail's Cato blue livery in use 1995–2001.]] -->
[[File:DFT7145 Ahuriri 8Jun2003 JChristianson.jpg|thumb|200px|[[New Zealand DF class locomotive (1979)|DFT 7145]] in Napier in Tranz Rail's [[Bumble-Bee (livery)|bumble bee livery]], in use 2001–2004.]]
New Zealand Rail carried its corporate brand until 18 October 1995, when Tranz Rail Limited was renamed Tranz Rail Holdings Limited and New Zealand Rail Limited was renamed Tranz Rail. On the same day Tranz Rail Holdings Limited made a $100 million capital repayment to the Fay Richwhite consortium, largely financed by the sale of shares in Clear Communications.<ref name="gaynor_tough_case" /> The Tranz Rail brand was created by Wellington-based Cato Partners, who also designed brands for the divisions of Tranz Rail:<ref name="cato">{{cite web|url=http://www.cato.co.nz/nz/en#/nz/en/work/transport/nz_tranz_rail?navigation=false|title=Cato Partners – Tranz Rail|accessdate=28 December 2011|archive-url=https://web.archive.org/web/20111223152440/http://www.cato.co.nz/nz/en#/nz/en/work/transport/nz_tranz_rail?navigation=false#/nz/en/work/transport/nz_tranz_rail?navigation=false|archive-date=23 December 2011|url-status=dead}}</ref>

* CityRail, urban rail commuter services in Auckland and Wellington, were renamed [[Tranz Metro]]
* InterCity Rail, long-distance rail passenger services were renamed [[Tranz Scenic]]
* RailFreight, rail freight services were renamed [[Tranz Link]]

The livery that resulted was nicknamed [[Cato Blue (livery)|Cato blue]] by rail fans.<ref name="cato" />

==== Initial Public Offering ====
Tranz Rail listed on 14 June 1996 on the [[New Zealand Exchange|New Zealand Sharemarket]] and [[NASDAQ]]. 31 million new shares, equivalent to 25% of the company,<ref name="lookingback" /> were issued to the public at $6.19.<ref name="gaynor_tough_case" /> At the time of the Initial Public Offering (IPO), Tranz Rail had term loans debt of $300 million.<ref name="lookingback" />

The share price reached $9.00 in the middle of 1997 due to the enthusiasm at the time for rail to have a revitalised future however the ongoing and unsustainable rail infrastructure costs were what failed the company in the end despite aggressive efforts to maintain a sustainable business. The rail traffic and extensive network were simply not sustainable to maintain by a private company in the long term even through Wisconsin Central Transportation were heavily invested in the future of the company. Some of the original Tranz Rail shareholders took advantage of the high share price to sell down their shares in the company. Berkshire Fund sold most of its shares at more than $8 each between November 1996 and March 1997.<ref name="gaynor_tough_case" /> In 1998, Alex van Heeren sold his holding for a profit of more than $42 million,<ref name="lookingback" /> and the next year Fay Richwhite sold 6.2 million shares at an average $3.67 a share. On 8 February 2002, Fay Richwhite sold 17.6 million shares at $3.60 a share and Berkshire Fund sold 4.3 million shares on 12 February that year at the same price.<ref name="gaynor_tough_case" /> The original investors made a $360 million profit from their investment.<ref name="lookingback" />

===TasRail investment===
In partnership with Wisconsin Central as the [[Australian Transport Network]], Tranz Rail invested in Tasmanian rail operator [[AN Tasrail|Tasrail]] in 1997. From 1998, Tranz Rail sold twelve members of its [[New Zealand DQ and QR class locomotives|DQ class and three QR class locomotives]] to Tasrail. The locomotives were rebuilt at the [[Hutt Workshops]]. The DQ locomotives were originally imported by New Zealand Rail in 1995 from [[Queensland Rail]] as an alternative to buying new locomotives. In service, they proved unpopular with locomotive crews, due to excessive vibration and noise in their cabs.<ref>{{cite web
 |url=http://nzrailphotos.co.nz/locos/index.html 
 |title=Locomotives of New Zealand 
 |publisher=nzrailphotos.co.nz 
 |accessdate=23 January 2012 
 |url-status=dead 
 |archiveurl=https://web.archive.org/web/20120302032745/http://nzrailphotos.co.nz/locos/index.html 
 |archivedate=2 March 2012 
}}</ref>

The investment provided only marginal returns, and Toll later sold the [[TasRail]] shareholding to [[Pacific National]], a [[Toll Group|Toll Holdings]] partnership with [[Patrick Corporation]], in 2003.

===Asset sales===
[[File:Aratere.jpg|thumb|200px|Tranz Rail introduced the ferry {{ship|DEV|Aratere}} in 1999.]]
In December 1996, Tranz Rail sold the [[New Zealand DF class locomotive (1979)|DFT class]] of locomotives to the [[Chicago Freight Car Leasing Company]] for $131.5 million. It then leased the locomotives back for a period of 12 years. The lease ended on 19 December 2008 with the locomotives ownership returning to Tranz Rail's successor, KiwiRail.<ref>{{cite web|url=http://www.stuff.co.nz/business/8237/Rolling-stock-decision-looms-for-Toll-NZ|title=Rolling stock decision looms for Toll NZ|date=20 August 2007|accessdate=29 December 2011|work=[[The Dominion Post (Wellington)|The Dominion Post]]|author=NZPA|author-link=NZPA|archive-date=12 December 2013|archive-url=https://web.archive.org/web/20131212231700/http://www.stuff.co.nz/business/8237/Rolling-stock-decision-looms-for-Toll-NZ|url-status=live}}</ref>

Tranz Rail's chairman [[Ed Burkhardt]] resigned in August 1999 as a result of resigning as the chairman, CEO and president of Wisconsin Central. Industry insiders put this down to his preference to re-invest revenues rather than paying dividends to shareholders.<ref>{{cite news|url=http://findarticles.com/p/articles/mi_m1215/is_8_200/ai_55558027/|title=Why Wctc Jettisoned Ed Burkhardt – resignation of Wisconsin Central Transportation Corp. chairman, president and CEO|publisher=[[Railway Age]]|date=August 1999|accessdate=5 January 2012|archive-date=10 September 2010|archive-url=https://web.archive.org/web/20100910012110/http://findarticles.com/p/articles/mi_m1215/is_8_200/ai_55558027/|url-status=live}}</ref> Wisconsin's new board sold the company to the [[Canadian National Railway]] on 9 October 2001. Canadian National then put its 24% shareholding in Tranz Rail up for sale.<ref name="gaynor_tough_case">{{cite news|url=http://www.nzherald.co.nz/brian-gaynor/news/article.cfm?a_id=14&objectid=3601119|title=A tough case ... and a long one|author=Brian Gaynor|author-link=Brian Gaynor|accessdate=5 January 2012|year=2003|work=[[The New Zealand Herald]]|archive-date=7 January 2016|archive-url=https://web.archive.org/web/20160107192103/http://www.nzherald.co.nz/brian-gaynor/news/article.cfm?a_id=14&objectid=3601119|url-status=live}}</ref>

Tranz Rail also contracted out services which were previously provided in house. [[Alstom]] was contracted for locomotive servicing and took over the [[Hutt Workshops]], while [[Transfield Services]] took over track maintenance.

In June 2001, Tranz Rail sold 50% of [[Tranz Scenic]] to two directors of the [[Victoria (Australia)|Victoria]], Australia rail operator [[West Coast Railway (Victoria)|West Coast Railway]] for $33 million.<ref name="Auckland_metro" /> This sale included long-distance passenger rolling stock and ten diesel locomotives of the [[New Zealand DC class locomotive|DC class]], reclassified as the DCP class, and two [[New Zealand EF class locomotive|EF class]] electric locomotives. In 2004 this share was purchased by Toll NZ, as one of the West Coast Railway directors had died and the business was not performing adequately.<ref>{{cite news|url=http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=3567605|title=Toll NZ buys back Tranz Scenic passenger services|date=20 May 2004|accessdate=10 January 2012|work=The New Zealand Herald|archive-date=13 January 2014|archive-url=https://web.archive.org/web/20140113093531/http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=3567605|url-status=live}}</ref>

On 24 December 2001, Tranz Rail sold the Auckland suburban rail network to the New Zealand Government for $81 million.<ref name="Auckland_metro">{{cite news|url=http://www.nzherald.co.nz/transport/news/article.cfm?c_id=97&objectid=583728|title=Auckland rail deal clinched|work=[[The New Zealand Herald]]|date=24 December 2001|accessdate=10 January 2012|archive-date=13 January 2014|archive-url=https://web.archive.org/web/20140113092804/http://www.nzherald.co.nz/transport/news/article.cfm?c_id=97&objectid=583728|url-status=live}}</ref> In 2003 a competitive tender was held to find a new operator for the suburban passenger services, which Tranz Rail did not bid for. Connex (later renamed [[Transdev Auckland]]) won the contract, and took over Tranz Metro's Auckland operation from 23 August 2004.<ref>{{cite news|url=http://www.nzherald.co.nz/traffic/news/article.cfm?c_id=348&objectid=3586089|title=New hand on lever of Auckland's trains|author=Matthew Dearney|work=[[The New Zealand Herald]]|date=23 August 2004|accessdate=9 January 2012|archive-date=11 November 2013|archive-url=https://web.archive.org/web/20131111110555/http://www.nzherald.co.nz/traffic/news/article.cfm?c_id=348&objectid=3586089|url-status=live}}</ref>

===Intermodal Transformation Project===
Michael Beard became CEO of Tranz Rail in 2000 following the retirement of Dr Francis Small who had led the organisation from its SOE days into its first phase of privatisation.<ref name="unlimited">{{cite web|url=http://unlimited.co.nz/unlimited.nsf/default/can-this-man-save-tranz-rail |archive-url=https://archive.today/20130223014153/http://unlimited.co.nz/unlimited.nsf/default/can-this-man-save-tranz-rail |url-status=dead |archive-date=23 February 2013 |title=Can this man save Tranz Rail? |date=1 July 2001 |accessdate=5 January 2012 |work=Unlimited magazine |author=Nikki Mandow }}</ref> His policy was to focus on the rail freight operation, and sell any assets which were not core to this business, such as long-distance passenger trains (Tranz Scenic) and commuter services in Wellington and Auckland (Tranz Metro),<ref>{{cite news|url=http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=3502824|title=Michael Beard: Tranz Rail's customer focus is working|work=[[The New Zealand Herald]]|accessdate=10 January 2012|date=20 May 2003|archive-date=7 January 2016|archive-url=https://web.archive.org/web/20160107192103/http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=3502824|url-status=live}}</ref> partly because Tranz Rail was running out of cash to fund the rail network maintenance which it had spent over $900 million from 1993-2003.{{citation needed|date=July 2022|reason=needs a reference}} Beard also moved Tranz Rail's headquarters from the [[Wellington railway station]] to a new purpose-built office on the North Shore of Auckland, at a cost of $16 million.<ref name="unlimited" /> In 2000 a ministerial inquiry was formed to look into Tranz Rail's safety record,<ref>{{cite web|url=http://www.beehive.govt.nz/node/8454|title=beehive.govt.nz/node/8454|date=7 September 2000|publisher=[[The Beehive (building)|The Beehive]]|accessdate=23 January 2012|author=Margaret Wilson|author-link=Margaret Wilson|archive-date=7 January 2016|archive-url=https://web.archive.org/web/20160107192102/http://www.beehive.govt.nz/node/8454|url-status=live}}</ref> due to an unusually high number of work-related fatalities over the previous 12 months.<ref>{{cite web|url=http://tvnz.co.nz/view/news_national_story_skin/2617 |title=Tranz Rail to be brought into line |publisher=[[TVNZ]] |date=7 September 2000 |accessdate=23 January 2012 }}{{dead link|date=November 2016 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>

Beard introduced a "mode neutral" policy at the same time, as part of his "Intermodal Transformation Project".<ref name="itp">{{cite web|url=https://www.nzherald.co.nz/business/tranz-rail-moves-deliver-gains/RV43NEY733OT2UPZ3BSBSTPZFU/|title=Tranz Rail moves deliver gains|author=Noel Coom|date=21 November 2002|accessdate=19 April 2022|archive-date=19 April 2022|archive-url=https://web.archive.org/web/20220419080937/https://www.nzherald.co.nz/business/tranz-rail-moves-deliver-gains/RV43NEY733OT2UPZ3BSBSTPZFU/|url-status=live}}</ref> The project emphasised containerised freight over "marginal" freight, which Tranz Rail stopped carrying by rail.<ref name="itp" /> This led to accusations that Tranz Rail was intentionally moving freight off rail and onto roads. One of the reasons cited by Tranz Rail for these policies was the cost of using road transport to the company was less than that of using rail, because the road infrastructure is provided as a [[Public good (economics)|public good]], whereas the rail network was a [[private good]].<ref name="tranzrail_ppp">{{cite web|url=http://www.sharechat.co.nz/article/97cd142a/tranz-rail-a-case-for-public-private-partnership.html|title=Tranz Rail a case for public private partnership|date=24 April 2003|accessdate=6 March 2012|author=Sharechat.co.nz|archive-date=7 January 2016|archive-url=https://web.archive.org/web/20160107192103/http://www.sharechat.co.nz/article/97cd142a/tranz-rail-a-case-for-public-private-partnership.html|url-status=live}}</ref>

====Roger Award====
Tranz Rail won the [[Roger Award]] for The Worst Transnational Corporation operating in New Zealand on three occasions: 2000, 2001 and 2002, and was the first corporation inducted into the "hall of shame". The Awards came amidst critical reports of lax safety standards, inadequate maintenance, [[asset stripping]] and [[insider trading]].<ref>{{cite web|url=http://canterbury.cyberplace.org.nz/community/CAFCA/publications/Roger/Roger2000.pdf|title=The 2000 Roger Award for the worst Transnational operating in Aotearoa/New Zealand|publisher=[[Campaign Against Foreign Control of Aotearoa]]|accessdate=12 January 2012|year=2000|archive-date=4 February 2012|archive-url=https://web.archive.org/web/20120204055306/http://canterbury.cyberplace.org.nz/community/CAFCA/publications/Roger/Roger2000.pdf|url-status=live}}</ref>

===Takeover===
In May 2002, Tranz Rail was delisted from the NASDAQ, as 70% of its shares were owned by New Zealanders and 16% Australians.<ref>{{cite book|title=Rails, New Zealand's Rail Transport Journal|date=June 2002|publisher=Southern Press Ltd}}</ref>

In May 2003, United States based [[RailAmerica]] made a takeover offer of 75c per share for Tranz Rail. The offer was later withdrawn when the share price dropped below 50c. In June 2003, the Government announced that it would buy back the rail network for $1 and purchase a 35% stake in the firm for $76 million (67c per share), which would have given it effective control of the company. The Government would have had the right to nominate three of the seven directors on the board. This met with approval from the [[Rail & Maritime Transport Union]] (RMTU) which had run a vigorous "Take Back The Track" campaign for the government to renationalise the railway network. The Rail Freight Action Group, which represents the interests of some of the biggest rail freight using companies, declared its support. Tranz Scenic, by then a separate company from Tranz Rail, did likewise.

====Toll Holdings offer====
{{Main|Toll NZ}}
In May 2003, the Australian transport firm [[Toll Group|Toll Holdings]] purchased a 6.1% share of Tranz Rail, increasing its share to 10.1% by June and 19.9% in July. Toll then launched its own takeover bid, initially offering 75c per share, later increased to 95c.

In July 2003, the Government announced that it was dropping its bid to buy a 35% stake in Tranz Rail, instead allowing Toll to succeed in its takeover bid. Toll's bid valued Tranz Rail at $231 million. The Government reached a Heads of Agreement with Toll later that month, and eventually bought the rail network for $1, plus $50 million for property assets including leases and [[Wellington railway station]]. The deal also established a performance regime creating incentives for Toll if it shifts freight from road to rail, and penalties if freight carriage falls below 70% of current levels. If Toll increases freight volumes by 10% or more on certain lines the Government will grant it a track access charge holiday. The parties agreed the Government would spend $200 million over the next five years upgrading the track via the New Zealand Railways Corporation, operating as ONTRACK.

Toll did not achieve the 90% stake of Tranz Rail it required to meet the Government's deal and compulsorily acquire the remaining 10% of shares, despite raising its offer again to $1.10 per share. In 2003, around 3,000 small shareholders held 25% of Tranz Rail's shares, many of them major institutional shareholders such as AMI and [[Infratil]]. After a number of extensions of the deadline set by Toll, it held 84.2% of shares in Tranz Rail after the offer closed in December 2003. By that time, shares were being sold on the New Zealand Sharemarket for $1.65, above even the independent valuation of between $1.34 and $1.62 made in July by merchant bankers Grant Samuel. Despite Toll not achieving the 90% requirement, the Government honoured the Heads of Agreement made in July.

In February 2004, Tranz Rail reported a $346 million loss for the half-year ended December 2003. In the same year, it carried 2.1 million tonnes of coal on the [[Midland Line, New Zealand|Midland line]] in the South Island. The departure of the former chief executive officer, Michael Beard, and six other top managers cost it $6 million in exit payments.

The company was renamed [[Toll NZ]] and did not retain any of the Tranz Rail directors. In May 2008, the New Zealand Government agreed to buy the rail and sea transport assets of Toll NZ Limited for $665 million.<ref>{{cite web|url=http://www.scoop.co.nz/stories/PA0805/S00053.htm|title=Rail buy back marks new sustainable transport era|date=5 May 2008|accessdate=2008-05-05|archive-date=5 May 2008|archive-url=https://web.archive.org/web/20080505191641/http://www.scoop.co.nz/stories/PA0805/S00053.htm|url-status=live}}</ref> The government branded the new company [[KiwiRail]].