Tiphook containers to raise 830m pounds: Transamerica pays 'staggering' price - Transport group slims down to trailers to avoid collapse

TIPHOOK, the debt-laden transport leasing group, confounded its critics yesterday by selling its container division to Transamerica of the US for pounds 830m, a price far in excess of market expectations.

The proposed sale is conditional on due diligence and the agreement of Tiphook's lenders and shareholders. If it goes through, it will reduce the group's aggregate debts to less than pounds 400m, and leave the company with an opportunity for recovery through its trailer and railway carriage businesses.

Observers said the deal was a remarkable escape from oblivion for the crisis-ridden group and its controversial chairman, Robert Montague. Most analysts were staggered by the price Transamerica was prepared to pay for the containers, which have a book value of between pounds 500m and pounds 600m. 'By my calculation, Transamerica is paying the equivalent of dollars 2,400 per container,' said Adam Moskowitz, an analyst at BDS Securities in New York. 'They could have bought them new for that.'

Chris Kane, of Salomon Brothers, said the price was 35 per cent higher than the most optimistic expectations. 'I guess Transamerica is taking the view that it's worth paying that much for market share and to have the assets on board for a recovery in world trade.'

The news cheered shareholders and the holders of dollars 700m of Tiphook bonds in the US. In London, the shares, which have been in free fall in recent weeks, recovered from 44p to 63p. In New York, the company's American Depositary Receipts, which comprise three ordinary shares, rose dollars 1.50 to dollars 3. The bonds, which were trading at less than 60 per cent of par value, jumped to 80 per cent.

But observers were cautious about the prospects for a slimmed- down group. 'It appears to be a very good deal for the banks, which will get all their money back,' said Richard Bernstein, an analyst at City Marketing.

'But the container division made 97 per cent of the group's profits before tax and exceptional items last year. Trailers made just pounds 3m, so the position is less clear for shareholders and bondholders.'

Sources close to Tiphook suggested that the price reflected competition to buy the business and pointed to a clause in the agreement that requires Tiphook to pay Transamerica compensation of pounds 20m if the deal falls through and the containers are sold to a third party.

Other potential bidders for the assets included GE Capital, the giant US corporation, whose subsidiary, Genstar, is the world's biggest container-leasing operation.

The deal will spring Transamerica into second place globally, with about 950,000 units compared with Genstar's 1.2 million.

Dick Olsen, a Transamerica vice- president, said the US group was paying a fair price for the containers. 'The important thing to stress is that we're buying just the assets, not the business as a whole.'

But analysts pointed out that the assets will come with existing customers, so Transamerica will immediately get the cash flow from the containers that are rented out - about 80 per cent of the fleet.

A Tiphook spokesman said a circular would be sent to shareholders by the end of the year giving more details of the structure of the new Tiphook. It was hoped that the deal could be concluded in January, following a shareholders' meeting.

He added that there would be management changes, and that the search for a new chief executive was being intensified, but Mr Montague would remain chairman.

View from City Road, page 22

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