Paul Little’s nightmare at Toll Holdings got a whole lot worse this
morning when the stock crashed another 57c to $12.13, meaning it has
now fallen 10.74% from the $13.59 it was at before the ill-fated $4.6 billion
Patrick Corp takeover bid was launched on 22 August last year.

Over the same period, the All Ordinaries index is up 7.3% so that
represents underperformance of 18.5%, something the normally stellar
Toll has never delivered before.

The market appears to be worried about a few things, such as the loss
of shareholder value from the dysfunctional relationship at Pacific
National, the amount of cash wasted on the defence, the likelihood of a
protracted court battle with the ACCC and the prospect of Toll going
over the top in buying P&O’s Australian stevedoring assets for up
to $2 billion.

Whilst Patrick shares also dived a more modest 52c to $6.70 yesterday, the stock
is up 14c to $6.89 today and one of the reasons is speculation that a rival
bidder could yet emerge.

Richard Branson’s Virgin Group is the obvious candidate and there is
some talk in the market that a $7.40-a-share bid will be launched soon.
Branson is about to become very liquid from the $1.63 billion cash sale of his 72% stake in Virgin Mobile to NTL and would
dearly love to recover control of Virgin Blue from Patrick. Toll Holdings would be a
ready buyer of Patrick’s valuable stevedoring business and Branson knows plenty
about trains from his Virgin franchises in the UK.

Branson would have no problems with the ACCC, but it has to be said
that Graeme Samuel’s tactics yesterday were very interesting. His
emphatic 8 page statement
appeared designed to blow Toll out of the water and exert maximum
pressure against any court challenge. The ACCC suffered a major blow
when AGL beat it in court, and clearly Samuel would rather not risk another

Finally, it would be very interesting to know how much money has been
wasted on all these takeover processes so far, let alone the enormous
distraction it has been for management.

As we’ve argued before, takeovers are becoming ridiculously expensive and the disclosure is not often very timely. For instance:

  • Boral spent $11 million on its failed bid for Adelaide Brighton;
  • GPT spent $16 million on its failed merger with Lend Lease; and
  • Lend Lease spent $28 million on its failed merger with GPT.
  • Axa Asia Pacific spent $7 million saying “non” to its French parent last year

Both Patrick and Toll need to come clean and reveal the amounts spent
so far. Both will probably be above $20 million as this has been long,
ugly and costly, with dozens of lawyers and advisers involved.