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Recycler Metal Man is making hay out of old car parts.

The Auckland-based company, which compresses and re-sells scrap metal, has 64 staff throughout New Zealand and an annual turnover of about $40 million.

Metal Man picked up several prizes at the recent Westpac Manukau Business Excellence Awards, winning the business of the year supreme award, and awards for excellence in manufacturing and exporting.

General manager Clark Proctor said the company's scrap metal came from a range of suppliers including boat builders, sheet-metal workers and automotive repair garages.

Metal Man exports about 50 per cent of its recycled metal, mainly to countries throughout Asia but also to Europe. The "top-grade furnace-ready" metal is used to make a variety of products, such as pots and pans, engine components and aluminium plates for boats.

Mr Proctor said the boom in scrap metal prices this year - they have risen by about 140 per cent - was "unbelievable", but not the windfall some might think. "I'm actually happy when prices are low. Because it doesn't promote thieving [of scrap metal], and removes those people from the fringes of the industry who are bad practitioners and rear their heads when prices are high."

Metal Man operates out of Auckland, Hamilton and Christchurch.

Australia's OneSteel is planning to spend about $175 million to take over Wellington-based Steel & Tube Holdings.

OneSteel, which already owns 50.27 percent of Steel & Tube, is to offer $4 a share for the rest. This compares with a price of $3 on the market before the offer was announced this morning. The offer values the whole company at $353 million. The offer will be conditional on the Australian company achieving 90 percent acceptance. Also, and most unusually, the bid is conditional on the NZX 50 index not dropping below 2710 for three consecutive days prior to the bid being declared unconditional.

The NZX 50 is comfortably above that level at the moment - trading above 3200 early today. But the inclusion of such a condition demonstrates nervousness about the current global environment.

The bid comes at a time when Steel & Tube's profitability has taken a hit from the economic downturn. Its earnings slipped 19 percent to $22.5 million for the year to June.

The company said that its three Key market segments of construction, manufacturing and the rural sector, all suffered to a varying degree as the combination of exchange rate volatility, high interest rates and reduced growth in consumer spending slowed the economy. These conditions prevented businesses in general from recovering the increased cost of doing business resulting in a margin squeeze.

OneSteel managing director Geoff Plummer said the takeover would allow OneSteel to simplify its corporate structure and efficiently manage the Steel & Tube business as part of the OneSteel group.

"OneSteel's proposal confirms its commitment to the New Zealand market and to Steel & Tube’s business, employees, customers and suppliers. If OneSteel's offer proceeds, OneSteel intends to retain the Steel & Tube brand, grow the Steel & Tube business and maintain a quality product offering and high level of service."

Timaru bus drivers are planning to strike for a week, effectively putting buses off the road.

The action involves about 10 drivers and comes after attempts to gain an increase in the minimum pay rate they receive, Amalgamated Workers Union spokesman Lindsay Chappell said yesterday.

The strike will run for seven days from Monday, July 21, and comes as a result of their employer's -- Timaru Bus Service Ltd -- "continued disregard for realistic wage rates," Mr Chappell said. "Our members regret it has come to this as they have the greatest respect and regard for the community who have been very supportive through the dispute."

It is illegal for the operator to attempt to use other drivers during the strike period.

While the drivers felt a responsibility to the community, Mr Chappell said they could not continue to work for the $12 an hour they receive or the $13 the company was now offering. There was also the issue of drivers not being paid for extra time when they finished a run late due to traffic delays or roadworks.

Their Christchurch counterparts, who have the same employer, are paid $16.85 an hour and $17.05 an hour after two years. The Timaru wages are the lowest rate paid by any South Island passenger service.

The drivers received $2 an hour more when employed by the service's previous contractor, Ritchies Transport. Mr Chappell said the drivers have been attempting to negotiate better wages and conditions since the company won the contract 18 months ago.

"Ecan chose the successful tender and, on this occasion, the lowest price, which clearly was based on the minimum wage for labour. "This is what the system is allowing and we ask what Ecan is doing with the savings made by the comparative pricing procedures.

"The public are paying for this service in their rates and you can guarantee there has been no rebate as a result of this tender process," Mr Chappell said.

Further details of transport smartcard project revealed

Auckland’s smartcard-based integrated ticketing project is shaping up to cost over $100 million, including operating costs for the first ten years.

Computerworld understands a decision on a contract for Auckland is due in September. The short-list is thought to comprise Infratil (with Unisys); based on its Snapper smartcard launched recently in Wellington; Downer EDI, with Wayfarer; and Thales, with Transfield.

The programme director for the Auckland integrated ticketing smartcard project, Greg Ellis, last week wrote to short-listed vendors assuring them that the tender process is still open, after Computerworld Australia (see here) reported Ellis saying at a conference that West Australia’s SmartRider system is one of the world’s best.

The reporter suggested the Auckland system would be modelled on SmartRider, provided by Downer EDI. Ellis clarified to Computerworld last week that SmartRider is one of the models Auckland will follow. He also mentions the Brisbane system as one that has “influenced thoughts”.

Ellis would not be drawn on the cost of the project because of tender negotiations, but referred Computerworld to the publicly available cost of the Brisbane project, at $142 million, as an example.

That, he says, is a whole-of-life cost. The project is in two parts: installation and implementation; then 10 years operational running. The successful bidder would probably set up a separate company to handle operations.

However, a range of industry sources in New Zealand estimated the cost of the project is between $100 million and $250 million.

Downer EDI, which implemented of the Perth system, on behalf of Wayfarer, already has technology in place in Auckland’s transport system. Ellis confirms that Downer EDI has “expressed interest” in the Auckland project.

Computerworld understands that while the Auckland Regional Transport Authority gets to sign off on the contract, the funding will be provided by the Auckland Regional Authority and by Land Transport NZ.

Integrated ticketing systems have become a feature of public transport in cities in the developed world. Some countries, such as the Netherlands and Switzerland have national integrated ticket systems. In the UK and Australia, such systems have been or are being launched in major cities. London is a case in point with its Oyster system

But these projects have also been complex and high-risk. The New South Wales government has taken legal action against its supplier ERG, seeking to regain losses of around A$90 million. ERG has counter-sued for A$250 million in compensation for termination of the contract.

In Melbourne, the overdue A$500 million myki smartcard ticketing system has had its completion date extended. It was originally due to be completed in 2007; that’s spun out to 2012 with another likely cost over-run of A$212 million. This month, South Australia announced it would seek to automate ticketing for public transport by 2009/10.

It has budgeted A$29 million to kick-start the system.

There are political dimensions to the Auckland project. The government wants more people to use public transport: there is the 2011 Rugby World Cup to consider; the Kyoto Protocol is to be revisited soon, with the associated carbon costs of private transport to the fore.

If the Auckland project is successful, it will almost certainly be rolled out further.

Wellington, for one, has indicated it has a watching brief on the project.

Infratil says it has no plans to sell its minority stake in Wellington bus operator Mana Coach, even though the High Court has ruled out a planned merger with its Wellington bus business.

Infratil subsidiary New Zealand Bus runs the scheduled bus services in Wellington and the Hutt Valley. Mana Coach operates mainly north of Johnsonville and has limited runs into Wellington. Infratil acquired its 26 per cent holding in Mana Coach through the purchase of Stagecoach New Zealand in 2000.

New Zealand Bus was fined $500,000 and costs of about $600,000 by the High Court in 2006 after it tried to buy the rest of Mana Coach without Commerce Commission approval. The Mana Coach vendors at the time, Kerry and Ian Waddell, were found guilty of being accessories to the transaction, but not fined. Their conviction was subsequently overturned on appeal.

The Waddell family sold its 74 per cent stake in Mana Coach to merchant bank Bancorp, which in turn sold it to British transport entrepreneur Brian Souter last December.

Infratil executive Paul Ridley-Smith said yesterday that he expected the ownership structure of Mana Coach to continue in its current form.

Mr Souter was an experienced bus operator as a founder and major shareholder of Stagecoach, he said.

Last week the Court of Appeal turned down an appeal by the Commerce Commission against the High Court's decision not to convict Infratil for its role in the transaction. But the judgment upheld the $1.1 million fines and costs for New Zealand Bus, which were paid in 2006.

Twenty-eight years ago, a brother and sister set up a bus service in Perth that ran two coaches to London. Those two coaches expanded into Stagecoach Group, at one time the biggest bus company in the world and a watchword for Thatcherite capitalism. The next step was international expansion, and that was where the wheels fell off.

Six years on from the company's nadir, where its shares hovered around 10p and rumours it was on the verge of going bust, it has fought back to surpass its peak at the turn of the century. One analyst yesterday called the group the "shining light" of the public transport sector after it announced a strong set of results.

Stagecoach's storming rise in the 1980s was described as "a classic rags-to-riches tale from the frontiers of capitalism" by Christian Wolmar in his book Stagecoach, published in 1998. It was masterminded by Brian Souter, a former bus conductor and accountant, who launched the company in 1980 with his sister Ann Gloag using their father's redundancy money.

Through a strong knowledge of the industry and following the wave of privatisation and subsequent fragmentation of the market after the Transport Act 1980 it build a significant presence in the market. By 1992 it had expanded into rail operations with the shortlived Stagecoach Rail. Its use of the system and aggressive tactics weren't always appreciated. Mr Wolmar said: "Through press coverage of Monopolies and Mergers Commission referrals and reports, Stagecoach became notorious, an emblem of the excesses of Thatcherism."

When the time came to list on the London Stock Exchange in April 1993, investors clamoured to get their hands on the stock, with the float coming in seven times oversubscribed. It listed at 23p per share, valuing the group at e134m, and over the next six years stormed to a peak of 284p in 1998. One sector expert said: "In the late 1990s all the public transport groups thought the UK had gone ex-growth. There had been huge consolidation, and everyone began looking abroad."

National Express, Arriva and Stagecoach all looked to North America. Stagecoach bought Coach USA, the country's biggest operator, in June 1999 for $1.2bn, creating the biggest bus operator in the world. Mike Kinski, who had taken over as Stagecoach's chief executive the previous year (Mr Souter had become chairman), said at the time of the deal: "We see this as a $40bn market potential."

The move proved disastrous, as over the next three years it had to issue four profit warnings, primarily relating to the US business, which sent its shares spiralling to 10p. This sparked speculation that it was in danger of breaching its banking covenants, which was hotly denied at the time by the financial director, Martin Griffiths, and subsequently proved inaccurate.

The transport analyst said: "Coach USA was not a good buy. It was a lower-quality business and had serious problems. They bought the wrong business, and added to that it was just coming into a recession in the US." The business was also smashed by the terrorist attacks of 2001. "In late 2000, the market thought were problems at the company, but no one realised how serious and deep-seated they were. They realised extensive surgery was needed."

Several months prior to the fourth profit warning, it launched a full-scale inquiry into its US operation and Mr Kinski's successor, Keith Cochrane, parted ways with the company. "There was the impression that he had tried everything and it justwasn't working," one source said. The company brought Mr Souter back, and the rebuilding process had the share price peaking at record levels late last year at 291.5p. One company insider said it had adopted a "back-to-basics" strategy to rebuild its business. Mr Griffiths, who remains the financial director, said yesterday: "The company made a poor acquisition in the US, it didn't meet our expectations. I was always confident we could come through it, but it was a painful process."

Under Mr Souter, Stagecoach sold down or restructured 70 per cent of the US operation, keeping only the most profitable businesses. But essentially it was refocusing on the UK. The group also sold down a business in New Zealand and its interests in Hong Kong. Then, two years ago, the Australian investment house Macquarie offered e263.6m for Stagecoach's London Bus division, which signalled the end of its interest in operating buses in the capital.

The analyst said: "They focused on core UK operations and set about working out how to stimulate growth and exit the unprofitable US businesses. The market perceptions are of a very good management team, and of course shareholders are happy because of the huge amounts returned to them."

Last year, rather than targeting another expensive foreign acquisition, Stagecoach returned e700m to shareholders (including Mr Souter and his sister, who still own about 25 per cent of the company between them). This followed a e250m return several years earlier, but the size surprised analysts and investors alike. "The share price has continued to rise as the market can see it is a cash-generative business and it is happy to return money to investors," the analyst said. Over the past five years the company has also halved its almost e1bn of debt on the balance sheet.

The group has been helped by the sector, which is not particularly cyclical; people will always need transport to travel to work, as well as the children using buses for school and pensioners who travel regularly to hospital. Mr Griffiths added: "The macro environment for public transport is good. People are more concerned about the environment and congestion on the roads is increasing. There is also a wave of inward migration from countries in Eastern Europe which are very comfortable with public transport."

Stagecoach's shares yesterday jumped over 7 per cent to 240.5p after it reported that its performance since the end of October had hit the top end of management forecasts.

Its UK rail business stood out, with like-for-like revenue growing 14 per cent in the nine months to 3 February. These numbers also did not include East Midlands Trains, the franchise it took over on 11 November. Elsewhere in its rail portfolio, its operation with Virgin rose 12.4 per cent. The group's UK bus operation rose 7.4 per cent, while passenger volumes on its buses grew 2.5 per cent.

The management believes that the outlook remains positive despite caution over the wider economy, particularly with the impact of rising fuel prices, although much of that is hedged.

Mr Griffiths said: "The numbers are good, and we are reassured by the continued rise in revenues. The strategy has been very clear in the past four years. We are focused, but also opportunistic, and looking at bolt-on acquisitions. As for another multibillion-dollar deal; we never say never, but at the moment we are comfortable."

British transport entrepreneur Brian Souter has re-entered the Wellington bus business, with Souter Holdings buying Mana Coach Services from merchant bank Bancorp.

The price has not been revealed. Mr Souter founded multinational transport firm Stagecoach and is still a major shareholder.

Mana Coach runs 120 buses in the Wellington region, including Newlands Coach Services.

Stagecoach New Zealand was sold to Wellington investment firm Infratil two years ago for $250 million. Stagecoach New Zealand runs scheduled bus services in Wellington and the Hutt Valley as well as Auckland.

Bancorp bought its stake in Mana Coach from the Waddell family in July last year for an estimated $24 million - a day after Infratil said it would appeal against a High Court decision preventing it from buying all of the company. Infratil already owns the remaining 26 per cent of Mana Coach through the purchase of Stagecoach. Bancorp described its purchase of Mana Coach at the time as a "long-term strategic investment in infrastructure". Infratil finally lost its appeal against the High Court decision last month.

Bancorp managing director Craig Brownie said Mr Souter made an approach to buy Mana Coach "three or four weeks" ago. Mr Brownie denied that Bancorp had been warehousing the shares on behalf of Infratil while it awaited the outcome of its appeal.

Infratil has consistently refused to say whether it had done a deal with Bancorp to buy the shares if the High Court appeal had succeeded.

Mr Brownie said Bancorp always had Infratil in mind as a potential buyer of the Mana Coach shares if it had been allowed to bid for them. "But it would be fair to say that New Zealand Bus would see Souter Holdings as a good co-investor long-term. "As a 26 per cent shareholder they had to be happy with the Souter company coming in. Even though they lost the court case, they are very happy about the outcome."

Returning the company to the control of a highly experienced operator was the best outcome for the business, he said.

Former Stagecoach New Zealand managing director Bill Rae has been appointed chairman of Mana Coach, replacing Mr Brownie, and Geoff Norman will continue as chief executive. Kerry Waddell has left the board, as a Bancorp appointment.

New Zealand billionaire Graeme Hart is hatching a deal for his Carter Holt Harvey cardboard box business to join forces with its counterpart at Amcor, in a play aimed at challenging the dominance of Richard Pratt's Visy.

Mr Hart has been been in talks with Amcor for two months to form a joint venture between the separate corrugated and paper businesses of his forest products company and the Australian packaging giant. A combined operation would have revenue of about $A1 billion a year. Amcor has run a knife through the hierarchy of its cardboard box business over the past few weeks, making redundant at least three senior executives including its boss, Darryl Roberts. The Victoria-Tasmania general manager, Andrew Harris, and another senior executive, Walter Gross, departed almost immediately last month.

A former Amcor executive said the latest redundancies were aimed at lowering costs to a level that would eventually determine the shareholdings of both Amcor and Carter Holt in the joint venture. "Hart looks like he is going to take management control of it," the executive said.

The deal, expected within months, will raise concerns about a duopoly in Australia's $A2.2 billion cardboard box market, which is still reeling from the record $A36 million fine imposed on Mr Pratt and Visy for a price-fixing cartel with Amcor. The former Amcor executive claims the Australian Competition and Consumer Commission has given tentative approval to an Amcor-Carter Holt joint venture.

Mr Hart has gone on a spending spree since taking full control of Carter Holt early last year for $NZ3.3 billion, buying Swiss packaging giant SIG, Blue Ridge Paper Products of the US and beverage packaging assets from International Paper. But New Zealand's richest man will still have an estimated $A2.5 billion-plus to spend after selling a 20 per cent stake in Goodman Fielder in October and from a yet-to-be completed auction of Carter Holt's timber products business.

"They may be looking at it," another Amcor executive said late last week of Mr Hart's intentions for Amcor. "There's a rumour about Carter Holt Harvey every week - Graeme Hart has run the ruler over Amcor." Amcor executives will brief investors in Sydney on Tuesday next week about the overall business.

A New Zealander, Greg Beatty, the former boss of Fonterra Australasia, took over as Amcor Australasia's managing director in October from Louis Lachal, a 27-year veteran of the company who will retire next year. Also departing Amcor Australasia are Melanie Huson, the human resources chief who leaves next week, and another executive, Shay McQuade. Before Mr Hart took over Carter Holt, the company is understood to have offered the Amcor board about $A1.3 billion for its fibre packaging business about three years ago. Sources say Mr Hart has since made several approaches to Amcor for the business, to no avail.

Carter Holt is the third-largest cardboard box company in Australia behind Richard Pratt's Visy Packaging - which has about 47 per cent of the market - and Amcor (less than 40 per cent). Between them, the three control the cardboard box markets on both sides of the Tasman. Amcor's cardboard box businesses in Australia and New Zealand have struggled from a lack of investment.

Tourism Holdings is back on track with its strategy to streamline its business after announcing a joint venture with national coach company InterCity Group. About 30 jobs will be lost as a result of the deal.

The tourism operator, which owns well-known brands including Kelly Tarlton's Underwater World, Maui campervans and the Waitomo Caves will own a 49 per cent share in the new company - which will be called InterCity Holdings. InterCity will own the remaining 51 per cent.

Under the deal, Tourism Holdings' Fullers Bay of Islands and Great Sights divisions shift into the new company which will also include the InterCity Coachlines, Newmans Coach Lines and Kings Dolphin Cruises and Tours brands under the InterCity Holdings name.

The consolidation is expected to be completed by June. Staff from the Fullers Bay of Islands and Great Sights businesses will transfer to the InterCity Group but about 30 people will be made redundant. InterCity Group chief executive Malcolm Johns will head the new company and the board will comprise a further two directors from each of the companies.

Tourism Holdings chief executive Trevor Hall said he had been in talks with InterCity since before the failed MFS takeover bid but it had been put on hold during the process. "Malcolm and I had spoken about this previously but had not gone very far. But once MFS was done we got down to business."

Tourism Holdings would also receive $16 million in cash once the rationalisation is complete. Hall said this would be used to reduce its debt levels from a forecast $90 million to around $75 million by June next year. "We see significant returns out of InterCity - we are looking for growth and dividends."

InterCity chief Malcolm Johns said it was a big job to get Northland on the tourism map as currently only one in five tourists head north of Auckland. "We want to make the Bay of Islands to Northland what Fiordland is to Queenstown."

First NZ Capital analyst Jason Familton said the joint venture was a positive move for Tourism Holdings as it would allow the company to free up capital while still having exposure to the coach and ferry business. Shares in Tourism Holdings were unchanged at $2.30 yesterday.

Ends

Note by JH: Parent company of Intercity Holdings Ltd is RST 2007 Ltd, which is owned 46.37% by Ritches Transport Holdings, 46.37% by Transit Group and 7.26% by Nelson Intercity Ltd

TOURISM Holdings is going into a joint venture with coach operator InterCity Group as it looks to drive further rationalisation in the tourism sector and reduce its costs.

THL said yesterday that it would be selling its Fullers Bay of Islands leisure cruising business and Great Sights coach tour operation to InterCity. The deal, effective on December 1, will see THL gain a 49 per cent shareholding in InterCity and take out $16 million in cash.

THL chief executive Trevor Hall said the new combined InterCity company would be "a significantly more profitable vehicle than either of us operating individually. We are talking in the multimillions (of dollars)."

In conjunction with the deal, THL is also restructuring its internal operations, which will include duplication of services that occurs at the moment in some areas such as reservations. This will see job numbers reduced by 30 by next April. Mr Hall said he was confident the staff would be able to be placed in other jobs both within THL and in other tourism- related businesses.

InterCity operates the country's largest coach transport network, connecting to more than 600 destinations and with over 150 services a day. It also owns the Kings cruise and tour business in the far North.

InterCity is controlled by Masterton's Tranzit Group and Timaru's Ritchies Transport. Tranzit is owned by the Snelgrove family and Ritchies by the Ritchie family. Nelson bus operator SBL also has a small stake in InterCity. The current shareholders will collectively own 51 per cent of the new InterCity Group. The new company will have an enterprise value of about $70 million.

Current chief executive Malcolm Johns will continue to manage the business.

Forsyth Barr head of research Rob Mercer said the deal was an excellent outcome for THL. "This transaction again highlights the upside potential from divesting/merging (THL's) leisure group operations," he said. "THL gains the benefit of maintaining a financial interest in the operations while at the same time releasing some of the capital -- $16 million -- tied into this underperforming part of its group assets."

Tourism Holdings is involved in a broad range of tourism-related activities. It owns attractions such as the Waitomo Caves and Kelly Tarlton's and operates motorhome, campervan and rental car businesses.

The company has been looking to focus on the rentals business, the most profitable part of its operations. An attempt early this year to sell its tourism leisure group, which includes assets such as the Waitomo caves, led to a $277- million bid being made for the whole company by Australia's MFS Living & Leisure.

The bid narrowly failed to reach the required 90 per cent acceptance level, and lapsed in late July. Mr Hall and his team have looked for ways to streamline the business -- the company sold two thirds of its interest in Johnstons Coachlines. THL shares closed unchanged at $2.30.
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CAPTION: Bolting ahead: THL will pocket $16 million from the deal with InterCity.