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 Ltd. The government wrote off NZ$1.3 billion in debt acquired by the company from the Railways Corporation, and injected a further $300 million in capital. 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 Bolger National government privatised New Zealand Rail Ltd in 1993. The company was sold for $400 million to a consortium of merchant bankers Fay, Richwhite & Company (40% via the investment company Pacific Rail, later renamed Midavia Rail), the American railroad Wisconsin Central (40%), and Berkshire Partners (20%). In 1995 the company was renamed Tranz Rail Holdings Ltd.
One of New Zealand Rail's most controversial safety incidents happened in 1994 when 6-year-old Morgan Jones fell under an observation carriage on the Coastal Pacific express, after a hand rail he was holding onto suddenly fell off. Although Jones survived the accident, he was left blind and had a leg amputated.
Tranz Rail sold the Auckland suburban rail network to the government in 2002 for $81 million.
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, now 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 Stock Exchange 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 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 Toll NZ Ltd (less its trucking and distribution operations) for $665 million.