The Queensland government has cut its stake in Aurizon to below 5 per cent after selling $350 million of shares in the rail group to pay down debt.
The state government has now got rid of nearly all its holdings in Aurizon, formerly known as QR National, making a profit of about $2.7 billion. It had retained a 34 per cent stake following the company's float three years ago.
Treasurer Tim Nicholls said the government had taken advantage of "favourable market conditions" to reduce the state's holdings.
Aurizon's shares, which floated at $2.55, are up about 27 per cent this year and closed on Tuesday at $4.75.
Moelis & Co analyst Simon Fitzgerald said the ongoing demand for Aurizon stock was reflected by the premium paid by investors to buy the shares in the government sell-down on Monday night.
The government sold 74.3 million shares at $4.71 a share, reducing its holdings from more than 8 per cent. Investment bank UBS conducted the trade.
The price paid was a 4¢ premium to Aurizon's closing price of $4.67 on Monday. Aurizon, which has bought back shares in previous government sell-downs, did not participate in Monday's share sale.
The Queensland government sold $1.5 billion of shares - just over half its 34 per cent stake - at $3.47 a share in October 2012, with $1 billion of shares going to Aurizon.
It subsequently sold another $806 million of shares at $4.03 in March, shortly after Aurizon announced a joint venture with Indian mining giant GVK Hancock Coal to build a $6 billion port and rail project from the Galilee Basin in Queensland.
But falls in the price of thermal coal, which is mined in the Galilee, have led the venture to scale back plans for new rail infrastructure, and analysts say it could be several years before the project gets under way.
Aurizon's hopes of developing rail infrastructure in the Pilbara in Western Australia, linking iron ore mines to ports, are also likely to take several years to eventuate.
The government did not disclose which funds bought its shares, but Perpetual and UK investor Children's Investment Fund Management now appear to be Aurizon's largest investors.
Perpetual held more than 9 per cent of Aurizon in March but has been selling its holdings, dropping below the 5 per cent substantial shareholder threshold in September, according to filings with the Australian Securities Exchange.
The proportion of local investors in Aurizon's stock has increased as the government has sold down its holdings. At the time of the float, some two-thirds of institutional investors in the stock were foreign. But the proportion of foreign investors has dropped to about half as local investors who did not buy into the float have picked up the stock.
About 9 per cent of Aurizon shares are with retail investors.