Australia’s largest rail operator, QR National, struck a five-month high today after the Queensland government began selling more than half its stake in the company.

The state government will sell a total of $1.5 billion of shares in QR National and use the proceeds to pay down debt. The sale will reduce the government’s stake from almost 34 per cent to 16 per cent.

The deal includes a sale of $1 billion of shares via a selective buyback to QR National, as well as a $500 million placement today to a small number of cornerstone investors.

About 144 million shares changed hands at $3.47 a piece – the stock’s closing price on Friday – shortly before the market opened this morning.

The sell down removes a significant portion of the share overhang from the government’s cornerstone stake, which has weighed on the stock since QR National was floated in late 2010.

The news sent QR National shares up just over 5 per cent to a five-month high of $3.645 today, making it the biggest gainer among the top 200 companies on the ASX.

Ian Myles, an analyst at Macquarie Equities, said investors had reacted positively to the sell down because it was earnings accretive for QR National and removed a degree of the share overhang from the government’s cornerstone stake.

‘‘The fundamentals don’t change. There is still plenty of balance sheet capacity in that company,’’ he said. ‘‘If the resources sector does slow down, this company does have the capability to remove more shares when it says it is appropriate.’’

The buyback will need the approval of QR National shareholders. The company has postponed its annual meeting on November 7 to November 21 in order to give shareholders time to consider the deal.

QR National has spent about $50 million in acquiring 14.5 million shares since announcing a buyback in August. That buyback will be suspended, and eventually be replaced by the selective buyback announced today, provided it wins the approval of shareholders.

The Queensland Treasurer, Tim Nicholls, said the government would continue to review its investment in QR National, but had ‘‘no current intention’’ to sell any of its remaining shares in the near term.

The rail company said the selective buy-back would allow it to ‘‘execute its capital management initiatives faster and with more certainty than would be the case’’ via its on-market buy-back program.