£500m Railtrack deal expected

A £500m DEAL to buy Railtrack out of administration and give its shareholders around 250p for each share is expected to be announced on Monday.

The package will involve not-for-profit company Network Rail taking over from Railtrack plc which was forced into administration by former Transport Secretary Stephen Byers, last October at which point shares were suspended at 280p.

The deal will also see London & Continental Railways paying £295m for the first phase of the Railtrack-owned Channel Tunnel high-speed rail link, with Network Rail paying £80m to operate and maintain the link.

With Railtrack also sitting on £350m worth of cash, the overall deal should see shareholders getting about 245-250p per share.

However, the Railtrack Private Shareholders Action Group is urging shareholders to continue to fight for a better deal.

'This is nowhere near the proper value for Railtrack plc,' said the group's chairman Andrew Chalken.

The deal will need to be approved by Railtrack shareholders at an extraordinary general meeting likely to be held next month.

With £300m of the £500m buy-out money coming from the Government-backed Strategic Rail Authority, the deal will also have to be given clearance by the European Commission.

Floated at 360p, Railtrack shares soared to £17 at one stage before dipping sharply following a series of train crash disasters.

Shares are likely to be re-listed on the London Stock Exchange shortly after tomorrow morning's expected announcement.

Previously referred to as a company limited by guarantee, Network Rail was formally named in March this year. It is officially described as a non-shareholder, 'not-for-dividend' company, with any operating surplus being reinvested in the rail network.

It is being initially financed by a £9bn bridging loan from nine banks including Barclays, HSBC and Royal Bank of Scotland.

All being well, Railtrack plc should be out of administration by the end of July, with Network Rail then taking over responsibility for track, signalling and stations.