The sale of On Board Services, British Rail's catering arm, to its management for pounds 11.5m will be announced today by the Department of Transport.
The buyout is backed 60-40 by Candover, a venture capital company, and the Bank of Scotland, with the seven-member management team putting up an undisclosed amount to fund expansion and improvement of the service.
John Jarvis, chairman of Jarvis Hotels, will join the OBS board as non- executive chairman, said Terry Coyle, the company's managing director. The newly privatised company is the third-largest supplier of packaged meals in Britain.
A flotation or trade sale is likely in three years, after current contracts with train operating companies have been renewed and an aggressive expansion programme put in place. OBS hopes to raise its sales from a projected pounds 37m in the first year to pounds 55m by 1998. Its pre-tax profits have been estimated at about pounds 2m.
Mr Coyle said growth would come from beefing up UK train catering operations with an airline-style service, opening retail outlets in the 33 railway stations where it currently has food preparation areas, and bidding for business on Europe's high-speed trains.
"We see our future moving further into Europe," Mr Coyle said. "With it's high-speed services it's very attractive." The European rail catering sector is dominated by Wagon Lits and Servair from France, Germany's Mitropa and Rail Gourmet, a subsidiary of Swissair.
British travellers will not be ignored, however, he insisted. In the future, passengers could find a hot meal, prepared on board and delivered to their seats, included in the ticket price. "You're going to see an increase in customer service," he said. A range of new products will also be introduced.
The sale puts to rest fears among traditionalists that the company would be sold to rival bidder Rail Gourmet, which was rumoured to believe scrapping English breakfasts would be a sound cost-cutting move.
Mr Coyle said the sale meant "the traditional British breakfast has been saved. It's the mainstay of the business."
OBS has 650 staff, but could increase that to almost 2,000 if it was successful in bidding for contracts to serve food on trains, part of the business that was largely kept separate from the privatisation.
OBS is one of the first fragments of British Rail to be privatised, which Mr Coyle believes will give it time to prepare services for the operating companies when they are sold off in six to12 months' time.