Former BR managers to share in pounds 40m sale bonanza

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The Independent Online
Another round of windfall profits for former British Rail managers emerged yesterday when Jarvis, the Essex construction group, moved to take control of a privatised track renewals company for pounds 50m, netting more than pounds 40m for directors and venture capital backers.

Jarvis is paying pounds 50m for Fastline, formed from a management buyout from British Rail of Eastern Track Renewals, responsible for replacing tracks on the East coast main line from London to Edinburgh. If the deal goes through 10 managers will share in cash and paper profits of pounds 11.5m.

Fastline's directors and staff, along with venture capitalists Apax Partners, paid pounds 11m for the company in March 1996. They paid a further pounds 4.6m for York-based Northern Track Renewals two months later. Before the sale to Jarvis they paid off debt, boosting the value of their windfalls.

The biggest beneficiary is David Doggett, 47, Fastline's chairman and managing director, who will see his pounds 50,000 investment turn into pounds 2.6m, in the form of cash and Jarvis shares, in the space of just 15 months. Described as a "BR man to his boots", Mr Doggett had been with the state- run rail industry for 25 years.

Two other senior managers, David Douglas, the track renewals director and Phil Lee, engineering director, will net about pounds 1.8m each from initial investments of pounds 35,000. The biggest beneficiary is Apax, which will see its 58 per cent investment in Fastline for pounds 500,000 turn into pounds 30m.

All of Fastline's 1,200 employees will also share in a pounds 4.2m cash bonus, worth pounds 3,500 each for "excellent performance." A further 170 staff who together paid pounds 250,000 for shares in the company will share out pounds 3.75m. Jarvis will fund the acquisitions with a pounds 62m share issue.

The deal mirrors the recent controversial sales of rolling stock companies, which made gains of pounds 386m for Eversholt shareholders this year and pounds 300m for Porterbrook investors last year, including a pounds 36m profit for managing director Sandy Anderson.

Jarvis said the profits were the result of Fastline's success in winning contracts from Railtrack. A spokesman contrasted the windfalls with the pounds 5m Jarvis is also paying for the 50 per cent of another track renewal company, Relayfast, which it does not already own. In this deal, also announced yesterday, Relayfast's shareholders will emerge with no profits at all. Jarvis paid pounds 4.9 for the other half of Relayfast in May.

Paris Moayedi, Jarvis chairman, defended the Fastline profits. "The two companies were set up in exactly the same way. One made a success of it and the other didn't. In the one that was successful the management and employees walked away with lots of money. Good luck to them."

The deal strengthened Jarvis's position in bidding for pounds 1bn of Railtrack track contracts over the next four years. Mr Moayedi said Jarvis had been shortlisted for all 5 of the contracts on offer and would be disappointed not to win something. The Office of Fair Trading yesterday invited comments on the deals on merger grounds, but Mr Moayedi said there was "little likelihood" of them attracting opposition.

Jarvis shareholders have already enjoyed huge gains on the back of the company's pounds 9m purchase of another British Rail business, Northern Infrastructure Maintenance last year. Jarvis shares rose 1.5p yesterday to 308.5p. A year ago they were just 76p.