Institutions scramble to ride with Railtrack

The Railtrack privatisation was looking a runaway success last night when it emerged that around pounds 10bn of institutional funds were chasing the shares.

The institutional part of the offer - worth about pounds 1.2bn - is believed to have been subscribed between eight and nine times, twice the level expected a few days ago. Institutions are almost certain to be denied some shares because of the private investors, whose separate offer was three-times subscribed with 650,000 applications worth approaching pounds 1.5bn.

The unexpectedly high institutional demand as the offer closed at 4.00pm yesterday compared with a level of subscription provisionally thought, a week ago, to be between four and five times. This suggests a last minute upgrading of the size of offers made by professional investors.

The results make it almost certain that the offer will be priced right at the top of the 350p to 390p range promised in the prospectus, but a final decision may not be made until late today, after meetings between Sir George Young, the transport secretary, his officials and City advisers.

City sources were already describing the results as a triumph after a privatisation process that set off an unprecedented level of attacks by Labour and a series of embarrassing leaks from railway industry sources that at times made it look as if the sale would not get off the ground.

Assuming the company is sold at 390p a share, it will be valued at pounds 1.95bn, well above the pounds 1.5bn widely predicted earlier this year. Institutions pay a fixed first instalment of 200p a share and private investors receive a 10p discount on this.

Results are also awaited from a tender offer for private investors who are allowed to subscribe for larger numbers of shares but without receiving the perks in the retail offer. The tender is aimed at investors who want to take advantage of tax relief through PEP schemes.

By coincidence, the results of the privatisation are being counted as Labour's policy forum meets to discuss industrial and economic proposals that include changes in the way the railways are regulated and controlled.

The formal announcement of the allocations of shares is expected tomorrow with trading due to begin on Monday.

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