Red Star sell-off grinds to halt: BR works on new management plan as parcels firm fails to attract good bids

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The Independent Online
THE GOVERNMENT'S rail privatisation programme suffered an embarrassing setback yesterday after it was forced to abandon the sale of British Rail's Red Star parcels business because no satisfactory offers were received.

Roger Freeman, Minister for Public Transport, said the BR board was now urgently drawing up a new management plan for the business with the aim of achieving financial viability and a successful sale in 1994.

Red Star employs 1,200 and lost pounds 9m in the last financial year on turnover of pounds 46m. It was put up for sale in June. BR said a number of bids had been received, including one from a management buyout team, but that none of these had proved sufficiently attractive.

Despite the setback over Red Star, the Government announced yesterday that it was pressing ahead with the sale of BR's track maintenance and renewal operations. These employ 33,500 people and have a workload worth pounds 1bn a year. The sale of the business, split into a number of companies, is to be completed by April 1996.

Mr Freeman said he expected the privatisation to take the form of a trade sale rather than a flotation and that management-employee buyouts were unlikely to be favoured.

'There is an appetite out there in British industry,' he said, indicating that interest was likely to come from electrical and civil engineering contracting firms and construction companies.

Mr Freeman said all staff would transfer to the private sector, but he would make no forecast about the numbers that would be employed after the sale.

The businesses will have contracts of between two and five years with Railtrack, the public sector body that will take over the management of the infrastructure from April. Mr Freeman said the contracts would make the companies attractive to purchasers and would give Railtrack competitive choice and keen pricing.

The Post Office is buying 16 mail trains from Asea Brown Boveri for an undisclosed sum. The trains will service a new distribution centre that the Post Office plans to build in north-west London. At the same time the Post Office said it had signed a 13-year contract with BR for the delivery of mail.

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