Road builders left to keep rail privatisation on track
City & Business
Sunday 27 August 1995
Michael Meacher, Labour's transport spokesman, has had a wonderful week, gleefully presenting the West Coast U-turn as the final nail in the coffin of the rail sell-off. Certainly, it is a blow. The service is the flagship of the railways, serving passengers from London to Manchester and Glasgow, and taking in more revenue than any of the other 24 train operating companies (TOCs).
Rail privatisation remains mired in bureaucracy. It is horribly complex. It has already cost taxpayers hundreds of millions of pounds. It may well never deliver benefits to passengers. Indeed, it may well never happen at all. But it won't be the shelving of the West Coast franchise that derails it. Already two other TOCs have been wheeled out to take the place of the West Coast service in the queue for franchising. Meanwhile, advisers on the rail sell-off remain confident that the first three TOC franchises, accounting for one-fifth of passenger services, will be awarded by Christmas.
It is important to have as many services franchised out as possible if investors are going to nibble when Railtrack, the backbone of the railway system, is floated next year. Railtrack's flotation prospects should become clearer when it produces its first proper set of figures on Monday week.
But while everyone is focusing on the progress on the TOCs, a much larger threat is looming in the shape of - sorry, but this business is acronym hell - the Briscos. These are the 13 companies that do everything from maintaining the track to repairing tunnels and bridges. None has yet been sold, though we are promised PQMs - pre-qualifying memoranda - shortly.
The Government is hoping that construction companies - desperately short of work because of the shrinking road-building programme and the housing slump - will flock to buy them.
Getting the Briscos into the private sector is even more crucial if Railtrack is to whet investors' appetites. Railtrack's long-term prospects depend more on cutting its costs through efficiency gains achieved by the Briscos than on lifting its income through passenger gains made by the TOCs. It is an irony that the success of rail privatisation lies more in the hands of road-builders than train operators.
Scottish paper war hots up
THE auctioning off of the Scotsman is coming to a head. SBC Warburg, the merchant bank advising the Thomson Organisation on the sale, is asking for indicative bids by the end of this week. It promises to be a fascinating sale. Not because of the size of the assets. The newspaper group, along with its sister, the Press & Journal group in Aberdeen, is unlikely to fetch more than pounds 175m. But because of the intriguing mix of bidders - 11 at the last count. Newspapers are different, and the Scotsman is the closest Scotland gets to a national newspaper.
Several English newspaper groups are taking a look, including the Daily Mail publisher, Associated Newspapers. Then there is the curious Hambros- backed grouping, led by the Scottish Conservative supporter Professor Ross Harper. Dundee-based DC Thomson, best known for publishing the Beano, has joined the fray. So too has Midland Independent Newspapers, the regional group headed by Sir Norman Fowler, the former Cabinet minister.
We even got wind of a rumour on Friday that Andrew Neil, the former Sunday Times editor, was leading a consortium poised to bid. Not true, he told us, only to add enigmatically: "I'm not saying it won't happen, but it's not true at this stage." Make of that what you will.
The dark horse in all this is Caledonian Publishing, owner of the rival Glasgow Herald and a serious bidder. The Herald is to Glasgow what the Scotsman is to Edinburgh. Caledonian, a buyout three years ago from Lonrho, has had a torrid time since, lumbered with heavy borrowings, battered by the price war and weakened by inroads north of the border by "tartanised" English newspapers. A planned flotation has been shelved.
The sale of the Scotsman to the wrong bidder could seal Caledonian's fate. Its fear is that a new proprietor with deep pockets could launch a much more vicious price-cutting war with the express purpose of putting it out of business. Hence the need to pre-empt such a move.
A takeover of the Scotsman by Caledonian would raise competition fears and shock the Edinburgh establishment. But in the long term, it may be the only way of saving both papers. Even the Edinburgh mafia would prefer a Glasgow-based proprietor to a London-based one. The competition issues are serious. This would be one deal almost certain to come under the scrutiny of the Monopolies and Mergers Commission and the President of the Board of Trade - Ian Lang, a former Scottish Secretary (and a decidedly East Coast Scot).
Caledonian also has to convince its investors, led by Flemings, to finance the deal. They had hoped to be realising a handsome gain on their investment by now, not be asked to cough up more cash.
Signet investors revolt
RATNERS - or Signet as it calls itself these days - is heading for more upheaval, I would guess. On Friday, Brian Myerson and Julian Treger, the canny investors behind the UK Active Value Fund, snapped up a chunk of ordinary shares from Schroders, lifting their voting power from 5 per cent to 17.5 per cent. They have been trying to get a better deal for the preference shareholders (themselves included), who have not seen a dividend in years and are powerless to do much about it. They want the group broken up and the proceeds divvied up. In May, they failed to get the necessary shareholder support at an egm.
Mr Myerson and friends have shown themselves patient but persistent investors. Their doggedness paid off at Liberty, where they finally forced a restruct- uring of the stores group after a long battle with the controlling family.
Unless Signet comes up with greatly improved interim results next week, the rebels look one step closer to repeating that trick.
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