State aid to save DAF van operation

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THE SALE of Leyland DAF's van assembly operation, which collapsed earlier this year, is set to go through this week with the promise of state aid thought to be worth several million pounds.

Officials at the Department of Trade and Industry have told managers proposing to buy out the company from receivers that they can have regional selective assistance.

The DTI decision is thought to have been crucial in persuading financiers to support the management buyout. A director of investment capitalists 3i, the lead backer of the MBO, said several institutional and venture capital groups had now committed themselves to funding the purchase.

Unusually for 3i, it is expected to take a seat on the board. And Ned Dawnay, a director at merchant bank Lazard Brothers, will be named non-executive chairman. He is a former director of Rover cars.

Regional aid is used to support projects that would otherwise not go ahead. It is not known how much the DTI has pledged, but insiders said the package would be worth several million pounds. The money would be granted in stages, as and when capital investment is needed at the new company, to be called Leyland DAF Ltd.

The DTI had already promised pounds 18m in regional aid for the Birmingham division's joint venture with Renault to produce the new Excel van. Some of this will now be switched to the MBO team, led by managing director Alan Amey.

The money would be on top of the pounds 5m rumoured to be coming from the Birmingham Heartlands Development Corporation. This was said to be prepared to buy part of DAF's 100-acre site at Washwood Heath, Birmingham. However, this plan was being played down by DAF over the weekend.

Control of the company, which plans to build 200 vans a week with its current 1,000- strong workforce, could pass from the receiver to the managers tomorrow. However, 3i said: 'We might not sign on the dotted line until Wednesday.'

There were 2,000 staff when the company went into receivership in early February. The division had been producing more than 300 vans a week.

There are also plans for an MBO of the truck operation at Leyland, Lancashire. The area does not qualify for regional aid.

(Photograph omitted)