HMSO bidders likely to halve value of sale

The planned sell-off of HMSO, the Government's publishing and stationery arm, expected to be announced this week, could be thrown into jeopardy at the last minute by bidders determined to renegotiate their offers for the business.

Each of the three remaining bidders is understood to want to discuss a number of issues with the Government. The final price is likely to be less than half the pounds 100m the Government originally hoped to raise from the sale.

One key unresolved issue is whether the financial information about HMSO originally made available to bidders will justify the offers made for the business once a closer investigation is carried out.

"There are some people who may say that everything is rosy in the garden in order to persuade the vendor that they are very positive about running the business," a source said. "But there are still many points that are unresolved."

The three potential buyers left in the race to buy the publisher of official documents are Westminster Information Systems, backed by NatWest Ventures and Rank Xerox, Fleming Electra and a consortium including 3i, the venture capital company and Mercury Asset Management.

Civil servants advising Roger Freeman, the Public Services Minister, are believed to be close to reaching a decision on the winner of the bid. Mr Freeman is expected to announce the result later this week.

However a source close to one bidder said yesterday that despite a scaling down of offers from pounds 100m to between pounds 50m and pounds 70m, following a warning that HMSO's profits this year will not be as high as expected, attempts to re-negotiate further are likely.

"Although all three are still keen on the business, there is still a lot of talking to do even after an announcement is made," the source said. "After the new profits forecast, HMSO is not as attractive as it was and there are still some things to iron out."

Another bidder said: "I think it is fair to say that the financial information coming out of HMSO is quite poor. One of the issues will be to review the figures and see whether the bid made is supported by the financial evidence."

Binder Hamlyn, investigating accountants acting for the Government, are reviewing current financial information and preparing a report to be made available to successful bidders.

HMSO is the Government agency responsible for a range of publishing activities, including Hansard, passports and welfare benefits books.

Government estimates suggest it is likely to make profits of between pounds 7 and pounds 8m this year. This follows losses of pounds 42m last year, pounds 28m due to redundancy payments.

After the Government's announcement in September last year that it intended to privatise HMSO, the business was formally advertised in March with a shortlist of four organisations drawn up two months ago.

One, led by Hambros, dropped out recently.

Fear of embarrassing failures to deliver passports or benefits books, together with potential criticisms of poor service to MPs, have led civil servants overseeing the tender process to tread warily

All bidders have given assurances that the services they provide will be of a high standard.