Shares in Prism Rail, the train operator, fell 11 per cent yesterday after the group announced that discussions with a number of parties about a possible takeover had been ended.
It is understood that the talks, announced in January, collapsed due to uncertainty over the renegotiation of rail franchises. The shares ended 40p lower at 330p. They had risen to 500p, valuing the group at £130m, immediately after it said it was in talks.
Christian Cowley, an analyst at ABN Amro, said: "It doesn't surprise me that the talks have broken down, given that this is such a volatile period to be determining the company's value."
Prism operates four railway franchises: the LTS London to Southend line; West Anglia Great Northern; Wales & West; and Cardiff Railway. The group has been told by the Shadow Strategic Rail Authority that it must renegotiate its contracts, most of which run until 2004.
Arriva had been tipped as the most likely buyer of Prism's assets, but Robert Davies, Arriva chief executive, declined to comment yesterday. Other possible bidders are thought to have included some or all of the "big five" operators - FirstGroup, National Express, Stagecoach, Virgin Rail and Go-Ahead - and French-owned Connex.
Prism will today make a fuller announcement to the City, expected to include an update on current trading. The company may also unveil a joint venture or alliance in a move to boost its financial resources as the rail industry enters the second round of franchise negotiations and consolidation appears likely.
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