Strong demand puts Railtrack at top of range


THE British government has defied critics of its controversial railway privatisation plan and said it had sold all the shares in national rail network operator Railtrack for the highest price it could, amid strong demand.

In a statement, the government said that, after counting the applications, it had set the provisional final share price at 390p each and that, adjusting for discounts for the public, the sale would raise about £1.93 billion sterling.

The price was at the top of a range of 350p to 390p set on May 1st, and followed heavy demand from financial institutions that exceeded the volume of allocated shares by over 14 times. The Transport Minister, Sir George Young, said the entire sale would generate about £2.5 billion for the Exchequer, adjusted for a cut in ministry debt.

Commenting on the sustained criticism from Opposition politicians and pressure groups before and during the sale process, which said Railtrack was a risky investment, Sir George said. "It is quite clear there has been a tremendous appetite."

More than 665,000 individual applications came in for the UK public offer, which promised small investors a 10p per share discount to the institutional price. The proportion of shares allocated to this part of the offer surged to a final 48.3 per cent of the total, from the 30 per cent proposed before the sell off.

Private individuals could also buy shares in larger through a UK retail tender, another 10.2 per cent of the shares were allocated to that, it added. In total, 58.5 per cent of the shares sold were allocated to British private investors.

Sir George said the international book building process, in which institutional investors indicated how much they would pay for the shares in advance, showed the market had bid the price it thought Railtrack was worth and this had been the highest. "I'm greatly reassured that there is this appetite to invest in the railways of the future," he said.

Investors in Railtrack will only pay half the price of the shares now and the rest in July 1997, in the next tax year, so the shares will start trade on a part paid basis at first.

As private investors getting allocations will pay 190p each for the shares and institutions pay 200p a time the strong unsatisfied demand from institutions means a jump in the stock market price is likely on the first say, market observers said.

A London financial bookmaker, IG Index, has been taking bets on the likely closing price today that indicate the gamblers expect a jump to 214p, equal to a 7 per cent rise, on day one.