Railtrack holders urged to fight on

RAILTRACK investors who will next week receive an offer of around 255p per share for their holdings are being urged to set aside some of their cash to launch a massive legal action against the Government for a separate compensation package.

Railtrack Group is set to recommend a deal, perhaps as early as Monday, valuing the group at nearly £1.3bn. That includes the £500m for the rail operations from the Government's Network Rail company, £375m for its rights to the Channel Tunnel Rail Link and £350m in cash reserves with the rest made up from non-network property assets.

Railtrack will put out a circular detailing the offer which will immediately spark the relisting of the shares suspended at 280p last October when former Transport Secretary Stephen Byers put the network into administration. The offer is likely to be voted through by City institutions holding the majority of Railtrack shares at an extraordinary general meeting in early July.

But the Railtrack Private Shareholders Action Group is telling the 22,000 small investors it represents that even if they back the deal at 255p a share, or sell shares on the open market, they retain the right to seek compensation over and above the offer direct from the Government.

David Greene, the solicitor acting for the action group said: 'Individual shareholders will have to take a commercial decision on what they do with their shares. But the offer represents a settlement between the company and the Government and does not extinguish shareholders' rights.'

Legal counsel for the action group claim Byers acted 'maliciously and recklessly', outside of the powers of his office and in contravention of human rights provisions on property ownership.

According to 'grey market' experts in the City, Railtrack shares are likely to open at below 200p a share when they return from suspension, reflecting ongoing uncertainties about the deal and that the offer money can not be released for months until the quoted rump Railtrack Group goes through a voluntary liquidation.

City traders believe there will be little liquidity in the shares as institutions are likely to keep their powder dry. However, sellers could well be matched by arbitrage buyers and hedge funds looking to buy below the offer price to make a profit when the deal finally pays out.