Wrangling delays £500m offer to Railtrack investors

A last-minute hitch has held up the signing of a £500m deal between Railtrack and the Government to compensate shareholders for the decision to place the network operator into administration.

A Railtrack spokeswoman said last night that its board could not sign the contract because "certain issues remain outstanding, some of which could prevent cash being returned to shareholders in an acceptable timescale".

However, she added that all sides remained confident that these issues could be overcome. The hold-up relates to the terms under which Railtrack will be paid £375m to hand over its rights to operate the Channel Tunnel rail link.

Railtrack shares had been expected to be relisted on the Stock Exchange today, but trading in the shares is now unlikely to resume until later this week. The setback came as Railtrack shareholders pledged yesterday to fight the expected offer.

A spokesman for 22,000 private shareholders said the "derisory" offer from Network Rail represented an attempt by the Government to renationalise Railtrack on the cheap after it had failed to "steal" the company.

Once the not-for-profit company's offer is formally announced, shareholders will have about a month to decide if they want to accept an expected offer of £2.50 a share.

But Andrew Chalken, the chairman of the Railtrack Private Shareholders' Action Group, is campaigning for individual and institutional investors to vote against the deal at an extraordinary general meeting (EGM) next month. If that fails, his group plans to raise £2m to sue the Government for more compensation.

"We have done several valuations of the company and they have all been higher than £500m. If the Government said it was renationalising Railtrack and we would get back the money we put in, no one would have argued, but they first tried to take it for nothing and now they are trying to get away with a derisory amount.

"We are saying to private shareholders and the institutions, 'Vote no, because otherwise you are letting the Government get away with stealing the company from you'," he said. Railtrack was forced into administration by the former transport secretary Stephen Byers last October and shares were suspended at £2.80.

Under the terms of the proposed deal, shareholders would be paid between £2.30 and £2.50 a share ­ well below the floatation price of £3.60 ­ for 20,000 miles of railway track, 2,500 stations and 1,100 signal boxes. The £500m price includes £300m from the Government's Strategic Rail Authority.

Although Railtrack has 250,000 private shareholders, more than 75 per cent of the shares are held by financial institutions, many of which are more inclined to accept Network Rail's offer. Usman Mahmud, of the Railtrack Action Group, which also represents private investors, said he supported Mr Chalken's planned legal action, but expected the deal to be approved at the EGM.

¿ Rail unions threatened yesterday to take legal action against the Health and Safety Executive over its "failure" to insist Railtrack make maintenance work in-house instead of giving it to contractors.