Slow bids for Red Star
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by Kathy Watson • The sell-off of British Rail's parcel arm Red Star has attracted fewer bids than expected: several companies have decided against making offers because of the cost of laying off some or all of Red Star's 1,200 staff.
BR staff enjoy a generous redundancy package which a new owner would have to honour under the Transfer of Undertakings regulations. Many of the 1,200 Red Star staff have been with the company for 20 years and the bill could amount to £24m. According to the BR Board "several bids" were received by the closing date of 13 August, but they are all believed to be full of conditions which the BR Board wants clarified.
Amtrak, a division of Roadexpress and a Red Star management buyout team have made offers—but UPS and Parceline did not bid.
The MBO team is headed by Jonathan Smith, general manager of the London and South East division, with midland general manager John Holmes, public affairs director Roger Harrison and financial controller David Simons.
Paul Jackson, chairman of freight and express consultant Triangle Management Services, believes bid prices could vary wildly because of BR's redundancy terms.
"Bidders want the Red Star traffic not the people," he says. "If BR were selling the traffic they would probably get £10-20m_ But if they are selling the staff as well BR will have to pay someone £10-20m."
In 1992/3 Red Star made a £9m loss on a turnover of £46m.