Neil Maidment London
Britain embarked on its largest privatisation in decades yesterday as the government unveiled plans to sell most of the almost 500-year-old state-owned Royal Mail.
The Department for Business said a stock market flotation, which is fiercely opposed by unions, would take place in coming weeks, giving the public a chance to buy into the postal service. In the largest giveaway of any major UK privatisation, 10 percent of the shares will go to Royal Mail staff. It said the size of the sale would depend on market conditions, although it intended to dispose of a majority stake.
Analysts say the float could value Royal Mail, whose roots go back to a service founded by King Henry VIII in 1516, at between £2 billion and £3bn (R31.4bn and R47bn).
The sale would be one of the most significant privatisations in Britain since John Major’s Conservative government sold the railways in the 1990s. Major’s predecessor, Margaret Thatcher, pioneered state sell-offs but stopped short of the Royal Mail because of its potential controversy.
Business Minister Michael Fallon, who is leading the sale, said there was sufficient investor demand to push the button on the float. He dismissed the chances of a possible postal strike derailing the plans.
The Communication Workers Union (CWU), which represents most of the delivery service’s 150 000 staff, will send out strike ballot papers next Friday if an agreement cannot be reached over post-privatisation pay and conditions.
The CWU says privatisation could threaten jobs and lead to a poorer service, while the government and Royal Mail argue it will provide access to the capital the firm needs to modernise and better compete in the thriving parcels market.
Fallon said there were concerns about any privatisation among the workforce and among the people who relied on the organisation’s service, but said there were safeguards in place. “The six-day-a-week service that we all rely on and that businesses rely on, that is absolutely protected… and there is going to be no change to that,” Fallon told BBC radio.
Members of the public must spend a minimum of £750 if they want to buy shares, while Royal Mail staff will have to spend a minimum of £500 if they want to add to the potential £2 000 worth of stock each worker will get, based on a flotation value of £3bn.
The plan is the fourth time Britain has tried to take Royal Mail public, after three attempts failed in the past 19 years due to opposition from within the governing majority, which feared an electoral backlash from tampering with a revered institution.
Chuka Umunna, a business spokesman for the Labour Party, called the move “a politically motivated fire sale”, while a poll by YouGov in July showed 67 percent of the public opposed the sale.
Royal Mail, which no longer includes the Post Office services and retail business, has revenue of more than £9bn and it more than doubled operating profit to £403 million in the year to March.
In response to falling letter volumes, the firm has shed 50 000 jobs in the past decade and shut 25 mail centres.
Royal Mail said conditional on the listing it had agreed on new debt facilities worth £1.4bn with a banking syndicate that would replace all existing loans from the government and lead to a significant reduction in the overall cost of the group’s debt.
ETX Capital told clients it expected the initial public offering (IPO) to be priced “very attractively” so it would attract the demand needed “to deem this IPO as a success given the importance surrounding it”.
Stephen Bailey, the co-head of the Liontrust Macro Equity Income Fund, said investors were awaiting more details. – Reuters