Britain kicks off Royal Mail sale with $5.3 billion price tag

Fri Sep 27, 2013 5:52am EDT
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By Kylie MacLellan

LONDON (Reuters) - Britain's Royal Mail postal service should a command a value of as much as 3.3 billion pounds ($5.3 billion) when it makes its London stock market debut next month, the government said on Friday as it began taking orders for the selloff.

The sale would be one of Britain's most significant privatizations since John Major's Conservative government sold the railways in the 1990s and would give Royal Mail access to the private capital it says it needs to modernize and better compete in a thriving parcels market.

Kicking off the sale of the near 500-year-old company, the government said it would dispose of a majority stake in Royal Mail, offering shares at between 260 pence and 330p each.

That would value the company at between 2.6 and 3.3 billion pounds, raising between 1 billion pounds and 1.7 billion pounds for government coffers. The size of the offering could be increased by up to 15 percent via an "overallotment" option, whereby more stock can be sold if there is strong demand.

If that overallotment option is exercised, the government's stake could fall to as little as 30 percent following the sale.

"We are encouraged by the interest shown by potential investors so far," Business Minister Vince Cable said.

The sale plan is be the fourth time Britain has tried to take Royal Mail public, after three attempts failed in the last 19 years due to opposition from within the governing majority, which feared an electoral backlash from tampering with a revered institution whose red post-boxes are known around the world.

The latest privatization push has been criticized by the current opposition Labour party and is fiercely opposed by trade union members who are considering strike action.   Continued...

A Royal Mail post box stands on a street corner in Manchester, northern England September 12, 2013. REUTERS/Phil Noble