Banks get slim fees for privatisation of UK's Royal Mail

Fri Sep 27, 2013 11:58am EDT
 
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By Kylie MacLellan

LONDON, Sept 27 (Reuters) - The investment banks working on the privatisation of Britain's Royal Mail postal service stand to share a maximum fee pot of just under 24 million pounds ($38.4 million), around a third below the typical amount for a similar sized listing.

The government kicked off its disposal of a majority stake in Royal Mail on Friday, seeking to value the company at as much as 3.3 billion pounds ($5.3 billion) in one of Britain's most significant selloffs since the 1990s.

It will pay the banks a maximum possible overall fee of 1.2 percent of the amount raised by the sale.

That is below the average of 1.6 to 2 percent paid for initial public offerings over $1 billion in Europe, Middle East and Africa between 2010 and 2013, according to data from Thomson Reuters/Freeman Consulting.

Companies bringing large deals to market have greater power to squeeze fee percentages, as the absolute sum is higher and banks are keen to gain credit on league tables which rank the performance of firms and are fiercely competitive.

Banks also see it as prestigious to work on such high profile deals and are keen to form good relations with governments in the hope of future work.

Earlier this month the British government did not pay any fees to the banks that handled its sale of a 6 percent stake in bailed-out lender Lloyds Banking Group.

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