Royal Mail valued at $5.3 billion ahead of IPO
Sep. 27, 2013
LONDON (AP) — The British government said Friday that Royal Mail will be valued at up to 3.3 billion pounds ($5.3 billion) when it sells a majority stake in the 500-year-old service next month.
Shares are expected to be priced at between 260 pence and 330 pence, giving a market valuation of between 2.6 billion pounds and 3.3 billion pounds. Based on these figures, the government will raise between 1.04 billion pounds and 1.72 billion pounds.
The sale is a big and controversial change for a national institution that dates to the time of King Henry VIII. Even Margaret Thatcher, who championed the sale of state-owned companies such as British Telecom and British Gas in her tenure as prime minister, refrained from privatizing Royal Mail in the 1980s.
Business minister Michael Fallon was reminded in a BBC interview of Thatcher's reticence. The late leader had famously said she was not prepared to privatize Queen Elizabeth II's head — an image which appears on stamps across the land.
"We are not selling the queen's head," Fallon said. "We are not selling the post offices. We are selling Royal Mail."
The stock sale would allow Royal Mail to tap investment it needs to modernize and to compete, particularly in parcel delivery, a major source of income as letter use declines in favor of email.
But postal unions and the government opposition have condemned the initial public offering as a "fire sale" of a lucrative state asset. Stock trading starts on Oct. 15 — a day before the Communications Workers Union strike ballot closes.
Union workers stand to benefit from the stock sale, with 10 percent of the shares made available for free to 150,000 U.K.-based Royal Mail employees. But there are fears of potential job losses.
"Those who want to sell off the Royal Mail Group are motivated purely by short-term gain and vested interests," the postal union told its members in a statement. "We cannot give the company a free hand to determine your future and the future of U.K. postal services."
The sale will close on Oct. 8, with the actual pricing expected to be announced on Oct. 11. The government's holding is expected to be between 37.8 percent and 49.9 percent.