Royal Mail needs to be able to compete with the internet, smart phones and international postal operators. That’s why I have announced that the Government will sell shares in Royal Mail through an IPO

Michael Fallon

Said Michael Fallon, MP, in his post dated September 12, 2013 on Conservative Home (a pro-Conservative Party website) justifying the sale of Royal Mail.

Michael Fallon, in his post says that the sale of shares will give Royal Mail the commercial freedom it needs to succeed. It will give the company future access to capital it needs for investment – to seize the opportunities for growth such as increasing parcel volumes from the boom in online shopping. It will give Royal Mail commercial confidence – free from Whitehall interference. We are making 10 per cent of the shares available to around 150,000 eligible employees for free. This is the largest employee share scheme of any major privatisation for almost 30 years. We are also giving people the opportunity to buy shares in Royal Mail through intermediaries, online or, of course, by post. We are committed to ensuring a sustainable future for the Post Office by maintaining a network of at least 11,500 branches across the UK.

However, The Daily Telegraph has disclosed that Michael Fallon - Conservative minister in charge of selling off Royal Mail - was firmly against the state-owned business’s privatisation just four years ago by publishing his letter to this effect. Ian Murray MP, shadow Minister for Postal Affairs, has criticised Michael Fallon terming his attitude as 'deeply hypocritical'.

The British government has kicked off the sale of the near 500-year-old company by disposing 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 per cent 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 per cent following the sale. 

Courtesy : The Daily Telegraph

Bloomberg has reported that Royal Mail’s $5.3 Billion IPO, that opened today (September 27, 2013), was over subscribed within hours, mainly on demand from institutions. Royal Mail shares will be open to applications until Oct. 8 and are expected to make its debut on Oct 11 on the London Stock Exchange. Michael Fallon told Bloomberg Television : Postal services “aren’t businesses that sit naturally in the public sector,” he said, adding: “Its future lies in the private sector.” The U.K. government wouldn’t be able to block a foreign takeover of Royal Mail once the shares are traded, Fallon said, while adding that the company will have access to capital needed to expand internationally as other nations open postal markets. 

According to the government, which is being advised by Lazard Ltd., bookrunners for the sale are Goldman Sachs Group Inc., UBS AG (UBSN), Barclays Plc (BARC). Merrill Lynch & Co., with Investec Ltd., Nomura Bank International Plc and RBC Europe Ltd. are the lead managers.