Royal Mail privatisation kicks off ahead of CWU strike ballot

By Simon Nias, Friday 27 September 2013

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Royal Mail kicked off its initial public offering (IPO) today just as the CWU was sending out ballot papers to postal workers for strike action opposing the privatisation.

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The timing of the flotation, with shares expected to begin open trading on 15 October, means the government will already have sold a sizeable chunk of the Royal Mail before the earliest possible strike action (on 23 October).

Business secretary Vince Cable announced the IPO this morning, with an expected price range of 260-330p per share giving an implied market capitalisation of £2.6-3.3bn, and said that he was "encouraged by the interest shown by potential investors so far".

Cable said: "Today is an important day in the life of Royal Mail: people can now apply to buy shares in this iconic British brand. This will give Royal Mail access to the private capital it needs to modernise, as envisaged under successive governments, and enshrined in law by Parliament two years ago."

The offer is open to institutional investors and members of the public, who can apply for a minimum allocation of £750 (or £500 for Royal Mail employees) through intermediaries, via the website www.gov.uk/royalmailshares, or by post.

The government plans to hand 10% of Royal Mail's shares to its 150,000 eligible, UK-based employees, while its own shareholding will drop to between 30-49.9% depending on the demand for shares from investors.

Moya Greene, chief executive of Royal Mail, said:"Royal Mail has a unique place in the UK and that will not change as we move into the private sector. We will now be better able to compete in what is a fast changing and intensely competitive market.

"I’m delighted our people will own a meaningful stake in the company and that the public now have the opportunity to own a share in our future as well."

However, CWU general secretary Billy Hayes criticised the timing of the move. "It seems remarkable that the prospectus is being issued on the same day that postal workers are being sent ballot papers for strike action," he said.

"Today’s announcement changes nothing in terms of the ballot which will go ahead as notified. Royal Mail is profitable and can continue to be successful in the public sector. The sale is driven by political dogma, not economic necessity, and postal workers and the CWU will continue to fight to save services as well as defend their terms and conditions."

According to the share offer, Royal Mail's implied dividend yield for the year to 31 March 2014 would be approximately 6.1% to 7.7% on the basis of the expected offer price range and a notional full-year dividend of £200m (the amount Royal Mail believes would have been proposed if the company had been listed throughout the full year ending 31 March 2014).




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