Public get chance to buy part of Royal Mail in £3bn 'Thatcher-style' privatisation

 

Millions of families were today invited to buy shares in Royal Mail in the first “Thatcher style” privatisation for almost two decades.

Small investors will be able to apply for a minimum of £750 worth of shares when the world’s oldest’s postal service is floated on the Stock Exchange later in the autumn.

Business Secretary Vince Cable confirmed that at least 51 per cent of Royal Mail will be hived off after almost 500 years in Government hands. But the main postal union condemned the announcement as “dogma from old-fashioned Tories”, and called on Labour to pledge to renationalise at its party conference.

More than 100,000 postal workers are being balloted on strike action, which could start as soon as October 10. The sale will include a 10 per cent allocation of free shares to Royal Mail’s 150,000 staff, worth about £2,000 each.

The City flotation will take place within “four to six weeks” and will value the business at up to £3 billion — making it the biggest privatisation since British Rail was broken up in the mid-Nineties.

Members of the public will be able to apply for Royal Mail shares online using a debit card or by returning an application form. But ministers said there was unlikely to be a “lavish advertising campaign” on the scale of the “Tell Sid” promotions of the 1986 British Gas privatisation.

Business minister Michael Fallon said: “We do want retail investors. The £750 level is pretty similar to that set 20 years ago (for earlier privatisations). We are not going to spend taxpayers’ money on lavish advertising campaigns. There will be some modest advertising on how to access the offer in the financial press.”

The Government has already promised shareholders a £133 million dividend in Royal Mail’s first year as a private company, to be paid out next July. Beyond that dividends are expected to be increased.

Mr Fallon reassured Royal Mail staff that they “have nothing to fear and everything to gain”. He added: “We will go through with privatisation regardless of what the union is doing. There is an 8.6 per cent pay offer on the table. The rest of the public sector, teachers and nurses, are getting one per cent this year.”

The privatisation marks the culmination of a 20-year effort by successive governments to get the Royal Mail out of 100-per-cent state ownership. The plans unveiled today involve only the sale of the Royal Mail delivery business, not the chain of Post Offices. The company will still be able to call itself “Royal” and will be able to use the Queen’s head on stamps.

Billy Hayes, general secretary of the Communications Workers Union, said: “This isn’t about what’s best for the Royal Mail, it’s about vested interests of government ministers’ mates in the City.”

Markets get a special delivery

Commentary: James Ashton

WHAT a delivery. Here is a company that was long deemed unsaleable, haemorrhaging cash with huge overheads and operating in a market that was being whittled away by electronic media.

Even Lords Mandelson and Heseltine and ITV’s current golden boy, Adam Crozier, couldn’t get the Royal Mail in shape for a sale.

Yet, bar some union shouting, the Queen’s head will debut on the stock market by November. From losing millions, now Royal Mail is trying to lure punters with the promise of a chunky dividend.

It has been a remarkable turnaround, led by Moya Greene, the Canadian who helped to manage the privatisation of Canada’s railways, airlines and ports. There is really no reason for companies to be owned by the government. But for many years, no one else would touch this one.

Every sinew has been strained to dress Royal Mail for sale so it can tap the markets for more cash to modernise.

Its giant £12 billion pension liability, which cost £400 million a year to service, has been parcelled off to taxpayers and buried in the Treasury machine. Stamp prices have been pushed up. More importantly, along came a boom in online shopping that means growing parcel volumes have a fair chance of offsetting the decline in letters.

The unions have been made to look flat-footed by rattling the sabre over strike action for months without getting on with it. Even with their threats, the shares must be worth a punt.

The Government wouldn’t have got this far without making sure this share offering is priced to go, would it?

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