Royal Mail to Give Away Shares Worth £300m to Staff in Planned Flotation

Royal Mail employees will get free shares in the company, as part of the British government's plan to privatise and list the 375-year-old postal operator.

The staff will get shares worth up to £300m ($447m/€348m) for free rather than at a discount in the privatisation of the company, which would be Britain's biggest in decades, Sky News reported. The offered shares would come to 10% of Royal Mail's equity.

In addition, the employees will be guaranteed a proportion of the retail element of the initial public offering (IPO) of Royal Mail, which would give them more than 10% stake in the company. Taking into account the overall valuation of the IPO between £2.5bn and £3bn, the employees' stake could worth up to £300m.

About 150,000 of Royal Mail's 165,000 staff are expected to be eligible for the share distribution, Sky News said, adding that employees at the European parcels subsidiary GLS would be excluded from the deal.

The employees will not receive shares on the IPO day and the giveaway would take place in several tranches, Whitehall sources told Sky News. Each eligible member of the staff would receive shares worth about £2,000.

Business Secretary Vince Cable will announce the details of the privatisation to the House of Commons on Wednesday afternoon.

The government is expected to sell about 60% of shares in Royal Mail in the first phase of the privatisation.

The government's decision to privatise the postal operator, whose history dates back to 1516 and King Henry VIII, comes amid a paradigm shift in postal business giving more importance to parcels in line with a rise in online shopping. The government argued that the business requires external capital to "innovate and seize the opportunities presented by new markets."

"I would hope that a privatised Royal Mail would be looking to expand on their products and services, and to make those services ready for 21st century consumers," Sky News quoted Robert Hammond, director of post and market analysis at Consumer Focus, as saying.

Meanwhile, trade unions criticised the listing plans saying it will spark a decline in postal service provision and working conditions for the company's employees.

In a letter to Business Minister Michael Fallon, the Communication Workers Union has warned that if the government does not think again about the privatisation, then "the threat to terms and conditions of postal workers will inevitably lead to strike action".