Royal Mail Privatisation: UK Government Announces Flotation Due Within Weeks

Royal Mail will be floated onto the London Stock Exchange within weeks as the UK government confirms to the markets its intention to launch an initial public offering for the postal service.

The government said it would keep flexible the total stake offered out to retail investors because it wants to balance market conditions, investor demand, and value for taxpayers. At least 41% of the firm will be on offer.

It had already been announced to parliament in July that the government planned to privatise Royal Mail through an IPO, but this is the first formal step towards flotation.

Employees will be given 10% of Royal Mail in shares, priority over retail investors in purchasing stock, and have a smaller minimum purchase of £500, against £750 for the rest of the market.

"This is an important day for the Royal Mail, its employees and its customers," said Business Secretary Vince Cable.

"HM Government is taking action to secure a healthy future for the company. These measures will help ensure the long term sustainability of the six-days-a-week, one-price-goes-anywhere universal postal service."

Moya Greene, chief executive of Royal Mail, said the firm's strategy is "delivering a revitalised company, with a unique UK, multi-use network through which we are proud to deliver the universal postal service for all UK citizens."

The government hopes that by releasing Royal Mail into the market it will become more efficient and competitive in the parcels sector, which has become increasingly crowded in recent years as the British institution's former monopoly is eroded.

Postal unions have been staunchly opposed to the privatisation of Royal Mail and the Communication Workers Union is going to ballot its members with a view to strike action.

Labour also opposes the flotation, with Shadow Business Secretary Chuka Umunna saying it is "wrong" and simply "selling off a treasured national institution to fill George Osborne's black hole".

City analysts doubt Royal Mail will meet the £3bn value needed to enter the FTSE100 on flotation.

David Battersby, an investment manager at Redmayne Bentley, was extremely sceptical of Royal Mail's IPO and criticised the structure of the company.

"I have no intention of going anywhere near the business of Royal Mail. It is heavily unionised and it has far too much competition from other carriers both in terms of parcels and electronic format," he told IBTimes UK.