Royal Mail Privatised in 2013 with IPO: Financial Times

Britain's struggling state-owned postal service will float on the stock market in autumn 2013 if its finances continue to improve, according to the Financial Times.

Royal Mail Group would be sold to institutions and the public in an IPO and its staff will be given shares - the government's favoured option - although a full sale to one private buyer is not being ruled out.

"We see no reason why this company should not be IPO-able," a senior insider quoted by the FT said.

"Royal Mail is viewed with a high level of affection by the public. That could easily play well into an IPO situation."

The Treasury was not immediately available for comment.

It is thought the sale process would only start in the autumn of 2013 with a partial sell-off.

Some analysts put the Royal Mail's value at around £3bn-£4bn, though it is difficult to calculate since it is not already a publicly traded stock.

Part of the privatisation plans would see 10 percent of Royal Mail shares go to its staff.

Post offices would stay in the public sector but could be mutualised, with staff and customers owning them.

The government recently took control of Royal Mail's pension fund, which has assets worth £28bn and liabilities worth £37.5bn - leaving a £9.5bn deficit.

"The transfer of the £28bn assets from the Royal Mail pension fund to the Exchequer will free it from its crippling pension debts, ensure the pensions of hard-working staff are paid and help to bring in new private sector investment," chancellor George Osborne said in his Budget speech.

This move boosts Royal Mail's attractiveness to potential buyers and investors.

In another development for those interested in buying a stake in Royal Mail, Ofcom is soon due to loosen its regulatory grip on the postal service by allowing it more freedom over pricing its products.

Royal Mail's turnover was £9.2bn from 2010-11 and its latest annual report from August shows the group as a whole, which also owns Parcelforce, makes £39m operating profit.

A November 2010 survey of British retail investors by financial PR group M:Communications showed they had significant interest - almost three quarters - in buying shares in Royal Mail if it were to be privatised.

The coalition government's bill to privatise Royal Mail became the Postal Services Act when it passed through parliament in 2011.

Successive governments have tried and failed to privatise it because of various operational and financial difficulties, along with public opposition to the move.

"Royal Mail is in a difficult position - there is no hiding from the facts: mail volumes falling; a multibillion pound pension deficit; less efficiency than its competitors and an urgent need for more capital at a time when there are huge constraints on the public purse," Business Secretary Vince Cable said when launching the bill.

"The company now has to go further and faster to innovate, modernise and adapt better to the digital age - that requires substantial investment. This investment needs to be delivered by the private sector, particularly in light of the huge public sector deficit."