Britain Prepares I.P.O. for Postal Service

Britain Prepares I.P.O. for Postal Service

Updated, 5:16 a.m. |

LONDON – The British government confirmed plans on Thursday to sell a majority stake in Royal Mail, the country’s postal service, in an initial public offering.

The I.P.O., which is expected in the coming weeks, would be one of the largest British offerings in recent years, and mark the end of public ownership for Royal Mail, whose roots date back to the court of Henry VIII in the 16th century. The privatization also would be the largest in Britain since the country sold its railroads to private investors in the 1990s.

The offering is part of the British government’s ongoing efforts to offload state-owned assets as part of a wide-ranging deficit reduction plan, but it has faced vocal opposition from Royal Mail workers and some local politicians.

The government said on Thursday that 10 percent of the offering would be set aside for Royal Mail employees, while the remaining undisclosed stake would be sold to institutional investors. The government had already announced that it would give some shares free to employees in any I.P.O. of the mail service.

The size and timing of the deal were not announced, but analysts expect that the share sale could reach up to £3.5 billion, or $ 5.5 billion. Royal Mail also has arranged £1.4 of debt facilities that are dependent on the share sale going ahead.

“This is an important day for the Royal Mail,” Vince Cable, the British business secretary, said in a statement on Thursday. “These measures will help ensure the long term sustainability of the six days a week, one-price-goes-anywhere universal postal service.”

Royal Mail has faced stiff competition from private companies like DHL and TNT of the Netherlands, and has been forced to close rural post offices and increase the cost for delivering mail. The number of parcels and letters that the centuries-old company delivers on a daily basis has fallen around 30 percent, to 58 million, over the last 5 years, according to the company’s website.

Despite Royal Mail’s troubled financial position, union leaders remain opposed to the share sale, and have vowed to call a number of strikes by the end of the year in an attempt to block the offering.

“This isn’t about what’s best for the Royal Mail, it’s about vested interests of government ministers’ mates in the City,” said Billy Hayes, general secretary of the Communication Workers Union, which represents many of Royal Mail’s staff, in a statement on Thursday. “Privatisation is the worst way to access to capital as it’s more expensive than borrowing under public ownership.”

Goldman Sachs, UBS, Barclays, Bank of America Merrill Lynch, Invectec and RBC are coordinating the Royal Mail I.P.O, while Lazard is advising the British postal service on the offering.



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