10th Jun 2015 15:55
LONDON (Alliance News) - The UK government Wednesday announced plans to sell around half of its remaining stake in Royal Mail PLC through a share placing, just days after Chancellor of the Exchequer George Osborne said the government would sell all its remaining 30% stake this year as part of its efforts to bolster its coffers.
The price of the placing will be determined via an accelerated book building process, the Department for Business, Innovation & Skills said. The placing is expected to comprise around 150 million shares, or around half the 30% stake the government has in the company. The 30% stake is currently valued at around GBP1.5 billion.
Details of the placing price and number of placing shares will be announced "in due course", it said.
Bank of America Merrill Lynch, Goldman Sachs International and JP Morgan Securities have been appointed to act as joint bookrunners on the placing. NM Rothschild is acting as capital markets adviser. Freshfiels Bruckhaus Deringer LLP is acting as legal counsel.
A spokesperson for the Department for Business said that "current market conditions represent a good opportunity to achieve value for the taxpayer".
Shares in Royal Mail surged higher following its initial flotation in October 2013, prompting a long-running row between the previous coalition government and critics over whether the shares had been priced too cheaply and resulted in taxpayers missing out on an extra windfall. Shares in the company were floated at 330 pence and were trading at 516.5 pence on Wednesday.
Royal Mail last month posted higher profit for the financial year to March 29 as cost-cutting measures in the UK offset lower-than-expected revenue in its parcels business. It reported a pretax profit of GBP569 million for the year ended March 29, up from GBP421 million a year earlier, even though revenue declined to GBP9.42 billion from GBP9.46 billion.
The legacy postal operator still has an obligation to deliver post to every address in the country and has been going through a transformation and efficiency drive as it positions itself to cope with the burgeoning parcels market and the gradual decline in the letters market.
"The universal service is strongly protected by law and Ofcom has a duty to ensure its provision. Therefore the Government sees no policy reason to retain a stake in Royal Mail," the Department for Business spokesperson added.
The Royal Mail float is part of a wide-ranging package of measures outlined by Osborne designed to cut Whitehall spending and raise money in the current financial year to the end of March 2016. Excluding the GBP1.5 billion the government has estimated it will make from the sale of Royal Mail shares, Osborne also outlined a total of GBP3.07 billion in cost savings to be made by different departments.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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