18th Oct 2013 14:59
LONDON (Alliance News) - UK Business Secretary Vince Cable has defended the pricing of the Royal Mail float, arguing that there was not enough demand from long-term investors to price it above the 330 pence per share issue price, in part because of the ongoing threat of industrial action, reports Sky News City Editor Mark Klelnman.
Sky News has reported that it obtained a letter sent by Cable on Friday to the Business, Innovation and Skills Select Committee, in which he dismisses concerns that the sale of the postal operator was spectacularly underpriced.
Cable and the government's investment-banking advisers have been accused of undervaluing the company after seeing its share price rise by 38% on its first day of trading. Shares in the 501-year-old institution have breached the five-pound level Friday, trading at 504.61p in the later afternoon, up 5.1%.
Cable said that the initial price range for the flotation, which attributed a value of between GBP2.6 billion and GBP3.3 billion to Royal Mail, was recommended by Goldman Sachs and UBS, the lead banking advisers, and endorsed by Lazard, which provided independent advice to ministers, reports Sky.
"In August 2013, as the date of the IPO approached, this list of potential investors was narrowed down to a focused group of approximately 20 investors, selected on the basis of feedback gathered during the investor engagement process and, in particular, their understanding of the risks inherent in the company's industrial relations," Cable wrote to the Parliamentary committee.
The timing of the disclosure that unions would ballot Royal Mail workers for strike action, which was approved this week, meant that some potential investors in the company indicated that they would opt not to buy shares, the Business Secretary added.
http://news.sky.com/story/1156367/cable-hits-back-at-royal-mail-sale-critics
By Jon Darby; [email protected]; @jondarby100
Copyright 2013 Alliance News Limited. All Rights Reserved.
Related Shares:
RMG.L