Royal Mail privatisation 'in the coming weeks'
- 12 September 2013
- From the section Business
The government has given formal notice to the stock exchange that it plans to privatise the Royal Mail "in the coming weeks".
BBC business editor Robert Peston said he expected the sale to take place in November.
Employees will be given 10% of the shares, with the rest being offered to institutional investors and members of the public.
Unions have already threatened strike action over the privatisation.
The minimum amount members of the public can buy in shares will be £750.
Free shares will be given to 150,000 UK-based Royal Mail employees, who will be able to apply for additional shares under an employee priority offer, with a minimum application of £500.
The Communication Workers Union (CWU) opposes the float and is about to ballot its members for strike action. The outcome of the ballot will be announced on 3 October.
Royal Mail expects CWU members to vote for industrial action, with the first date available for a strike being 10 October.
Moya Greene, chief executive of Royal Mail, said the privatisation of the company was now beyond doubt, and urged the CWU to come to an agreement with the Royal Mail, rather than going ahead with potential strikes.
"Talk of a ballot for industrial action makes no sense when there is a significant three-year deal on the table and negotiations are ongoing," she said.
The pay offer from Royal Mail would give workers a salary worth 8.6% more in three years' time.
It has been rejected by the CWU as it is conditional on the workforce accepting changes to pension arrangements and other terms and conditions.
It is also concerned about the future of Royal Mail's universal service.
Business minister Michael Fallon sought to reassure people that the six-day-a-week universal service was protected.
"It is the law - it's an Act of Parliament that was passed two years ago and only Parliament could ever change that," he told BBC News.
"I can't think of any political party that would want to reduce the service that we all rely on."
The government plans to sell a majority stake in Royal Mail, but it has said it will be flexible about exactly how big the stake will be, depending on market conditions and how much demand there is for the shares.
More information is available at www.gov.uk/royalmailshares which is also where online applications will be once the offer opens.
Private investors will also be able to apply for shares by post or through stockbrokers.
Royal Mail has announced that "in the absence of unforeseen circumstances" it will pay a dividend of £133m in July 2014, saying it would have paid £200m if the business had been listed for the whole of its financial year.
Robert Peston said that implied the business was worth around £3bn.
As part of the privatisation, Royal Mail will take on £600m of loans from banks, with another £800m available if necessary. This will replace the loans it currently has from the government.
The Post Office was separated from Royal Mail in 2012 and is not for sale.
Business Secretary Vince Cable said: "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."
But shadow business secretary Chuka Umunna said: "Ministers are pushing ahead with this politically-motivated fire sale of Royal Mail to fill the hole left by George Osborne's failed plan."
"The government has not addressed the huge concerns which remain on the impact the Royal Mail sale will have on consumers, businesses and communities."