Royal Mail sold today

 
Royal Mail

Within a few hours, any of us will be able to apply for Royal Mail shares - either online, with a pack obtained at a post office or through a financial specialist.

And the process of offering shares to big investors will also begin.

So it is a historic moment, the first privatisation of an important public service since the 1990s.

Royal Mail's shares will be sold at a price of between 260 pence and 330 pence a share, valuing the widely revered service at between £2.6bn and £3.3bn.

Which means that despite employing almost 170,000 people, it will not be one of the 100 biggest listed companies in Britain by value.

That relatively low value reflects the perceived risks of investing in the company. Although it has returned to profit, its letters business is in what many would see as terminal decline, because of the unstoppable rise of assorted forms of electronic communications, and its healthier parcels operation is subject to serious competition.

Also, the kind of modernisation deemed necessary by the company's management cannot be taken for granted in a company where industrial relations remain fraught.

These risks are captured in the relatively high dividend yield or income to be paid by Royal Mail to its shareholders. At the proposed range in the sale price, Royal Mail shares would pay a dividend equivalent to between 6.1% and 7.7% of the offer price.

The timing of the sale is electric, coming as it does as the CWU union ballots its 100,000 members on a strike.

By starting the share sale today, the Department of Business has more or less guaranteed that Royal Mail will be in the private sector before any strike can actually happen. Royal Mail should be privatised by 15 October, eight days before the first possible day for a strike.

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Not all grassroots Tories are overjoyed by the prospect of Royal Mail being in the private sector”

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If demand for the shares is strong the government's stake could fall to just under 40% - and if in the few weeks after privatisation, demand continues to be strong, there is provision for further shares to be sold to investors, which would take the taxpayers' holding down to 30%.

The time of the sale is gripping for a second reason, that it comes just days before the Tories' annual conference - which raises the prospect of senior Conservative leaders citing it as another example of their pro-market credentials, in supposed contrast to the lurch to the left of Labour under Ed Miliband.

That said, not all grassroots Tories are overjoyed by the prospect of Royal Mail being in the private sector.

There is a perhaps a Thatcherite confrontational tint to the whole exercise, unusual for a government led by David Cameron, whose own ideological roots seem more Blairite than Iron Lady.

As I have already mentioned, for example, ministers are pressing ahead with a share sale on the very same day as the CWU trade union ballots its 100,000 Royal Mail workers on a strike.

And the cockles of those nostalgic for Thatcherism may be warmed by the fact that this is the first sale of a government asset where there is a large-scale initiative to sell shares to the general public since the heyday of privatisations in the late 1980s and early 1990s.

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +1

    Comment number 7.

    Still slightly bemused by all this, is the government afraid to push through reforms in RM, hence selling off at undervalue and allowing those ruthless capitalists to do it instead? Because do it they will, as the pressure from the major shareholders would be strong.

    This isn't fearless capitalism, it's cowardly politics.

  • rate this
    0

    Comment number 6.

    Shame that I or indeed the majority of people can not take advantage of this sickening investment oppertunity. I will however (no doubt) soon start paying extra for those shareholder dividends.

  • rate this
    +1

    Comment number 5.

    Another chance to demonstrate how privatisation can give tax payer can get better value through competition.

    Just look at all the success stories of Gas, Electricity and British Rail. We are paying less for a better server aren’t we?

    How about privatising the BBC next?

  • rate this
    +3

    Comment number 4.

    Isn't it more important to do something about the energy supply cartel (and the bank cartel) that this diversionary privatisation? After all there is already a free market in parcel delivery (with even Argos becoming an ebay pick-up-point).

    Email is almost ubiquitous and saves trees - so get everyone on the internet NOW!

    Postal services are a nice facility, but becoming less and less essential.

  • rate this
    +29

    Comment number 3.

    I have a question :

    How can the government sell us something we already own?

    Every reason given for selling the Royal Mail sounds like a con. Every time someone in government is pushed for a real answer, all we get are weasel words and parliamentary BS. And now it's sold, we just get more of the same with added "it's a private industry" now.

    DAYLIGHT ROBBERY!

  • rate this
    +2

    Comment number 2.

    so the Government, are now planning to stitch up rural customers Government, by lieing that the USO is protected by law, equally the knee jerk reaction to the strike ballot may be the downfall of this government

  • rate this
    +2

    Comment number 1.

    2nd Class Stamp from £1
    1st Class Stamp from £2
    Parcel from £4

    Why - because far higher prices reflect the actual cost of the service and enable a reasonable salary to be paid to the staff (and dividends to shareholders)

    But most communications will switch to electronic only - what is actually best. Pricing out of junk mail will be welcomes by everyone!

 

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