Royal Mail to float "in weeks"

12 September 2013

The government has announced details of the privatisation of Royal Mail, two years after the sale of Royal Mail was approved by parliament in the 2011 Postal Services Act.

Members of the public will be able to buy a minimum of £750 of shares through intermediaries such as Hargreaves Lansdown and Interactive Investor, or directly from the government.

Royal Mail plans to offer generous dividends to attract investors, with a commitment of intent to distribute up to about 50% of its profits in the form of dividends in future years.

While no timetable for the stockmarket listing has been published, the government said a float is expected to take place "in the coming weeks".

The government said that 10% of the shares will be given to employees for free. If the estimated sale price of £3 billion is correct, this means the free shares could be worth up to £2,000 per head.

But workers will also be offered the chance to buy further shares, with a minimum of £500 a good deal lower than the minimum purchase set for private investors.


However, the planned floatation is not without controversy. The Communication Workers Union wishes to halt the sale of Royal Mail until safeguards are put in place to protect thousands of post offices. It is planning to ballot its members for strikes over pay, jobs and other issues linked to privatisation. It also wants an improved deal on pay and conditions for Royal Mail's workforce and has rejected an 8.6% basic pay rise over three years offered by management.

The National Federation of Sub-postmasters is also urging ministers to retain a chunk of Royal Mail to give it a say in future decisions about its operations that may impact Post Office closures and customer service.

Offering retail investors the opportunity to purchase shares during an IPO is a rarity these days, because timing issues mean it can usually only work for very large and well known entities where the share price is usually less volatile.

Last year Direct Line launched a retail offering to customers, raising £115 million equal to a 15% stake in the insurer.

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