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

    Comment number 367.

    alan @364

    And you tell us why. Thank you.

    And you tell us why. Thank you.

    No word of better ways
    You could be, are you, one of them?
    That knows nothing of time and weariness, of age and pain
    Comfortable, no doubt

    May your God forgive you, knowing not

  • rate this

    Comment number 366.

    The most catastrophic thing to be announced today is the accelerating of the state subsidy for house purchase plan from January 2014 to NOW - this will create a diabolical housing bubble which will do immense damage to the economy.

    The BoE is prevented from commenting on this inanity till NEXT SEPTEMBER!

    The Royal Mail thing is a pin-prick in comparison.


  • rate this

    Comment number 365.

    It will be interesting to see if privatisation of Royal Mail has an affect on the £1 million bonuses that the directors award themselves for a job well done!
    The Tories are really desperate for headlines for their party conference.
    It shows me once again how out of touch Mr Cameron really is and I'm sad to see that Labour will have to try really hard to lose the next election!!

  • rate this

    Comment number 364.

    Michael Hesiltine should have done it years ago.
    Next one to sell-off is the fire service which is under-worked, over-paid, over-pensioned and much to keen on striking.
    Then if teachers don't stop threatening to go on strike they can be next.

  • rate this

    Comment number 363.

    VERY nice to see Robert Peston reporting on this matter rather than the awful Ms Yueh.
    He has written a fair article . Personally I think it's worth privatising if only to bring it into line with all the others in the 1990s----remember? In those days when we never had it so good, we all erned enough, we didn't pay Bedroom Tax, we didn't have millions of immigrants, we stood tall in the world !!!


Comments 5 of 367


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