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Royal Mail announces plans to float on stock market

23 September 2013 by Alexandra Jones

The government has announced its intention to proceed with an initial public offering (IPO) of Royal Mail.

The IPO follows changes to the Postal Services Act 2011, which lifted restrictions on Royal Mail’s ownership, allowing the government to sell shares in Royal Mail.

 

In addition, the Act established a new regulatory regime for postal services with Ofcom as the new postal market regulator and enabled Royal Mail’s historic pension deficit to be transferred to the government.

 

Further, Royal Mail and Post Office Limited were separated in 2012, meaning that the Post Office is not for sale and will remain, subject to the Act, in government ownership.

 

The IPO highlights are as follows:

 

  • Royal Mail to list on the premium segment of the official list and the main market of the London Stock Exchange.
  • The government will retain flexibility around the size of the stake to be sold, as this will be influenced by market conditions at the time of the transaction, investor demand and the objective to ensure that value for money for the taxpayer is achieved.
  • The government intends to dispose of a majority of the existing shares, taking into account shares sold and the 10% of Royal Mail to be made available for free to around 150,000 eligible UK-based Royal Mail employees at the time of listing under an Employee Free Shares offer. This is separate and in addition to the Employee Priority Offer referred to below.
  • Upon listing, all of Royal Mail’s existing government provided loans will be refinanced with external debt facilities to be provided by Royal Mail’s new banking syndicate.
  • To comprise an offer to institutional investors in qualifying jurisdictions and an offer to members of the public located in the UK (the Retail Offer), which includes a priority offer to eligible Royal Mail employees located in the UK (the Employee Priority Offer).
  • Members of the public located in the UK will be able to apply for Royal Mail shares in the Retail Offer:

– through participating intermediaries, who will apply for Royal Mail shares on behalf of their clients; or

– through a direct online or postal application to the government.

 

Commenting on the announcement, Business Secretary Vince Cable said: ‘This is an important day for the Royal Mail, its employees and its customers. 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. 

 

‘By announcing today that we intend to move ahead with a sale of shares in Royal Mail, we are completing the third and final part of the reforms agreed by Parliament two years ago. This delivers on the commitment in the Coalition Agreement to give Royal Mail access to private capital, including opportunities for employee ownership.’

 

Moya Greene, Chief Executive Officer of Royal Mail, added: ‘Our strategy is delivering a revitalised company, with a unique UK, multi-use network through which we are proud to deliver the universal postal service for all UK citizens. This network and our strong brand, coupled with the high service quality delivered by our people enable us to take full advantage of the growth in UK e-commerce to further enhance our pre-eminent parcels business. Combining this UK presence with our pan-European parcels business GLS, should result in a financial profile that combines revenue growth and margin progression to underpin strong cash flow generation.’

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