The UK’s business minister has said the government is leaning towards a full IPO for Royal Mail, and will be exploring the option further prior to a decision on privatisation.
In a speech at the policy exchange last night, Michael Fallon said two options “remain on the table” for Royal Mail – a full Initial Public Offering (IPO) or a private share sale.
But he said the government was currently attracted to an IPO.
“We will explore this further,” he said. “We will soon be issuing a tender for the procurement of a syndicate of banks that, if this is the sale route chosen, will execute a sale of shares.”
Fallon said initial appointments for the banks were expected to be made by the end of May.
However, he added that Royal Mail is also exploring the option of access to external capital through the debt markets.
The government’s intention is to complete a sale within this financial year – before April 2014. It believes the sell-off will lead to a more efficient organisation run on a more “commercial” basis.
“I can state categorically that we have no intention of selling off Royal Mail cheaply. We have not publicly speculated on Royal Mail’s value. We will sell shares in Royal Mail at a fair commercial price that represents value for money for the tax payer,” the business minister said.
During his speech, Fallon again confirmed that as required by 2011 postal reforms, at least 10% of Royal Mail’s shares would go to an employee share scheme, and that he is having regular meetings with the Communication Workers Union to encourage it to engage on establishing the scheme.
Shares may be made available for Royal Mail staff free or at a discount price, but a system will be in place when the broader share sale takes place, the minister said.
“I strongly believe that employees should share in the company’s future success and dividends. I urge the CWU to put ideology aside and take up that invitation so that their members do not lose out,” he said.
The minister was speaking as the union representing 132,000 postal workers is in the process of planning industrial action to disrupt Royal Mail’s downstream access system, partly in protest at privatisation.
The UK business minister said it was time for the government to “step back” from Royal Mail, and allow its management “the real commercial freedom that it has needed for a long time”.
He pointed to the profitability seen in other national postal services around Europe that have privatised – mentioning Deutsche Post, Austria Post, bpost and PostNL – while also noting that other European countries are now considering ownership change for their postal services, including Spain, Portugal and Scandinavia.
The minister placed a gloss on past UK privatizations, stating that “very few people now question whether the likes of BT, BP or Rolls Royce should have remained state owned”.
Addressing the Policy Exchange last night, Fallon highlighted the parcels and e-commerce business within Royal Mail as being a particular “tremendous opportunity” for Royal Mail, including its e-fulfilment activities, and its European parcels business GLS.
But Fallon once again insisted that selling off Royal Mail would not mean changes to the universal service obligation.
“A change of ownership in Royal Mail will not mean that Royal Mail can stop delivering to rural areas. Royal Mail will remain the UK’s designated universal postal service provider and must continue to provide a six days a week service throughout the UK,” he said.
Fallon said certain groups were “scaremongering” by raising concerns that the sale of Royal Mail would lead to skyrocketing stamp prices.
“Change in ownership will not lead to VAT being added to stamp prices. First and second class stamps are exempt from VAT as part of the one-price-goes-anywhere universal service,” he said.
Source: Post&Parcel/UK government