Royal Mail Sale To Begin Within Weeks
The Government has launched a £3bn stock market listing of Royal Mail in a move heralding the most ambitious privatisation for decades.
In a statement confirming Royal Mail's intention to float, ministers said the decision was an important step towards ensuring a "healthy future" for the company, despite intense opposition from trade unions which have pledged to ballot on industrial action in the coming weeks.
Under the proposed deal, members of the public will be able to apply for a minimum of £750-worth of shares in the newly-listed Royal Mail, while 150,000 of its UK-based employees will receive free shares likely to be worth roughly £2,000 each.
Endorsing a privatisation that eluded the last Labour government and which was rejected by Margaret Thatcher, Vince Cable, the Business Secretary, said it was "an important day for the Royal Mail, its employees and its customers".
"(The) 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."
Royal Mail also confirmed Sky News' revelations that the company would adopt a robust dividend policy in which it would pay out in the region of 50% of its profits as dividends, and that it had lined up £1.4bn of new debt facilities from a syndicate of banks.
Royal Mail currently pays an average interest rate of 8.8% on loans from the Government, meaning its new borrowings will be on far more attractive terms to the company.
The exact size of the initial public offering (IPO) of Royal Mail shares will depend on the level of demand from investors, although Mr Cable said he expected a majority of the company to be in private hands by the time the share sale is completed in November.
The company will pay a dividend of £133m for the 2013-14 financial year, which it said would have been £200m if it had been listed throughout the year.
Thursday's announcement acknowledged that strike action was a possibility, and said Royal Mail had "contingency plans in place and will also consider its legal options".
"Negotiations between Royal Mail and the CWU are continuing and Royal Mail remains committed to reaching an agreement with the CWU and averting industrial action. However, there can be no guarantee that negotiations will lead to a successful outcome or the aversion of industrial action," it said.
Moya Greene, Royal Mail's chief executive, said she was determined to "deliver a revitalised company" and that the injection of private capital would help her to achieve that objective.
"(Our) 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."
The flotation was attacked by Labour's shadow business secretary, Chuka Umunna, who said the sell-off was "politically-motivated".
"Ministers are pushing ahead with this politically-motivated fire-sale of Royal Mail to fill the hole left by George Osborne's failed plan," he said.
"This is taking place despite opposition from a huge coalition including the Conservative Bow Group, the Countryside Alliance, the National Federation of Subpostmasters, the cross party BIS Select Committee as well as Royal Mail employees themselves.
"The Government has not addressed the huge concerns which remain on the impact the Royal Mail sale will have on consumers, businesses and communities, but ministers are ploughing on regardless."
CWU general secretary Billy Hayes added: "We remain convinced that privatisation is the wrong decision for Royal Mail.
"It would be bad for customers, bad for staff and bad for the industry. Privatisation would put jobs and services at risk and lead to higher prices for customers. We've seen it happen time and again in other industries."