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Government to sell remaining 14% stake in Royal Mail Government to sell remaining 14% stake in Royal Mail
(3 days later)
The government has continued selling assets it no longer considers should be held in the public sector with the £700m disposal of the remaining shares it owns in Royal Mail. The government has continued selling assets it no longer considers should be held in the public sector with the £591m disposal of the remaining shares it owns in Royal Mail.
Bankers were hopeful of selling the shares, which represented a 14% stake in the company, for less than a 5% discount on the Royal Mail’s share price on Monday. Bankers were hopeful of selling the shares, which represented a 14% stake in the company, for less than a 5% discount on the Royal Mail’s share price on Monday at around 455p.
Royal Mail shares are trading at about 471p, which values the company at approximately £4.7bn. In June, the government sold about 50% of its then existing stake, amounting to approximately 15% of the company, at 500p per share raising £750m.Royal Mail shares are trading at about 471p, which values the company at approximately £4.7bn. In June, the government sold about 50% of its then existing stake, amounting to approximately 15% of the company, at 500p per share raising £750m.
Three US-owned banks handled the sale on behalf of the government for zero fees. The banks say they do such deals for the government for prestige reasons and to build up their franchises. Barclays, the UK bank most likely to be able to handle a deal like this, was not included.Three US-owned banks handled the sale on behalf of the government for zero fees. The banks say they do such deals for the government for prestige reasons and to build up their franchises. Barclays, the UK bank most likely to be able to handle a deal like this, was not included.
The original sale of the first 60% of shares in Royal Mail was heavily criticised when bankers priced the shares at 330p, only to see them rise to nearly 618p. Critics said the taxpayer had lost about £1bn on the sale.The original sale of the first 60% of shares in Royal Mail was heavily criticised when bankers priced the shares at 330p, only to see them rise to nearly 618p. Critics said the taxpayer had lost about £1bn on the sale.
Bankers on the deal on Monday night reported solid demand, mainly from domestic and US institutional investors, even though the FTSE 100 closed down 0.7%. No shares are being sold directly to private investors.Bankers on the deal on Monday night reported solid demand, mainly from domestic and US institutional investors, even though the FTSE 100 closed down 0.7%. No shares are being sold directly to private investors.
A Department for Business spokesperson said: “The universal postal service is strongly protected by law and Ofcom has a duty to ensure its provision. Therefore the government sees no policy reason to retain a stake in Royal Mail.”A Department for Business spokesperson said: “The universal postal service is strongly protected by law and Ofcom has a duty to ensure its provision. Therefore the government sees no policy reason to retain a stake in Royal Mail.”
The sale of shares in Royal Mail is part of a privatisation programme outlined by George Osborne at the time of the budget in July. The chancellor said at the time the government aimed to raise about £32bn in the current financial year from major asset sales. So far there have been sales of shares in RBS and Lloyds Bank and two sell-offs of stakes in Royal Mail.The sale of shares in Royal Mail is part of a privatisation programme outlined by George Osborne at the time of the budget in July. The chancellor said at the time the government aimed to raise about £32bn in the current financial year from major asset sales. So far there have been sales of shares in RBS and Lloyds Bank and two sell-offs of stakes in Royal Mail.
The government also plans to sell a £13bn portfolio of Northern Rock mortgage assets and, more problematically perhaps, a chunk of the student loan book. The sale of these types of assets is most likely to appeal to other financial institutions or trade buyers. Other assets, such as Channel 4 or Ordnance Survey, are also possibilities for disposal. The government also plans to sell a £13bn portfolio of Northern Rock mortgage assets and, more problematically perhaps, a chunk of the student loan book. The sale of these types of assets is most likely to appeal to other financial institutions or trade buyers. There are suggestions that three consortia had bid for the Northern Rock assets, known as Granite, by the October 9 deadline.
Other assets, such as Channel 4 or Ordnance Survey, are also possibilities for disposal.
“The government is committed to ensuring the effective and efficient management of publicly owned assets, including assessing options for disposal,” a Treasury spokesman said. “Where there is no longer a strong policy reason for continued public ownership, or where there is potential for an asset to operate more sensibly and efficiently in the private sector, the government will continue to look into the potential sale of public sector assets.”“The government is committed to ensuring the effective and efficient management of publicly owned assets, including assessing options for disposal,” a Treasury spokesman said. “Where there is no longer a strong policy reason for continued public ownership, or where there is potential for an asset to operate more sensibly and efficiently in the private sector, the government will continue to look into the potential sale of public sector assets.”
• This article was amended on 15 October 2015. An earlier version referred to the “£700m disposal of the remaining shares it owns in Royal Mail”. This has been corrected.