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Updated: Royal Mail IPO set for before March 2014
By Julie Fisher | Wed, 10th July 2013 - 12:11
A majority stake in Royal Mail is to be sold through an initial public offering before the end of March 2014, business secretary Vince Cable has confirmed.
A 10% portion of the shares will be set aside for postal workers, who will receive them free of charge provided they agree to hold them for three years.
With Royal Mail expected to be valued at £3 billion, this will be one of the biggest stockmarket flotations since the utilities were privatised in the 1980s.
"We will retain flexibility around the size of the stake to be sold," Cable told the House of Commons on Wednesday.
"This will be influenced by market conditions, investor demand and our objective to ensure overall value for money for the taxpayer. It is our intention to dispose of a majority stake, taking into account shares sold and those allocated to employees."
But postal workers were opposed to privatisation, with the Communication Workers Union (CWU) announcing on Monday that postmen were "deeply suspicious" of the plans.
Members of the CWU took to an open-topped bus in the City to protest the privatisation, many holding placards with slogans such as: "Save our Royal Mail".
The union also warned business minister Michael Fallon in a letter that further steps towards privatisation "will inevitably lead to strike action."
Labour also said it would oppose the flotation. Shadow business secretary Chuka Umunna protested: "There is every sign this treasured national institution is being sold off on the cheap to get income quickly to a Treasury whose economic strategy has failed."
The privatisation will not include the Post Office, which is a separate company.
"We have seen consistently strong demand for blue-chip IPOs of late and there's little reason to believe that the Royal Mail float would be any different, with some clients already having made tentative enquiries," commented Mike McCudden, head of derivatives at Interactive Investor.
Noting that the flotation of Royal Mail was likely to attract more interest due to the successful listing of Belgium's postal service Bpost on the New York Stock Exchange's Euronext market in June, he added: "With a projected market cap of £2.5 billion or even £3 billion, this most British of institutions would still find itself just outside the FTSE 100 top flight.
"Regardless, we believe that our clients will be keen to offer their stamp of approval to the deal and be eager to buy in accordingly."