UK govt to offload final 14% stake in Royal Mail for £700 mn

13 Oct 2015


The UK government is set to sell its remaining 14-per cent stake in postal service company Royal Mail Plc, which is expected to raise approximately £700 million ($1.1 billion), as part of the government's debt-reduction drive.

The shares in Royal mail are traded at around 471 pence, which values the company at about £4.7 billion.

A department for business spokesperson said, ''Current market conditions should allow a successful sale and the realization of value for the taxpayer,''

''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 spokesperson said.

The disposal will be by way of placing to institutional investors, according to the treasury.

Four months ago, the treasury sold 15-per cent stake at a price tag of 500 pence a share to fetch £750 million.

The five-centuries-old Royal Mail was privatised in 2013, when the government sold about 70-per cent stake in the postal service at a price of 330 pence through a London initial public offering (IPO), an over-allotment option and a free employees' share of 10 per cent.

The move came under strong criticism over the cheap selling price of the shares, following a 38-per cent jump on the first day post listing and surged over 80 per cent in the following days.

Last week, the government gave out 1 per cent of its interest in Royal Mail to eligible employees as reward for hard work in turning around the company.

According to the statement, the UK's retail post office company, Post Office Ltd, which was separated from Royal Mail in 2012, remains wholly-owned by the government. 

The company operates a wide network of branches throughout the UK and the relationship between the company and Royal Mail are a commercial one, it said.

Apart from its stake in Royal Mail, the treasury's other divestment plans include a £13-billion portfolio of mortgage assets it got through the nationalisation of troubled Northern Rock bank in 2008, as well as other assets, such as television broadcaster Channel 4 or mapping agency Ordnance Survey.

''The government is committed to ensuring the effective and efficient management of publicly owned assets, including assessing options for disposal,'' a treasury spokesman told the Guardian.

''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,'' he further stated.


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