Royal Mail to be privatised in £3bn IPO

Sunday, 15 September 2013 09:21

The government has announced that the Royal Mail will be privatised in a stock market listing that values the company at £3 billion.

The government said that the plans were an important stage in securing a “healthy future” for the company. 

Under the proposed deal, members of the public will be able to apply for shares as long as they are prepared to purchase stock worth at least £750.

In a bid to entice workers, all 150,000 of Royal Mail’s UK-based employees will receive free shares likely to be valued at around £2,000 each.

However, despite this, the Communication Workers Union (CWU), which represents some Royal Mail employees’ is against the idea and will ballot workers on strike action, the results of which will be announced on October 3rd.

CWU general secretary Billy Hayes said: "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."

Moya Greene, chief executive of Royal Mail said: "Talk of a ballot for industrial action makes no sense when there is a significant three-year deal on the table and negotiations are ongoing.”

The pay offer on the table for workers will see them earn 8.6 per cent in three year times. The offer has been rejected by the CWU because they are unhappy to proposed changes to workers pension benefits. 

Vince Cable, the Business Secretary said the changes would protect the universal postal service and 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."

However, shadow business secretary Chuka Umunna said: "Ministers are pushing ahead with this politically-motivated fire sale of Royal Mail to fill the hole left by George Osborne's failed plan."

"The government has not addressed the huge concerns which remain on the impact the Royal Mail sale will have on consumers, businesses and communities.”

Royal Mail has returned to a healthy profit in the last year after years of losses. This has raised the value of the firm but has also strengthened the argument against privatising a service that is now operating healthily.

The UK postal service has seen a big fall in the number of letters sent due to the rise of email. However, new trends have helped the service because the rise of online shopping has led to many more packages being delivered, increasing business for Royal Mail.

The Initial Public Offering (IPO) will value the company at around £3 billion and will tempt investors if it goes ahead because Royal Mail says it will pay out 50 per cent of its profits in dividends.

It will pay a dividend of £133 million in July 2014 and said this would have been £200m if the business had been listed for the whole of the financial year.

Royal Mail also announced it had agreed a new £1.4 billion debt facility with a syndicate of banks that will cut the interest it pays on its debts, currently 8.8 per cent on loans from the government.

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