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Britain’s Royal Mail to go private with IPO

Thursday, 12 Sep 2013 | 1:21 AM ET
Bloomberg | Bloomberg | Getty Images

The Royal Mail, Britain's near-500 year old postal service,has launched an initial public offering, a historic privatization which is set to be bitterly opposed in the U.K.

The late Baroness Thatcher famously said that the Royal Mail could not be privatized, and two subsequent attempts stymied after opposition from the U.K. parliament.

Michael Fallon, the U.K.'s minister for Business and Enterprise, who has been one of the main politicians persuading other MPs to support the privatization, told CNBC that he hopes to avoid a strike.

"It's very important that they have a real stake in the business and reap some of the benefits of the modernization and be able to vote on the future of the company," he said.

'Right time' for Royal Mail to go private
Michael Fallon, UK Minister of State for Business and Enterprise, says Royal Mail needs to be able to invest to secure its future.

The flotation is now expected to launch in October. It is considered to be essential for the survival of the service, which has seen revenues hit by the rise of email, and by competition for lucrative delivery services from rivals like TNT.

Fallon emphasized the importance of the parcels business, fueled by the rise of e-commerce firms like Amazon and eBay.

"Royal Mail needs to invest in its future and continue to modernize. It can't compete against schools and hospitals for government's cash, that's absurd," Fallon said.

"This is the right time to get on with this to allow Royal Mail to get access in the capital markets and invest in the future."

There are concerns that union unrest may affect the flotation. Royal Mail chief executive Moya Greene will meet representatives of the company's 4,500 workers in Birmingham Thursday morning, to try and persuade them to support the privatization. Workers have been offered a sweetener of 10 percent of the shares, which is predicted to be valued at around £2,000 each, but are still protesting against proposed pay rises. One major union, the Communication Workers Union, is expected to vote next week over a one-day strike.

Chuka Umunna, the opposition Labour Party's shadow business secretary, 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. This is taking place despite opposition from a huge coalition.

"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."


Greene said in a statement she wanted a "revitalized company... that combines revenue growth and margin progression to underpin strong cash flow generation."

By CNBC's Catherine Boyle. Follow her on Twitter: @cboylecnbc

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