Investors eye Royal Mail sale

Individuals will have the chance to buy part of the UK’s postal service this year

Q How much is Royal Mail worth as a private company?

A This is not a purely profit-driven business. Investors will be buying into a company that must mail to all UK homes six days a week and faces a tough battle with unions if it wants to slash headcount. But online shopping is driving sales growth and annual operating profit has hit £403m, providing some justification for the supposed £3bn valuation.

Q How will the Royal Mail share offer be marketed?

A Don’t expect to see billboards urging the public to put their life savings in Royal Mail shares. There will be a reserved marketing campaign that will appeal to people with knowledge of the markets and tempt a few new investors through a government-backed website.

Q How popular will the share offering be with retail investors?

A When insurer Direct Line went public last year it received 25,000 applications from individuals wanting to invest. In the end it allocated 15 per cent of its shares to retail investors. The Royal Mail privatisation has a higher profile and equity markets have since rebounded so expect to see far more investors jostling for shares.

Q How will Royal Mail staff benefit from the deal?

A Workers will receive a hefty 10 per cent of the company’s shares on the day of the IPO in a tax-efficient Share Incentive Plan (SIP). Every member of staff will receive the same number of shares, regardless of their rank. But only existing postmen will benefit – it is not a collective trust and future recruits will not have the same opportunity to own part of their employer.