Treasury to sell £1.5bn of Royal Mail
CHANCELLOR of the exchequer George Osborne announced plans for a £13bn round of privatisations yesterday, as he added the sale of £1.5bn of Royal Mail to the £11.8bn sale of Lloyds Bank currently underway.
And if he brings forward plans to sell down the government’s holdings in bailed-out bank RBS, he could add tens of billions of pounds more to that tally.
“Holding over £1bn of Royal Mail shares in public hands is not a sensible use of taxpayers’ money,” the chancellor told MPs yesterday, announcing the sale of the government’s 30 per cent stake.
Royal Mail floated on the stock market in October 2013, and ministers came under criticism at the time as the share price rapidly rose from 330p to over 600p. The current share price is 523p.
The government’s advisor last time around, Lazard, will not be working on the next sale. Instead, Rothschild, a veteran of previous privatisations, has been hired.
Investment banks who could run the book on the sales will need to start putting forward pitches.
The sale is expected to begin this year, with the whole stake sold in chunks over a time period spanning as many as five years.
The government is considering options on the sale, but is less likely to pick a retail offering this time around.
“In the first stage, it is important to make a conscious effort to reach out to as many people as possible. But that is not necessarily true in this case,” a government source told City A.M.
“With the final stake, the important thing is to get the best possible return for the taxpayer,” the source added.
Retail stock brokers called for small investors to get a look in, arguing the shares from a public firm should end up in as many hands as possible.
Laith Khalaf from Hargreaves Lansdown, which had a role distributing the shares in the initial public offering (IPO), argued that a bigger role for small shareholders will make for a more stable investor base.
“There is this cock-eyed view that institutions are long-term investors while retail buyers aren’t, but the opposite is true,” Khalaf told City A.M.
“Retail investors tend to buy and hold shares, they tend not to be day-traders. This stock is a potential income-producer, so a good way to steady the boat is to have a lot of retail investors, putting money into ISAs and pensions.”
Royal Mail shares fell by nearly five per cent on yesterday’s announcement, closing the session at 523p per share.
CITYA.M. INVESTEC DERBY SPECIAL EDITION
City A.M., the official newspaper of the Investec Derby, will be publishing its special Saturday edition for racegoers tomorrow. Readers can pick up their copies at these stations, among others, from 10am:
▪ Waterloo Station
▪ Victoria Station
▪ Epsom Station
▪ Tattenham Corner Station
▪ Paddington
▪ Euston
▪ Clapham Junction