Government begins sale of remaining stake in Royal Mail

http://www.theguardian.com/business/2015/jun/10/government-begins-sale-remaining-stake-royal-mail

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The government has begun selling the taxpayer’s remaining stake in Royal Mail, in a move expected to raise about £775m and halve the government’s remaining 30% holding in postal service.

In an announcement made after the stock market closed on Wednesday evening, the Department for Business Innovation and Skills (BIS) said it would place about 15% of the company’s shares with City institutions overnight.

Related: Relinquishing last Royal Mail shares must be done at highest price possible

After a controversial flotation in 2013, in which the government was widely accused of selling off Royal Mail on the cheap, a BIS spokesman insisted the department would be seeking the “best possible” deal for the taxpayer, although he admitted that City institutions maight get “a small discount” on the price in the open market.

He added: “It is, however, normal market practice where a large volume of shares are placed on the market by a single seller to offer a small discount on the previous day’s closing price. The discount ensures that the seller is able to achieve a successful sale. This happens in both private sector and government asset sales.”

Royal Mail shares closed on Wednesday at 516.5p, a 57% increase on the 330p when the government floated about 60% of the company in October 2013.

The exact price that the taxpayer gets for its shares will not be known until the conclusion of the sale process, known in the City as “bookbuilding”. The sale is being conducted by the investment banks BofA Merrill Lynch and JP Morgan Securities, as well as by Goldman Sachs, which retains the role it held during Royal Mail’s controversial flotation.

As part of the Queen’s Speech debate on the economy last week, the chancellor said the government would begin selling its remaining shares in the Royal Mail.

BIS published a report this week explaining its sale of its remaining stake in Royal Mail. It stated: “The government believes that Royal Mail has demonstrated that it can thrive in the private sector and has the ability to access the funds it needs to ensure it has a sustainable future.”

On Wednesday night, in a move that seemed to strengthen the government’s argument, logistics group Whistl, which had been trialling the only competitor to Royal Mail in terms of delivering mail directly to the door – confirmed its intention to close down its letter delivery service, further putting at risk 2,000 jobs.