Anyone can now buy Royal Mail shares on the London Stock Exchange following a big move that sets into motion the privatization of the renowned British 497 year-old state owned postal service.
The Government is selling 52.2 percent of the company to the public, and an extra 7.8 percent if demand is high enough. In addition, Royal Mail employees will be given 10 percent of the shares at no cost.
At a share price of between 260 pence (4.17 USD) and 330 pence (5.29 USD) the Royal Mail is valued between £2.6 billion (4.17 billion USD) and £3.3 billon (5.29 billion USD).
Business Secretary Vince Cable said:
“Today is an important day in the life of Royal Mail: people can now apply to buy shares in this iconic British brand. This will give Royal Mail access to the private capital it needs to modernise, as envisaged under successive governments, and enshrined in law by Parliament two years ago.”
“We have already committed to give eligible Royal Mail staff a real stake in the company by giving them 10 percent of company shares for free. Now the sale of Government shares will give others a chance to have a real stake in this important company and we are encouraged by the shown by potential investors so far.”
The government’s stake in the company could potentially come down to 30 percent.
The value is not that high – The Royal Mail has over 170,000 employees. In fact, it will not even be among Britain’s 100 top valued companies.
The low value is mainly due to intense competition from electronic forms of communication which have risen rapidly over the last fifteen years. Competition from courier companies is another factor.
The sale comes just days before the Conservative party’s annual conference, which will help the party highlight its pro-market stance. However, not all Tories are happy about the privatization of the Royal Mail.
The sale now ensures that the company will be private before October 15th, making it impossible for unions to organize protest strikes.
Moya Greene, Chief Executive Officer of Royal Mail, said:
“Royal Mail has a unique place in the UK and that will not change as we move into the private sector. We will now be better able to compete in what is a fast changing and intensely competitive market. I’m delighted our people will own a meaningful stake in the company and that the public now have the opportunity to own a share in our future as well.”