The Deal: UK Launches Royal Mail IPO
NEW YORK (The Deal) -- The U.K. government Thursday, Sept. 12, fired the starting gun on the controversial privatization of a majority of Royal Mail Group, which could value the postal and parcel delivery services company at up to £3 billion ($4.7 billion).
Britain is selling the company to bolster deficit-reduction efforts which have consistently failed to meet Chancellor of the Exchequer George Osborne's targets amid dwindling tax receipts. The privatization will be the largest in the U.K. since the railway services selloffs of the 1990s.
In its official "intention to float" announcement, the government said it will hold the IPO "in coming weeks" and will "retain flexibility around the size of the stake to be sold." The announcement comes as the Communications Workers Union prepares for a vote on strike action, which could coincide with the listing in around four weeks' time.
CWU General Secretary Billy Hayes Thursday called the IPO "a betrayal of the British public," while Business Secretary Vince Cable reiterated the government's claim that the selloff is necessary to preserve service levels.The CWU will seek a pledge from Labour leader Ed Miliband at the party's annual conference later this month to renationalize Royal Mail if the center-left party defeats the Conservative-Liberal Democrat coalition government in May 2015. Royal Mail, led by CEO Moya Greene, had revenue of £9.3 billion in fiscal 2013, up 5% year-on-year. Group operating profit more than doubled to £440 million. It has expanded revenue in recent years on the back of soaring demand for parcel deliveries and is striving to improve operating margins. Net debt at its March 31 fiscal year-end was £906 million. Royal Mail plans to refinance government loans upon listing through a £800 million revolving credit facility and a £600 million term loan, which it said will be cheaper than its existing debt. It said Thursday it plans to pay a final dividend for the 2014 fiscal year of £133 million and pursue a progressive dividend policy. The offering will be open to retail investors, who will have to sign up for at least £750 of Royal Mail shares. Lazard's William Rucker and Charlie Foreman are advising the government on the selloff. Joint global co-ordinators and joint bookrunners are a Goldman Sachs (GS) International team including Mark Sorrell and Richard Cormack; and James Robertson and Christopher Smith at UBS (UBS). A Barclays (BCS) team including Mark Warham and Derek Shakespeare is joint book runner and sponsor. A Bank of America Merrill Lynch team including Oliver Holbourn and Justin Anstee is joint book runner. Investec Bank, Nomura International and RBC Europe are co-lead managers. Written by Laura Board
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