Britain's Royal Mail set to sell for almost €4bln
BRITAIN is on track to sell shares in Royal Mail at the top of its range, two sources close to the deal said, valuing the postal service at close to €4bln on the final day that investors can put in orders.
Despite the threat of strike action from delivery staff and criticism from opposition lawmakers, the government is close to completing the sale of a majority stake in the near 500-year-old Royal Mail - the fourth attempt to sell off the postal service.
The privatisation, which at the top of the expected price range would value Royal Mail at £3.3bln (€3.9bln), is Britain's biggest since John Major's Conservative government sold the railways in the 1990s.
The stock market offering has received strong demand from the outset, and investors have now been told those with orders below 330 pence per share, the top of an original 260p-330p range, risk missing out, the sources said.
Investors have also been warned that, due to strong demand, they should expect their orders to be scaled back.
The financial spread betting firm IG is predicting the shares could close between 385 pence and 405 pence on their stock market debut on Friday.
IG Chief Market Strategist David Jones said the success of past big privatisations such as BT and British Gas was probably attracting retail investors.
"People have got memories about how well these government sell-offs did back in the 1980s and 90s," he said. "With those, there were decent windfall profits on the first day."
Despite the strong demand, many members of the public are against the sale, with a YouGov survey in July showing two-thirds of British adults opposed the privatisation.
The government has said around 30pc of the shares on offer are expected to go to individual members of the public, who must spend a minimum of £750 to invest in the company.
It has also agreed to hand 10pc of Royal Mail's shares to staff in the largest share giveaway of any major UK privatisation. If they are distributed equally among the 150,000 eligible UK-based workers, each could receive £2,200 worth.
The sale of Royal Mail follows the flotation of its Belgian peer bpost in June and comes as strong equity markets have helped to revive new listings in Europe this year. European flotations raised €11.7bln in the first nine months - three times the year-ago level, according to Thomson Reuters data.
On Tuesday, vodka maker Stock Spirits began taking orders for its London share sale, while the debt collection firm Arrow Global saw its shares open higher on their London debut.
Cantor Fitzgerald analyst Robin Byde has estimated Royal Mail is valued at around 8 times earnings, below an average of about 10 for the European sector, including peers such as bpost and Austrian Post.
On Monday, British Business Secretary Vince Cable accused the opposition Labour party, which has said taxpayers could be short-changed by the sale, of irresponsibly talking up the value of Royal Mail.
Labour is opposed to the timing of the sale, which it says is designed to bolster Britain's public finances, but has resisted calls from party activists and trade unions to pledge to renationalise the firm if it wins power in a 2015 election.
Three sell-off attempts in the last 19 years have failed due to opposition from within the governing majority, which feared an electoral backlash from tampering with a revered institution.
Unions are currently balloting for strike action, although the ballot will close after Royal Mail makes its market debut.
Institutional investors have until 1600 GMT to put in orders for the sale, being run by Goldman Sachs and UBS , while individual retail buyers have until 2259 GMT.