The Business Times

UK sold Royal Mail too cheaply, but not by much: official report

Published Thu, Dec 18, 2014 · 07:25 AM

[LONDON] Shares in Britain's Royal Mail postal service should have been sold at a higher price when the firm was privatised last year, but the lost revenue was lower than previous estimates, a government-commissioned report said on Thursday.

Lord Myners, a former Labour minister commissioned to see if the government could improve the way it sells public assets, said on Thursday that Royal Mail could have raised up to 180 million pounds (US$280 million) more for the public purse.

The high profile public offering of a 60 per cent stake in Royal Mail was trumpeted as a success by the Conservative-Liberal Democrat coalition, but it has drawn fierce criticism from the opposition Labour party and trade unions.

Critics argue the sale, which raised 2 billion pounds, was rushed and point to a sharp rise in the share price after the sale as evidence of a botched deal. Business Secretary Vince Cable had insisted it would take time for a true share price to emerge.

Myners said his panel believed the offer could have been increased by 20 to 30 pence per share, equivalent to an additional 120 million pounds to 180 million pounds for the government. "For the avoidance of doubt, we do not believe that a price anywhere near the levels seen in the aftermarket could have been achieved at listing," the report said.

Royal Mail shares were issued at 330 pence in October 2013, and subsequently rose to reach almost double that level at 618 pence in January. The shares have since fallen back and are trading just under 400p.

A previous report on the sale by the public spending watchdog in April said the government had been too cautious in pricing the deal, leading to missed revenue of at least 750 million pounds.

Myners said in future the government should consider revising the book building process, in which large institutional investors express demand for the shares.


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