Government to sell remaining £1.5 billion stake in Royal MailComments Off on Government to sell remaining £1.5 billion stake in Royal Mail
The taxpayer’s stake is currently worth around £1.5 billion and the proceeds from its sale will be put towards paying down national debt.
Rothschild have been hired as advisers for the process, which is is likely to be closely scrutinised after the controversial October 2013 privatisation of the delivery firm.
The government was accused of underestimating demand for Royal Mail shares, which were offered to retail investors and institutions during its initial public offering.
The stock surged shortly after it listed on the London Stock Exchange leading to criticism that the government had shortchanged the taxpayer.
A scathing report said that ministers may have been afraid to fail over the sell-off and received “poor quality” advice.
The mistakes cost taxpayers £1 billion, according to a committee of MPs.
Shares in Royal Mail first floated at 330p a share. They closed on Wednesday at 526p. The stock dropped on the news of the share sale and were last down 2.3% 514p.
The Treasury today attempted to allay fears of a repeat, saying in a statement: “The transaction will be designed to deliver best value for money to the taxpayer.”
Osborne added: “It is the right thing to do for the Royal Mail, the businesses and families who depend on it – and crucially for the taxpayer.”
Further detail on the form of the sale to be announced in due course, the Treasury said.
It is facing stiff competition from rivals including DPD, Yodel and Hermes, which have all added capacity and Amazon, which has launched its own courtier network, is also a growing threat.
Its boss Moya Greene said the collapse of City Link and Whistl’s decision last month to pull out of doorstep deliveries in three UK cities shows that business was “very hard”.
At the time of its IPO, the former state-owned postal operator had expected growth of 4% a year in the parcels market, largely as a result of the acceleration of online shopping, but now it is forecasting total market growth of 1% to 2% for the next two years.
“Business is hard”: Royal Mail boss Moya Greene (Picture: Royal Mail)
Full-year revenues, reported last month dropped by 1% to £9.4 billion, while pre-tax profits rose from £421 million to £569 million last year.
Osborne’s announcement was part of a £4.5 billion package of measures unveiled by Osborne aimed at bringing down public debt, including selling of Department of Transport-owned land around King’s Cross valued at £345 million.
Overall, the Treasury is targeting savings of more than £3 billion across a string of government departments.