Royal Mail has buyers for all IPO shares

Royal Mail has buyers for all shares to be sold in an initial public offering (IPO) valuing the 360-year-old UK postal service at as much as £3.3 billion, sources have said.

The sale began yesterday and was fully subscribed within hours, mainly on demand from institutions, according to the sources who asked not to be named because an update on the fundraising was sent only to investors.

Royal Mail shares, open to applications until October 8th before trading commences on October 11th, will be priced at 260-330p each.

The Royal Mail sell-off will be the biggest privatisation in Britain since former prime minister John Major broke up British Rail in the 1990s.

The volume of IPOs in Europe has tripled in the year to date versus 2012 as investors are drawn by strengthening economies in the region.

The group will have a market capitalisation of between £2.6 billion and £3.3 billion once listed, with 401-522 million shares due to be sold, equating to as much as 52.2 per cent of its capital.

The United Kingdom government wouldn't be able to block a foreign takeover of Royal Mail once the shares are traded, said minister for business and enterprise Michael Fallon, while adding that the company will have access to capital needed to expand internationally as other nations open postal markets.

Royal Mail has a 53 per cent share of UK parcel deliveries and reported revenue of about £9.1 billion in fiscal 2013. Its operating profit, after some costs, was £440 million.

The government expects about 70 per cent of the base offer to go to institutional investors and the rest to retail buyers and Royal Mail workers. The minimum application for the retail offer is £750 of stock, or £500 for employees.

Staff, some of whom plan to strike over the sale, will also be given 10 per cent of the shares for free from the government holding, valued at as much as £331 million. – (Bloomberg)