British government has decided to privatize the country’s postal service, Royal Mail, which started operations in 1516 by carrying posts for the Tudor court and Henry VIII. The government announced Wednesday that it has appointed UBS AG (NYSE:UBS) and Goldman Sachs Group, Inc. (NYSE:GS) as joint bookrunners and joint global co-ordinators to manage Royal Mail’s planned IPO on London Stock Exchange later this year.
Business and enterprise minister Michael Fallon said Barclays PLC (NYSE:BCS) (LON:BARC) has also been appointed as a sponsor and joint bookrunner, while Bank of America Merrill Lynch will act as a joint bookrunner. The four banks were authorized to handle the float after a tender process in which a large number of banks participated, said Fallon. All four banks will report to Fallon and work with the Royal Mail, its advisers and the government to prepare and execute the IPO. The junior syndicate positions are yet to be filled.
Royal Mail Valued at £3 billion
According to Julia Werdigier of the New York Times, the planned IPO would value the Royal Mail at around £3 billion ($4.5 billion). The British government has been musing over the idea of selling the Royal Mail for the past several years. But talks gained momentum last year when the postal service provider’s finances began to improve. The government is also under pressure to generate additional savings to reduce the budget deficit.
Royal Mail Hit Hard by the Emergence of Emails
The Royal Mail was hit hard by the emergence of emails, which compelled people to stop sending handwritten letters. But earnings began to improve with e-commerce where people shop online and receive their goods through post. For the year ended March 31, the Royal Mail’s profits more than doubled from the previous year.
Royal Mail Union Workers Oppose Privatization
It will be the biggest privatization in the U.K. since railroads. The Royal Mail is one of the country’s largest employers, and the government wants to put aside 10 percent of the company’s shares to be owned by its employees. The trade union that represents postal workers, the Communications Union, has opposed privatization of the service. The union said that a sale is not in the best interest of the company and its workers.