I’ll be the first to admit that a Brit reading this will insist that I’ve misspelled “privatize” and that it should read “privatise.” Well, deal with it. I’m writing to both a primarily American audience as well as a spell checker.
Today, British officials announced that the Royal Mail will partially privatize within a few weeks, and that there are likely to be strikes by workers opposed to the plan. Regardless of the potential for strikes, this plan will go through in very short order.
Royal Mail facing competition from email
Not surprisingly, this move towards privatization is in direct response to the competition that the Royal Mail is experiencing from email. It is certainly not alone, as the United States Postal Service and others are experience the same troubles. The move will represent the biggest privatization of public works since The Iron Lady, Margaret Thatcher—who died this year—sold off former state-owned companies British Gas and British Telecom to the public in the 1980s.
Media reports say the part-sale of Royal Mail could be worth up to £3.0 billion ($4.74 billion, 3.57 billion euros). While no share price has been announced, traders are expecting to be made aware of the number either tomorrow or early next week.
Royal Mail IPO
In order to make this work, the British government has agreed to take on the pensions of Royal Mail workers that are presently running an alarming deficit.
“Her Majesty’s Government today announces its intention to proceed with an initial public offering of Royal Mail,” said a joint statement, which added that the IPO was “expected to take place in the coming weeks.”
Royal Mail will find itself listed on the London Stock Exchange, while the coalition government said it would “retain flexibility around the size of the stake to be sold.”
This planned semi-privatization will severely limit the Royal Mail’s ability to borrow funds and drive itself further into debt.
Vince Cable on future of the company
Business Secretary Vince Cable said it was “an important day for the Royal Mail, its employees and its customers.”
He added: “HM Government is taking action to secure a healthy future for the company. These measures will help ensure the long-term sustainability of the six days a week, one-price-goes-anywhere universal postal service.”
In the largest employed stock share in British history, over 150,000 Royal Mail employees will receive a free stake in the new company.
Institutional traders are expected to pick up the lion’s share of, well, shares when the Royal Mail begins trading.