There was a big stink when the UK government sold off the first 60% stake in Royal Mail back in 2013, as the price of the newly issued shares almost doubled from the price of the IPO within just a few months. That took a while to blow over, but the hullabaloo died down when the share price of Royal Mail fell by 30% within the next year or so.
The UK government apparently thought now was the right time to dispose of the rest of their stake, which would be worth close to $1 billion based on the current share price, as they have announced plans to finalize the sale this week.
Statement from UK Department of Business
A spokesperson for the Department of Business, Innovation and Skills noted: “Current market conditions should allow a successful sale and the realization of value for the taxpayer. The universal postal service is strongly protected by law and Ofcom has a duty to ensure its provision. Therefore the government sees no policy reason to retain a stake in Royal Mail.”
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More on UK government sale of final 14% stake in Royal Mail
Analysts say there’s a good chance the government’s shares, around a 14% stake in the company, can be sold for less than a 5% discount from the current share price.
Given that Royal Mail shares are trading at about 471p on Monday, the market cap of the firm is around £4.7 billion ($7 billion).
The UK government sold just over half of its then 30% stake (close to 15% of the company) at 500p per share this summer, raising £750 million.
Of note, three US-owned banks are handling the sale for the government for zero fees. Financial institutions often do deals for the government for prestige and to develop their franchises.
According to knowledgeable sources, the bankers are reported strong demand for Royal Mail shares, mainly from UK and U.S. institutional investors.
In the earlier sale of the government stake this summer, Royal Mail workers were awarded a 1% stake in the firm worth about £50 million ($75 million). This was in addition to the 10% they received when the government sold the initial stake in 2013.
The UK government had noted earlier this summer that it planned to sell off the rest of its stake before the end of the current financial year.