LONDON: Britain’s Royal Mail privatisation garnered orders for all of the shares on offer in the space of a few hours yesterday, sources said, marking a strong start for a selloff that stands to flush up to ¤2bn ($3.2bn) into government coffers.
The sale would be one of Britain’s most significant since John Major’s Conservative government sold the railways in the 1990s and would give Royal Mail access to the private capital it says it needs to modernise and better compete in a thriving parcels market.
Kicking off the sale of the near 500-year-old company, the government said yesterday it would dispose of a majority stake in Royal Mail, offering shares at between 260 pence and 330p each and valuing the whole company at between £2.6bn and £3.3bn ($4.2bn to $5.3bn).
Hours later it had already received orders for all of the shares on offer, two sources close to the deal said, without giving an indication of where in the range those orders had come.
If an “over-allotment option”, whereby more stock can be sold if there is strong demand, is exercised, the government’s stake in the company could fall to as little as 30 percent.
Analyst Robin Byde at brokerage Cantor Fitzgerald said that while the medium-term issue remained how fast Royal Mail can grow its parcels business to offset falling letter volumes, the valuation range made it attractive versus European peers such as Austrian Post and Belgium’s bpost.
“The headline really is that it’s priced to go,” Byde said, estimating Royal Mail was valued on a forward price-to-earnings multiple of around 8 times versus an average of about 10 for the European sector. “We would expect it to debut pretty well.”
Royal Mail follows the initial public offering of bpost in June and comes after stronger equity markets have helped revive new listings in Europe this year.
European firms have raised $15.9bn from flotations in the first nine months, three times the year-ago level, according to Thomson Reuters data.
The sale is the fourth time Britain has tried to privatise Royal Mail, which traces its origins back to 1516 when mail was delivered by horse from King Henry VIII’s court.
Three selloff attempts in the last 19 years have failed due to opposition from within the governing majority, which feared an electoral backlash from tampering with a revered institution whose red post-boxes are known around the world.