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ANDREW COWIE / AFP - Getty Images
A Royal Mail post box, known as a pillar box, on a street in London on July 10, 2013. The British government announced plans to float a majority stake in the Royal Mail on the stock market.
Britain, which invented modern mail delivery with the postage stamp in 1840, is putting its state-owned postal service up for sale.
The government said it will list a majority stake in the Royal Mail on the stock market some time in the next nine months, promising free shares for workers fiercely opposed to the country's biggest privatization in around 20 years.
Analysts gave the move a stamp of approval, saying the initial public offering (IPO) will value the often criticized institution at 2-3 billion pounds ($3-$4.5 billion), so selling a majority stake could raise over 1 billion pounds to help the country's stretched finances.
The Royal Mail, which traces its roots to a service founded by King Henry VIII in 1516, is familiar to tourists for the classic red mail boxes, known as pillar boxes, seen in just about every high street in England, Scotland, Wales and Northern Ireland.
In a bid to weaken support for trade unions, which have helped to scupper past attempts to sell off the business, the Conservative-led government said it would give away 10 percent of shares in Royal Mail to its 150,000 postal workers, with the condition that they must be held for three years.
The company's management has long argued that access to external capital is vital as it invests in shifting its business away from falling letter volumes and toward a growing parcels industry fueled by internet shopping.
But unions have threatened strike action, arguing privatization could jeopardize Royal Mail's commitment to provide a universal, six-days-a-week service and lead to a decline in working conditions for staff.
Business Secretary Vince Cable sought to soothe such concerns, saying the universal service would be protected by regulator Ofcom as well as parliament, and that privatization would not trigger a change in employment conditions.
"It cannot be right for Royal Mail to come cap in hand to ministers each time it wants to invest and innovate. The public will always want government to invest in schools and hospitals ahead of Royal Mail," he said.
State postal services have been privatized across much of western Europe. Last month, Belgium's bpost received strong interest in its stock market debut, which was priced towards the top end of expectations.
Royal Mail, which no longer includes the Post Office services and retail business, more than doubled profit in the year ended March 31, helped by parcel demand.
The listing, which will take place in the company's current financial year, will include a retail offering for the public, for which Royal Mail workers will also receive priority treatment. Banks Goldman Sachs and UBS have been appointed as lead advisers for the IPO.
Cable said the government would retain flexibility on the size of stake to be sold, pending market conditions and demand.
Britain's Conservative-Liberal coalition government, which paved the way for privatization last year by freeing Royal Mail of its hefty pension liabilities, has been criticized by the main opposition Labor Party for pushing to sell off the firm at a time when its profits are rising.
The privatization push follows similar attempts by the Conservatives in 1994 and by Labor in 2009, both of which were scuppered by union threats and party rebellions, with the latter attempt also succumbing to rocky financial markets.
In a consultative ballot sent to 112,000 Royal Mail workers in June, the Communication Workers Union said that, from a 74 percent turnout, 96 percent opposed plans to sell the firm. It urged the government to consider other ways to access capital or risk strike action.
A YouGov poll commissioned for a Think Tank paper released on Wednesday exploring the merits of privatizing Royal Mail showed that just 53 percent of the British public are aware of the sale plans, with 67 percent of people opposed to it.
Copyright 2013 Thomson Reuters.
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