Royal Mail to float within weeks

12th September 2013

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Following an announcement to the stock exchange, the government is expected to privatise the Royal Mail in a matter of weeks writes Philip Scott.

BBC business editor Robert Peston said he expected the sale to take place in November.

Some 10% of the shares will be split between 150,000 UK-based Royal Mail workers with the remainder offered to the public and institutional investors. The minimum amount members of the public can apply for will be £750. If the offer goes ahead private investors should be able to purchase Royal Mail plc shares through their ISA or SIPP.

Royal Mail has said that “in the absence of unforeseen circumstances” it will pay a dividend of £133m in July next year, adding that it would have paid £200m if the business had been listed for the whole of its financial year. The BBC’s Peston said that implied the business was worth circa £3bn.

The Communication Workers Union (CWU) opposes the float and is about to ballot its members for strike action. The outcome of the ballot will be announced on 3 October but Business Secretary Vince Cable says giving the company ”commercial freedom” is crucial to its success.

Commenting on the news of the floatation Justin Cooper, CEO of Shareholder Solutions, Capita Asset Services, says: “A healthy IPO market is crucial to the long term functioning of the economy and the financial system.

“It is a vital route for entrepreneurs to the all important exit from the firms they have built and helps ensure capital is efficiently allocated. Companies tend to mature and fade over time, or get taken over and delisted, so new blood is necessary to provide pension funds, insurance companies and private investors with places to put their money.

“The flotation of Royal Mail is the first in a series of mooted large new issues over the next couple of years. The return of the IPO is much to be welcomed.”

A number of brokers including The Share Centre and Hargreaves Lansdown Stockbrokers have both been appointed as intermediaries through which private investors may, subject to the terms and conditions of the offer, participate. Further information can be found at www.gov.uk/royalmailshares

Mindful Money will publish broker recommendations on whether you should invest as they arrive.

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