UK govt to offload remaining 30% stake in Royal Mail for £1.5 bn

The British treasury yesterday said that it would sell its remaining 30-per cent stake in postal service company Royal Mail Plc, which is expected to fetch £1.5 billion ($2.3 billion), as part of the government's debt-reduction drive.

The full privatisation of Royal Mail was revealed yesterday by chancellor George Osborne, under his plan to save additional £4.5 billion on top of the £13 billion spending cuts already announced in the 2015-16 budget.

''I am today announcing that the government will begin selling the remaining 30-per cent shareholding we have in the Royal Mail," Osborne said.

''It is the right thing to do for the Royal Mail, the businesses and families who depend on it – and crucially for the taxpayer," the chancellor added.

Government departments have been ordered to find the remaining £3 billion in savings. It is expected that the cuts will be targeted on departments outside the protected areas such as health services and schools.

The chancellor is set to announce another £30 billion of cuts in the emergency budget next month for the subsequent two years.

The five-centuries-old Royal Mail was privatised in 2013, when the government offloaded 70-per cent stake in the postal service through a London initial public offering (IPO), an over-allotment option and a free employees' share of 10 per cent.

Post listing, Royal Mail shares jumped 38 per cent on the first day of trading, inviting strong criticism on the government action of selling the shares too cheap.

The government had said that it was taking action to secure a healthy future for the company, adding the measures would help ensure the long-term sustainability of the six-days-a-week universal postal services.

The shares that were floated at 330 pence a share two years ago are now traded at around 526 pence, which values the government's remaining holding in Royal Mail at approximately £1.5 billion.

Details, including the break-up of the offering for various categories of investors, have not been provided.

''We will only sell our stake when we can be sure we're getting value for money but let's be clear: holding over £1bn of Royal Mail shares in public hands is not a sensible use of taxpayers' money,'' Osborne said.

The government has appointed Rothschild as financial advisor to complete the privatisation, in place of Lazard, which advised the 2013 float and profited from a controversial early stage purchase of the shares.

Under Osborne's plan, the biggest savings of £545 million are to come from the transport department which includes some asset sales.

Defence spending cuts will yield £500 million while non-schools part of education department will provide £450 million and the justice department £250 million.

Shares in Royal Mail fell by over 3 per cent yesterday on the news about the stake sale.