Banks to earn millions in Royal Mail privatisation

Of the seven City institutions appointed to steer through the IPO, only one is British

Seven City investment banks led by Goldman Sachs are set to share fees of up to £30m from the privatisation of Royal Mail.

As the Business Secretary, Vince Cable, set out details of a planned stock market flotation of the postal services, it emerged that only one of the institutions, Barclays – which has a smaller role as sponsor – is British.

It is the Swiss bank UBS which joins Goldman in leading the expected initial public offering (IPO), while ministers have also signed up Merrill Lynch, Investec, Nomura and RBC Europe. At the usual fee of around 1 per cent, and Royal Mail's expected valuation of between £2bn and £3bn, they can expect to earn millions each.

The Government has also hired the City PR firm Citigate Dewe Rogerson to spin the sell-off, and the law giants Linklaters and Freshfields Bruckhaus Deringer for legal work on the biggest privatisation since John Major sold off the railways in the 1990s.

Mr Cable told Parliament yesterday that a sale was vital as "the public will always want to invest in schools and hospitals ahead of Royal Mail".

He said 150,000 postal workers would be handed a 10 per cent stake in the company for free, in the largest employee share scheme of any privatisation for almost three decades. Royal Mail's 150,000 staff would be given stakes worth up to £300m, or about £2,000 each.

Mr Cable stopped short of an official intention to float declaration, which would trigger a four-week countdown for a listing to take place, instead saying an IPO was the Government's "preferred option".

It is expected to take place between now and April.

The public will be able to buy shares through a retail offer, but it won't be so much "Tell Sid", as in British Gas's privatisation, more email him: the share sale will be promoted via "online channels," a Treasury source said.

The Government is to retain a minority stake in Royal Mail, but the size of it and how much it privatises will "be influenced by market conditions at the time of a transaction and investor demand", Mr Cable added.

That investor demand could be dampened by union moves: staff have voted against privatisation and members of the Communication Workers Union are threatening strikes. The union's general secretary, Billy Hayes, said the sell-off would "destroy postal services". He said a ballot of members regarding strike action could be held on 31 July.

But Mr Cable told Parliament: "Royal Mail needs future access to private-sector capital because the postal market is changing... it cannot be right for [it] 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."

The shadow Business Secretary, Chuka Umunna, said: "Having nationalised the organisation's debts by taking on [Royal Mail's] pension liabilities, they now want to privatise the profit at the very time it is making money."

Q&A: Delayed delivery on sale

Q. Why has it taken so long?

Legislation to privatise Royal Mail was passed in 2011 and followed failed attempts by the Tories in the 1990s. Lord Mandelson had the unsuccessful idea of selling off a third of Royal Mail in 2009. Even Margaret Thatcher said she was "not prepared to have the Queen's head privatised".

Q. Why is the Government privatising Royal Mail?

It's part of its garage sale to raise money. Although Vince Cable also claims it's because the "postal market is changing; the number of letters we send is declining, while the number of parcels is growing as online shopping becomes more popular. But Royal Mail in the public sector has its hands tied in a way its competitors here and in Europe do not."

Q. How do I get shares?

The Government will release a prospectus describing the offer. For now, potential investors can register their interest with a stockbroker.

In the post: 500 years of history

1512 Brian Tuke, a former King's Bailiff, is made Master of the Posts by Henry VIII and builds a network of postmasters across England.

1635 Charles I makes the postal service available to the public, before Charles II established the General Post Office in 1660.

1793 First uniformed postmen.

1840 First adhesive postage stamp, the Penny Black.

1852 First pillar box erected.

1881 Postal order introduced, followed two years later by a parcel service.

1968 Second-class stamps introduced.

1990 Parcels business rebranded as Parcelforce.

2001 Service renamed Consignia in a rebranding exercise costing £2m.

2002 Service renamed Royal Mail Group with key brands Post Office, Royal Mail and Parcelforce.

2006 Royal Mail loses monopoly on the postal service.

2007 Plans to close 2,500 Post Office branches announced.

2009 Labour's attempt to part-privatise Royal Mail fails after union opposition.

2010 Coalition plans to sell the delivery business but retain the Post Office network in public ownership.

2012 Government takes on Royal Mail pension scheme.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness