Fury over ‘rush to sell Royal Mail on the cheap’

Labour warns prime assets could be sold, leaving taxpayer short-changed

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The Independent Online

Labour has accused the Government of rushing to privatise the Royal Mail, leading to it being sold off “on the cheap”.

Shadow Business Secretary, Chuka Umunna, said the prospectus for the controversial sell-off states that Royal Mail operates from 2,000 sites across Britain including delivery offices and mail centres.

He warned that once the privatisation is complete these assets, many in prime locations, could be sold, giving a large windfall to investors, while the taxpayer is “short changed”.

His warning came as bankers to the £3bn privatisation pushed the likely share price towards the top of the original range. The investment banks, led by Goldman Sachs and UBS, had set a price range of 260p to 330p per share.

Yesterday they narrowed that to 300p to 330p, which would value Royal Mail at £3bn to £3.3bn.

The prospectus highlights three sites in London at Mount Pleasant, Nine Elms and Paddington as being “surplus”, with some reports saying they were worth between £500m and £1bn, said Labour. It added that the document failed to specify which of Royal Mail’s other sites across Britain could be sold off and how much money this would raise.

The prospectus lists the value of Royal Mail’s freehold properties at £787m and leasehold properties at £318m.

A spokesman from the Department for Business, Innovation & Skills said: “The valuation of the company will be determined through the bookbuilding process, and the value of the Royal Mail’s property would be one factor that investors may consider when assessing the value of the Royal Mail.” Mr Umunna said: “David Cameron’s fire sale of Royal Mail is bad for consumers and bad for businesses and there are real fears that taxpayers are going to be considerably short changed.

“Royal Mail has a huge property portfolio in prime development sites in London and across Britain and there is nothing to stop the privatised company making a quick buck by flogging off these assets for development.”

The share sale next week looks set to be a resounding success with high demand from private and institutional investors. Broker Panmure Gordon analyst Gert Zonneveld suggested that based on the valuations of other publicly listed mail companies Royal Mail could be worth between £3.7bn and £4.5bn.

That implies that the shares could shoot up to a sizeable premium when trading starts next Friday. The share offer was fully subscribed by institutions when announced on 27 September. The retail offer to private investors closes at midnight on Tuesday and retail stockbrokers are gearing up for heavy demand with several opening their offices over this weekend.

Richard Hunter, of retail broker Hargreaves Lansdown, which is one of those handling the issue, said: “Although we’re specifically precluded from making any comment on the level of demand, based on past experience, there could be an additional last-minute rush, which is why we are open all weekend to take instructions from clients in case of need.”

Investors appear to be have been undeterred by the Communication Workers Union current vote on taking strike action over the privatisation.