The £3 billion privatisation of Royal Mail looks set for success next week as the banks leading the share offer today pushed the likely 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. Today they narrowed that to 300p to 330p, which would value Royal Mail at £3 billion to £3.3 billion.
Broker Panmure Gordon analyst Gert Zonneveld suggested that, based on the valuations of other publicly listed mail companies, Royal Mail could be worth between £3.7 billion and £4.5 billion. 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 it was 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 to cope with it.
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 vote on taking strike action over the privatisation. That vote closes on 16 October with the earliest any strike could be held a week later.
Chris White, head of UK equities at Premier Asset Management, said: “Royal Mail looks like an interesting offer. The company appears to have reasonable prospects over the next few years, especially in its parcels division which will more than offset the declining letters business. The productivity improvements that the company is putting through should help to drive profits forward over the next few years and the issue looks like it has been priced to go.”
Another major institution said: “We expect the IPO to be oversubscribed because the price range is good, it’s an attractive business with growth potential and the management has impressed us.”
Royal Mail, led by Moya Greene, pictured, could lose the rights to use symbols of the monarchy although the use of the Queen’s head is guaranteed for her lifetime, the sale prospectus revealed. The Royal cipher on post boxes and the crown on stamps could be removed under certain circumstances including if the firm ceases to provide a universal post service.