* Govt says size of sale would depend on market conditions
* Analysts say float could value company at 2-3 bln stg
* Royal Mail plans final dividend next year of 133 mln stg
* Union to send out strike ballot papers next week
* Minimum application size for public 750 pounds stg
By Neil Maidment
LONDON, Sept 12 Britain embarked on its largest
privatisation in decades on Thursday as the government unveiled
plans to sell the majority of the near 500-year-old state-owned
Royal Mail postal service.
The Department for Business said a stock market flotation,
fiercely opposed by unions, would take place in coming weeks,
giving the public a chance to buy into the company. In the
largest giveaway of any major UK privatisation, 10 percent of
the shares will go to Royal Mail staff.
It said the size of the sale would depend on market
conditions, although it intends to dispose of a majority stake.
Analysts say the float could value Royal Mail, whose roots go
back to a service founded by King Henry VIII in 1516, at between
2 and 3 billion pounds ($3 to $4.7 billion).
The sale would be one of the most significant privatisations
in Britain since John Major's Conservative government sold the
railways in the 1990s. Major's predecessor Margaret Thatcher had
pioneered state selloffs but stopped short of the Royal Mail
because of its potential controversy.
Business Minister Michael Fallon, who is heading up the sale
of Britain's leading postal provider, said there was sufficient
investor demand to push the button on the float and dismissed
the chances of a possible postal strike derailing the plans.
The Communication Workers Union, which represents most of
the delivery service's 150,000 staff, will send out strike
ballot papers next Friday if an agreement cannot be reached with
Royal Mail over post-privatisation pay and conditions.
The CWU has argued that privatisation could threaten jobs
and lead to a poorer service, while the government and Royal
Mail itself argue it will provide access to the capital the firm
needs to modernise its business and better compete in a thriving
"We remain convinced that privatisation is the wrong
decision for Royal Mail ... we want a commitment that a Labour
government would renationalise Royal Mail," CWU General
Secretary Billy Hayes said, referring to Britain's main
Fallon said there were concerns about any privatisation
among the workforce and among the people who relied on that
organisation's service, but said there were safeguards in place.
"The six day a week service that we all rely on and that
businesses rely on, that is absolutely protected ... and there
is going to be no change to that," Fallon told BBC radio.
Members of the public must spend a minimum of 750 pounds if
they want to buy shares, while Royal Mail staff will only have
to spend a minimum of 500 pounds if they want to add to the
potential 2,000 pounds worth of stock each worker will receive,
based on a flotation value of 3 billion pounds.
The sale plan is be the fourth time Britain has tried to
take Royal Mail public, after three attempts failed in the last
19 years due to opposition from within the governing majority,
which feared an electoral backlash from tampering with a revered
institution whose red post-boxes are known around the world.
Opposition business spokesman Chuka Umunna called the move
"a politically-motivated fire sale", while a poll by YouGov in
July showed 67 percent of the public opposed the sale.
Royal Mail, which no longer includes the Post Office
services and retail business, has revenue of over 9 billion
pounds and more than doubled operating profit in the year ended
March 31 to 403 million pounds, helped by a greater focus on
parcels, which make up almost half its turnover.
It had an operating profit margin of 4.4 percent in the
year, up strongly from the 1.7 percent recorded in 2012.
In response to falling letter volumes, the firm has shed
50,000 jobs in the past decade and shut around 25 mail centres.
Royal Mail said conditional on the listing it had agreed new
debt facilities worth 1.4 billion pounds with a banking
syndicate that would replace all existing loans from the
government and lead to a significant reduction in the overall
cost of the group's debt.
ETX Capital said in a note to clients the details of the
debt facilities would allay any concerns the privatisation would
be difficult, particularly in light of the strike threat.
"We expect it to be priced very attractively by the
government in order to garner the demand to deem this IPO as a
success given the importance surrounding it," the broker said.
Stephen Bailey, co-head of the Liontrust Macro Equity Income
Fund, said it and other investors were awaiting more details.
"We are looking at the offer, as I think most UK managers
are going to. But we are keen to hear more detail on the
restructuring that is ongoing at Royal Mail, and at the moment,
we only have very scant information on the financials," Bailey
Among examples of privatised postal services making healthy
profits, three from continental Europe, including Germany's
Deutsche Post, trade on average in line with the
biggest listed UK companies on a multiple of 12.4 times forecast
earnings for the next 12 months.
The government, which has hired Goldman Sachs and UBS
to drum up interest in the share sale, said Royal Mail
planned to pay a final dividend next July totalling 133 million
pounds. Had the company been listed for the full year, it would
have paid a total of 200 million.
Royal Mail Chief Executive Moya Greene, who saw the CWU
reject her company's three-year pay offer in July, will get
another chance to try to appease union members on Thursday when
she faces 1,500 of them at a conference in Birmingham.
In Thursday's statement, Royal Mail said it believed union
members would vote to strike, with the earliest date for action
set to be Oct. 10, but it had contingency plans in place.