* Offering shares at 260-330 pence each
* Values company at as much as 3.3 bln pounds
* Expected to make market debut on Oct. 11
* Government stake could fall to 30 pct
* Sale subscribed within hours - sources
By Kylie MacLellan and Neil Maidment
LONDON, Sept 27 Britain's Royal Mail
privatisation garnered orders for all of the shares on offer in
the space of a few hours on Friday, sources said, marking a
strong start for a selloff that stands to flush up to 2 billion
pounds ($3.2 billion) into government coffers.
The sale would be one of Britain's most significant since
John Major's Conservative government sold the railways in the
1990s and would give Royal Mail access to the private capital it
says it needs to modernise and better compete in a thriving
Kicking off the sale of the near 500-year-old company, the
government said on Friday it would dispose of a majority stake
in Royal Mail, offering shares at between 260 pence and 330p
each and valuing the whole company at between 2.6 billion pounds
and 3.3 billion ($4.2 billion to $5.3 billion).
Hours later it had already received orders for all of the
shares on offer, two sources close to the deal said, without
giving an indication of where in the range those orders had
If an "over-allotment option", whereby more stock can be
sold if there is strong demand, is exercised, the government's
stake in the company could fall to as little as 30 percent.
Analyst Robin Byde at brokerage Cantor Fitzgerald said that
while the medium-term issue remained how fast Royal Mail can
grow its parcels business to offset falling letter volumes, the
valuation range made it attractive versus European peers such as
Austrian Post and Belgium's bpost.
"The headline really is that it's priced to go," Byde said,
estimating Royal Mail was valued on a forward price-to-earnings
multiple of around 8 times versus an average of about 10 for the
European sector. "We would expect it to debut pretty well."
Royal Mail follows the initial public offering of bpost in
June and comes after stronger equity markets have helped revive
new listings in Europe this year.
European firms have raised $15.9 billion from flotations in
the first nine months, three times the year-ago level, according
to Thomson Reuters data.
The sale is the fourth time Britain has tried to privatise
Royal Mail, which traces its origins back to 1516 when mail was
delivered by horse from King Henry VIII's court.
Three selloff attempts in the last 19 years have failed 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.
The latest sale effort has been criticised by the current
opposition Labour party and unions, who on Friday sent out
ballot papers for strike action.
The ballot will close on Oct. 16, five days after Royal Mail
is scheduled to make its stock market debut, with the earliest
possible strike date being Oct. 23.
Labour, which polls show is the frontrunner to win the next
election, has come under pressure from its union backers and
party activists to pledge to renationalise Royal Mail. While it
has not ruled this out, Labour said it would be irresponsible to
do so without knowing how much it could cost.
The head of equities at a UK fund manager said Labour leader
Ed Milliband's promise earlier this week to freeze energy prices
for 20 months if his party wins power in May 2015 may have made
Royal Mail more attractive to some investors.
"The income fund managers are quite intrigued by it (Royal
Mail)," said the manager, who declined to be named. "If our
friend Ed is going to make things difficult for utilities ...
this is potentially quite a nice thing coming through."
The government said it planned to pay a final 2014 dividend
totalling 133 million pounds, equating to a full-year payout of
200 million had the group been listed for the full year.
Based on the offer price range, that full-year payout gives
Royal Mail an implied dividend yield of between 6.1 percent and
7.7 percent - making it attractive at a time when a regular UK
savings account is yielding less than 3 percent.
Britain has also agreed to hand 10 percent of Royal Mail's
shares to staff in the largest share giveaway of any major UK
privatisation. If distributed equally among the eligible 150,000
UK-based workers, each could receive 2,200 pounds worth.
The government said it expected around 30 percent of the
shares on offer would go to individual members of the public,
who must spend a minimum of 750 pounds to invest in the company.
Royal Mail, which no longer includes the Post Office
services and retail business, has annual revenue of more than 9
billion pounds. It more than doubled profit to 403 million
pounds in the year to March 31.
Last week Rapid Ratings, an independent U.S.-based ratings
agency, gave Royal Mail a cleaner bill of financial health than
any of the world's post or parcel companies, after a "dramatic"
change at the firm over the past two years.
Goldman Sachs and UBS are running the sale
of Royal Mail, and are also joint-bookrunners along with
Barclays and Bank of America Merrill Lynch.