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Royal Mail valued at up to £3.3bn

Friday, September 27, 2013 - 01:49

Sept. 27 - Investors appear hungry for the Royal Mail share offer - but is the underlying growth story realistic? David Pollard reports.

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£3.3 billion is today's daily digit. That's the valuation Britain's Royal Mail is attracting after its share offer was announced. As a public institution, it's nearly 500 years old. As a listed company, it'll make its stock market debut in October. Over 40 percent of shares will be up for grabs - at 260 to 330 pence. The public are expected to snap up just under a third of the stock, though they'll have to invest a minimum of £750. That market cap of £3.3 billion is at the top of the range - the government hoping to pocket anything up to £1.7 billion. Investors appear hungry for the shares after a spate of recent IPOs including estate agents Foxtons and a government stake in Lloyds Bank. Michael Van Dulken of Accendo Markets. SOUNDBITE: Michael Van Dulken, Head of Economics, Accendo Markets, saying (English): "We don't often see the government getting rid of significant stakes unless they've bailed out the company, as was the case with Lloyds. Well, you know, that was snapped up very quickly." Others question whether the projected dividends of around 6 to 7 percent are realistic. Richard Hunter is from Hargreaves Lansdown. SOUNDBITE: Richard Hunter, Head of UK Equities at Hargreaves Landsdown, saying (English): "We are in something of a terminal decline when it comes to the letters market. In terms of the parcels business, because it's higher margin, it's therefore one which is going to continue to attract more competition. There's also a part even of the parcels business which is on the decline, namely those things which are now downloadable." Also taking some of the spin off the sale: the spectre of strike action. Postal unions are balloting members on whether to walk out. They say the privatisation is 'unpopular'. But at least some of the shares will make their way to employees. Around ten percent of the new company - worth over £2,000 each to those eligible to get them.

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Royal Mail valued at up to £3.3bn

Friday, September 27, 2013 - 01:49