Royal Mail "sold for right price"

Friday 19 December 2014

The Government and taxpayer achieved "significant value" from the sale of Royal Mail and the right decisions were made over the pricing of shares, according to a report into the controversial privatisation.

Former city minister Lord Myners said the sell-off was executed with "considerable professionalism", adding that it would have been risky to price shares higher than 350p to 360p.

Opponents have claimed that the Government could have received millions more - possibly up to £1 billion - if shares had been priced higher than the 330p when the privatisation went ahead in October 2013.

The Government sold 60% of Royal Mail, raising nearly £2 billion. But ministers faced criticism after shares increased by 38% on the first day of trading, later peaking at 615p before falling back.

MPs have said that taxpayers may have lost up to £1 billion in potential proceeds from the sale, but this is rejected by Lord Myners.

He said: "This is a seminal piece of work which has the potential to fundamentally alter the way companies are floated on the UK stock market and I look forward to seeing how this develops.

"I regard the Royal Mail privatisation to have been a complex exercise executed with considerable professionalism. Many previous governments attempted to sell but failed. The sale was done against a backdrop of global economic uncertainty and a threat of industrial action, which go a long way towards explaining the cautious approach taken throughout the process.

"There were also some inherent complexities built into the transaction, such as a generous retail offer, which added to this caution. The Government adopted conventional standard market practices built up over time.

"We found no evidence to challenge the general assertion that an IPO price greater than 350-360p could have been achieved and we accept that a decision to revise the range would have come with added uncertainty and risk. The right decisions were made.

"We do not believe that a price anywhere near the levels seen in the aftermarket could have been achieved at listing. The aftermarket conditions were extraordinary, unpredictable and did not reflect significant value 'left on the table' as some concluded at the time. The Government and taxpayer achieved significant value."

Business Secretary Vince Cable said: "I am very grateful to Lord Myners and his expert panel for this important and insightful report. It contains a number of significant proposals which could make the general process of future sales more transparent.

"I would encourage financial regulators and those bringing companies to market to engage in this debate. In particular they should explore how digital auctions could, in certain circumstances, make the sale process much more flexible.

"I also welcome his comment that the sale was executed with considerable professionalism and that any decision to try to have priced the shares higher would have been risky. We were right not to take that risk."