Royal Mail: City Demand For Shares Tops £30bn

By Mark Kleinman, City Editor

Institutional investors have placed more than £30bn of orders for Royal Mail shares as the Government puts the finishing touches to the biggest UK privatisation for decades.

Sky News understands that firms from around the world have deluged the investment banks running the postal operator's sell-off on an unprecedented scale, with the initial public offering more than ten times oversubscribed.

Whitehall sources said that the £30bn figure excluded demand from members of the public, with a last-minute rush for shares expected throughout the course of Tuesday.

Approximately £2bn of shares are expected to be sold in the first phase of the privatisation, with roughly two-thirds of that figure expected to be allocated to institutional buyers and the remainder to retail investors.

The final allocations will be determined over the two days following the expiry of a deadline at midnight on Tuesday for retail investors to place their orders.

An announcement is scheduled for Friday about the pricing of the shares, with insiders saying it is "inevitable" that they will be sold at 330p, at the top of the Government's indicative price range. That would value Royal Mail at £3.3bn.

The £30bn demand figure, on which the Department for Business, Innovation and Skills (BIS) declined to comment, underlines the scale of appetite to own shares in a company that until two years ago was making losses of hundreds of millions of pounds a year.

Bankers pointed out that the figure was "in one sense meaningless" because so many investors had inflated their orders on the assumption that they would be scaled back.

"Many institutional buyers are going to end up with zero or 5% of what they ordered," said one. "There has been a deluge of overbidding."

Michael Fallon, the Business Minister overseeing the privatisation, has pledged that retail investors will receive their "fair share" of the stock although firm details of the share distribution are unlikely to emerge until Friday.

The political row over Royal Mail's privatisation has escalated in recent days, with Vince Cable, the Business Secretary, accusing his Labour shadow, Chuka Umunna, of "irresponsibility" for claiming that the shares will be significantly undervalued when they start trading next week.

Around 150,000 Royal Mail staff will receive about £2000 of free shares as part of the flotation, although they will have to hold onto them for up to five years to avoid triggering a tax liability on the sale.

Only 368 staff declined the offer, including the eight non-executive directors who were asked by BIS not to participate.

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