Parcels deliver Royal Mail’s future
THE PRIVATISATION of Royal Mail started to become a likely event in May this year after the restructured group posted profits of £403m, up from £152m the previous year.
“When we saw that profit margins had gone from around one per cent to 4.4 per cent we realised that the time was right to act,” said one of the advisers to the flotation yesterday.
Over the years a constant decline in letter delivery has been more than compensated for by a surge in parcel traffic, which was 13 per cent up on the previous year, according to the latest figures.
A flotation or sale of Royal Mail has been deliberated over the years, with the Labour government contemplating some form of privatisation under Lord Mandelson. But Labour left well alone in the end in the face of political and union opposition, leaving it for the coalition to take a company even Lady Thatcher dared not privatise into the private sector.
There is still opposition to privatisation, with unions concerned about jobs and quality of service and others worried about whether the universal delivery pledge will be continued. But this time ministers, led by Michael Fallon (below), appear determined to drive this deal through.
PROFILE: MICHAEL FALLON
Conservative MP Michael Fallon is considered to be one of the most important members of the government, despite not being in the cabinet. The minister is tasked with driving through difficult policies in both the business and energy departments – including the privatisation of Royal Mail, the rules that control fracking for shale gas, and the government’s plans to cut red tape.
First elected for Darlington in 1983, he was involved in some of the major privatisations during the final years of the Thatcher government.
Earlier this year Fallon told City PM that this experience made him sceptical of the postal union’s attempt to convince members to reject the offer of free shares in a privatised Royal Mail: “The unions in the mid-80s advised their members not to buy the shares but they still bought them in droves – and that’s when they had to pay for them.”
Assuming the Royal Mail privatisation goes to plan, he will push on with privatising nuclear firm Urenco.
PROFILE: MOYA GREENE
Moya Greene never intended to be a postwoman. But the Canadian – who is the first foreigner to run the Royal Mail – has made her name as the turnaround specialist who saved her nation’s state-operated postal service. After university, her career flipped between public and private sector roles but there has always been a focus on extracting profits from former state utilities: an early success while in government was helping to privatise Canada’s railway system and deregulating the nation’s airspace. Following a series of executive roles in the banking sector she became chief executive of Canada Post and took up the equivalent role at Royal Mail in 2010. She has been criticised for her £1.5m pay packet – but few investors will mind such a salary if she can keep boosting profits at a privatised postal service.
ADVISERS
JAMES ROBERTSON
UBS
James Robertson of UBS first got involved with Royal Mail in 2001 and has been involved in the group in one way or another since then.
Robertson and Christopher Smith lead the UBS team, which is a joint global co-ordinator and joint bookrunner. Robertson has experience of the sector, advising UPS on its proposed TNT acquisition.
MARK SORRELL
GOLDMAN SACHS
Joint lead on the deal with UBS is Goldman Sachs, whose team features Mark Sorrell, the son of advertising tycoon Sir Martin Sorrell. Last year Mark Sorrell won City PM’s dealmaker of the year award for his role in advising Walgreen on its purchase of a 40 per cent share in AllianceBoots. Richard Cormack is working on the deal alongside Sorrell.
JUSTIN ANSTEE
BANK OF AMERICA MERRILL LYNCH
Transport and services specialist Justin Anstee is part of the Bank of America Merrill Lynch team, which also includes dealmaker extraordinaire Rupert Hume-Kendall and Oliver Holbourn.
The bank shares joint bookrunner status with Barclays, whose team is headed by Mark Warham. Lazard is financial adviser to the government on the issue.