The private equity firm that tabled a bid for Royal Mail four years ago has told the Government that it will revive its interest if attempts to privatise the postal services group through a stock market listing are unsuccessful.
Sky News can reveal that CVC Capital Partners has signalled that it is ready and willing to invest in Royal Mail as ministers draw up contingency plans for the failure of an initial public offering (IPO) expected to value the company at up to £3bn.
CVC, which owns stakes in high-profile businesses including Formula One motor racing and the AA breakdown recovery group, would only make a fresh bid for Royal Mail as a ‘Plan B’ option if a flotation proved impossible, insiders said.
The private equity group recently sold part of its stake in the Belgian postal service through a public flotation. It was among a group of investment firms sounded out by Government advisers in recent months about its appetite to inject capital into Royal Mail as an alternative to a flotation.
News of CVC’s renewed interest in Royal Mail comes on the day that Vince Cable, the Business Secretary, sets out details of Government plans to float the company as early as the autumn.
Trade unions are opposing the privatisation although their antipathy would be exacerbated if ministers ultimately elected to sell Royal Mail to a private equity firm rather than through a stock market listing.
Sky News disclosed on Tuesday that ministers have decided after months of deliberations that tens of thousands of Royal Mail employees will be handed up to £300m in shares for free rather than at a discount.
As a further sweetener, staff will be guaranteed a proportion of the retail element of the IPO, meaning that postal workers could end up owning significantly more than 10% of Royal Mail.
Mr Cable will announce the plans in a statement to the House of Commons this afternoon.
The share giveaway to staff will encompass 10% of Royal Mail’s equity, in accordance with the Postal Services Act that paved the way for the sell-off of the company two years ago.
At an overall valuation of between £2.5bn and £3bn, that would value the employees’ stake at up to £300m.
Roughly 150,000 of Royal Mail Group’s 165,000 staff are expected to be included in the share distribution, with workers at the European parcels subsidiary GLS likely to be excluded from the deal.
A rough valuation of employees’ windfalls would mean each eligible member of staff could receive shares worth more than £2000, although that would depend on the value of Royal Mail’s shares when it floats on the London Stock Exchange.
UK-based staff will not receive all of the shares on the day that Royal Mail becomes a public company.
Under the Act, the Government pledged to hand 10% of the company to staff by the time the state’s shareholding is reduced to zero, a process that could take several years.
Whitehall sources said the share giveaway to staff would take place in several tranches and employees would be obliged to hold onto the initial chunk of shares for at least three years.
Members of the public will also be able to buy shares in Royal Mail through intermediaries, a website and possibly through Post Office branches, although a deal has not yet been finalised with the Post Office, which is now a separately-owned organisation.
People close to Mr Cable, who has been working alongside Michael Fallon, the Business Minister, on the privatisation plans, dismissed the prospect of a ‘Tell Sid’-style public information campaign such as those which accompanied the major state sell-offs of the 1980s.
Ministers hope the free share offer and the guaranteed component of the retail offering will be sufficient sweeteners for staff as union bosses continue to oppose the privatisation.
Writing in Wednesday’s Daily Telegraph, Mr Fallon said Royal Mail needed private capital to compete with rivals.
“This [an IPO] is a practical, logical and commercial decision. It cannot be right for a £9bn-a-year business to come cap in hand to ministers each time it wants to innovate or commit future investment.”
Martin Gilbert, chief executive of Aberdeen Asset Management, has become the first prominent City fund manager to publicly endorse a Royal Mail flotation, telling Sky News that talk of industrial unrest was just “union noise”.
Labour said the privatisation was a “fire-sale” and criticised ministers for pursuing it without what it said were adequate safeguards surrounding the future of Royal Mail.