UPDATE: Royal Mail could list on the day postmen strike

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The UK government has launched pre-marketing for the privatisation of postal delivery service Royal Mail this morning. The deal is expected to follow the standard timeline of two weeks of pre-marketing followed by two weeks of bookbuilding and roadshows, which could mean pricing of the IPO clashes with potential strike action by employees.

(Updated to clarify in paragraph seven there will not be a public offering without listing to Japanese retail.)

The timetable is flexible.

A ballot for national industrial action by members of the Communications Workers Union is due to ballot members from September 20, with a result due on October 3. The union has to give seven days’ notice of strike action so the first possible date would be October 10, four weeks today so the likely date for the LSE debut.

The Royal Mail intention to float said CWU members are expected to vote for national industrial action and that “industrial action and other forms of industrial action are therefore expected to take place across the whole of UKPIL’s [RMG’s UK and international parcels and letters delivery businesses] activities on or after October 10 2013”. The company said in that event, it has contingency plans in place and will also consider its legal options. Strike action relates to a rejected pay offer of 8.6% over three years, backdated to April 2013.

High profile strike action the day Royal Mail makes its debut as a public entity is an unattractive eventuality for both the company and UK government, but as the timetable will have to be finalised when bookbuilding begins the union could easily schedule a strike for the debut if the float is not accelerated.

Details were vague on the offering, which is expected to value the business at around £3bn. The government said the size of the offering is flexible, but that it would involve a majority sale, including the 10% of Royal Mail to be given to qualifying employees for free. That puts the sale at anywhere from 40%–90% of the company with proceeds of at least £1.2bn, if a £3bn valuation is achieved.

There is also a retail offer, both direct and through intermediaries, with minimum orders of £750. Employees receive priority in this up to 10% of the retail offer, with a minimum order size of £500.

A public offer without listing to retail investors in Japan was considered after it was successfully included in the IPO of Belgium’s bpost in June 2013. The POWL accounted for 13.6% of the bpost base deal, which raised €933.8m, leading to several banks pitching a POWL as part of the Royal Mail IPO. However there is no POWL in the Royal Mail IPO.

The Belgian service is one of the key peers for Royal Mail, with comps also including Austria Post, the Netherlands’ PostNL, as well as Singapore Post, known as SingPost.

Goldman Sachs and UBS are joint global co-ordinators and joint bookrunners with Bank of America Merrill Lynch and Barclays. Investec, Nomura and RBC are co-lead managers. Lazard is advising the UK government.