Private equity sale Plan B for RM if market float is ditched

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Private equity firms are being lined up to take a stake in Royal Mail in case plans for a stock market float are pulled.

Industry sources said bankers working for ministers were approaching ‘anyone and everyone who could do a £2bn deal’.

Former Royal Mail suitor CVC, the buyout house which owns Formula One, is understood to have been approached and is said to be interested.

American buyout firm Carlyle is understood not to be interested in pursuing the deal, while it is believed that KKR, which owns part of Alliance Boots, has also been approached.

A government spokesman said: ‘No decisions have been taken on the form or timing of the sale of shares in Royal Mail.’

The Royal Mail is expected to be auctioned off as early as this summer, though how much will be offloaded has not been decided.

'We’ve had really quite encouraging signs from investors,' said Mark Russell - the Government's man in charge - regarding the Royal Mail sell-off, adding that it won't be let go cheaply. Independent experts believe it is probably worth between £2billion to £3billion.
A stock market float is favoured, but a stake sale to a financial investor is possible.

But there is unlikely to be a mass marketing campaign like the famous 'Tell Sid' British Gas ads of the 1980s, when Margaret Thatcher's Conservative Government began a decade of privatising assets - or 'de-nationalisation' - including British Airways, British Telecom, British Steel, Cable & Wireless, Rolls Royce and British Petroleum.

The coalition sees privatisations as a way not only to cut debt but also to avoid the need for deeper spending cuts. It aims to raise £3billion this year selling its one-third stake in Urenco, the world's second biggest producer of nuclear fuel.

But Russell, who heads the Shareholder Executive which manages the Government's stakes in the 21 companies - boasting a combined £13billion turnover - said he could see privatisation going even further.