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UK business secretary defends Royal Mail sale

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DANICA KIRKA | October 9, 2013 12:30 PM EST | AP


LONDON — LONDON (AP) — British Business Secretary Vince Cable defended the government's sale of a majority stake in Royal Mail on Wednesday, saying that hundreds of thousands of small investors will buy shares.

Cable told a parliamentary committee Wednesday that more than 700,000 retail investors have sought shares in the initial public offering. Overall, investors have requested seven times more shares than the government offered for sale.

Shares are expected to be priced at between 260 pence and 330 pence, giving Royal Mail a market valuation of between 2.6 billion pounds ($4.1 billion) and 3.3 billion pounds. The government would raise between 1.04 billion pounds and 1.72 billion pounds based on these figures.

The opposition Labour Party says the sale should be put on hold amid concern the price is too low, costing taxpayers as much as 1 billion pounds.

The sale is a big and controversial change for a national institution that dates to the time of King Henry VIII. Even former Prime Minister Margaret Thatcher, who championed the sale of state-owned companies such as British Telecom and British Gas in the 1980s, refrained from privatizing Royal Mail.

Royal Mail workers protested near Parliament, carrying a banner saying: "The Great British Royal Mail Robbery."

Members of the Communication Workers Union are holding a strike ballot, with the results to be released next week. Any strike would be held in the weeks ahead of the busy Christmas period.

The Labour Party has challenged whether Cable had obtained the best price for the taxpayer. The concern is that if the shares are undervalued they will rise steeply on the first day of trading, giving investors a windfall that, according to Labour, should have gone to the taxpayer.