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UK Sets Royal Mail IPO Price At Top End Of Estimated Range, To Raise GBP 1.7 Bln

UK's Dept for Business Innovation&Skills said Thursday it priced the initial public offering of existing ordinary shares of Royal Mail Plc, the provider of postal and delivery services in the UK, at 330 pence or $5.28 per ordinary share, the top end of the estimated range. The pricing gives Royal Mail a total market capitalization of 3.3 billion British pounds or $5.27 billion.

Royal Mail shares are expected to commence conditional dealings on the London Stock Exchange on Thursday under the ticker symbol "RMG."

The IPO comprised of 521.7 million existing ordinary shares, representing 52.2 percent of Royal Mail's share capital on admission. The government had earlier estimated the shares to be priced between 260 and 330 pence per share.

Business Secretary Vince Cable noted in a release that institutional investors have snapped up two-thirds of the offer, with the remainder 33 percent going to retail investors. Cable added that the institutional offer was more than 20 times subscribed and the retail offer was about 7 times subscribed.

The U.K. Government is set to raise gross proceeds of 1.72 billion pounds or $2.75 billion from the offering. The proceeds will go up to 1.98 billion pounds or $3.16 billion if the over-allotment option is exercised in full.

"Our priority has always been protection of the consumer through the universal service obligation, good value for money for the taxpayer, and a stable long term ownership structure that will enable Royal Mail to be a successful enterprise and to raise commercial funding to invest. This listing achieves all of these objectives," Cable said in a statement.

The offer comprised of an institutional offer to global institutional investors and a retail offer to individuals located in the UK, including the Employee Priority Offer. All shares in the offer will be sold at the same price.

Her Majesty's Government, or HM Government, had announced its intention on September 12 to proceed with an IPO to sell a majority of the issued share capital in Royal Mail after the passage of the Act which lifted restrictions on Royal Mail's ownership, allowing HM Government to sell shares in Royal Mail.

Following the completion of the IPO and the free allotment of 10 percent of Royal Mail's share capital to its eligible UK-based employees, HM Government will remain with a 37.8 percent holding in Royal Mail, which will be reduced to 30.0 percent if the over-allotment option is exercised in full.

"We have struck the right balance, increasing the proportion of shares going to small investors to ensure they get their fair share and ensuring the employees get a 10 per cent. stake in the business," Cable added.

UBS Ltd. has been granted a 30-day over-allotment option by HM Government over up to 78.3 million Ordinary Shares, representing 15 percent of the base offer.

The joint bookrunners for the offering are Goldman Sachs International, UBS Ltd, Barclays Bank PLC, and BofA Merrill Lynch, while Lazard & Co., Ltd. were the financial advisers to HM Government for the offering.

The offering is part of the British Governments move to privatize the postal service as was done by some of the other European countries such as Germany, the Netherlands and Austria. However, the U.S. Postal Service continues to be held by the federal government.

Royal Mail, the iconic British brand, has been separated since April 2012 from the Post Office, which operates the UK's network of more than 11,500 post office branches. HM Government stated earlier that it is committed to the future of the Post Office and there will be no closure program.

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by RTT Staff Writer

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