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Royal Mail Staff To Get Free Shares In Sale

(c) Sky News 2013

Tens of thousands of Royal Mail staff will receive free shares worth as much as £300m as part of the privatisation of the postal operator, the Government will announce on Wednesday.

Sky News can reveal that ministers have decided after months of deliberations that Royal Mail employees will be handed the shares for free rather than at a discount.

As a further sweetener, staff will be guaranteed a proportion of the retail element of the initial public offering (IPO), meaning that postal workers could end up owning significantly more than 10% of Royal Mail.

Vince Cable, the Business Secretary, will set out the details in a statement to the House of Commons on Wednesday 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 (LSE: LSE.L - news) .

UK-based staff will not receive all of the shares on the day that Royal Mail becomes a public company - assuming that a flotation is able to proceed. Under the Act (Taiwan OTC: 3492.TWO - news) , 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.

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.

The Government is expected to attempt to sell up to 60% of Royal Mail in the initial phase of the privatisation, although that will depend on the demand from City institutions.

The Department for Business, Innovation and Skills and Royal Mail both declined to comment ahead of Wednesday's announcement.