Cable Said to Seek More Royal Mail Shares For Small Investors

U.K. Business Secretary Vince Cable is considering ways to reduce the portion of Royal Mail Group Ltd. shares allocated to institutional investors in a bid to boost the chances of smaller investors seeking a stake, according to two people familiar with the sale.

Cable and junior minister Michael Fallon met investment bankers yesterday, said the people, who requested anonymity because the talks are confidential. The government originally planned to sell around 70 percent of the shares to larger investors and 30 percent to retail investors. With the retail portion seven times oversubscribed, that split may now be adjusted in favor of smaller bidders, one of the people said.

Royal Mail’s privatization will be the biggest in the U.K. since British Rail was broken up in the 1990s. The share sale in the 360-year-old company, which has refocused on package-delivery markets spurred by a trend toward web-based purchasing, opened Sept. 27 and was fully subscribed within hours. The sale closed yesterday and conditional trading commences on Oct. 11.

Individuals who have placed large retail orders are also likely to see those scaled back, according to the people. In a statement on Oct. 7, Fallon said he was “committed to making sure smaller investors get their fair share.”

A spokesman for the Business Department said no final decision has been taken on allocation policy.

Cable earlier yesterday told Parliament’s Business Committee in London that the IPO had drawn 700,000 applications for shares from retail investors.


The popularity of the offering means share orders priced below the maximum 330 pence risk missing out, two people familiar with the sale process said Oct. 8.

The government didn’t encourage retail applications in the manner of the 1986 privatization of British Gas, now Centrica Plc, which was advertised on television, and set a monthlong timetable from announcement to the beginning of trading.

Cable told lawmakers he was looking to “place the shares with long-term investors.” He rejected suggestions from some of them that the popularity of the offering meant the price had been set too low or that ministers should consider a windfall tax on any property sales the privatized company might make.

Looking at previously oversubscribed offerings, Cable said, “the trajectory of their subsequent share values has been very, very disparate -- some have gone down.”

Out of the company’s 150,000 staff, 371 have opted not to receive free shares in the company, Cable said.

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