Abu Dhabi and Kuwait Funds Got Priority Royal Mail Shares

Goldman Sachs Group Inc. and Lazard Ltd. said there was no conflict of interest when advising on Royal Mail Plc’s initial public offering, after the government released a list of “priority investors” in the sale.

Lazard’s asset management unit and some investors in Goldman Sachs’s publicly traded arm in the U.S. were among 16 buyers given preferential allocations of Royal Mail shares with its IPO on the understanding they would be long-term investors. Lazard sold the shares within a week of the offering, because they exceeded its price target, Alan Custis, managing director for U.K. Equities at Lazard Asset Management, told a parliamentary committee in London today.

A separate Lazard arm provided independent advice on the IPO, the largest U.K. privatization since the 1990s, and Goldman Sachs was one of the banks managing the sale. William Rucker, chief executive officer of Lazard London, said the investment bank had no role in allocating Royal Mail shares to its asset management unit. The sale made 8 million pounds ($13.5 million) on behalf of Lazard clients, Custis said.

“Large global institutional investors invest in us, and we should be targeting similar investors to invest in Royal Mail,” said Richard Cormack, co-head of equity capital markets for Europe at Goldman Sachs. “This is not a conflict of interest.”

Questioned Strategy

The Department for Business released the full list of priority investors today after Business Secretary Vince Cable said there had been inaccurate “speculation” about the names. Lawmakers have questioned the strategy of selling 22 percent of the postal service to those on the priority list after the National Audit Office said almost half those shares were sold within a few weeks.

The full list of priority investors issued by Cable’s department was: Abu Dhabi Investment Authority, BlackRock Inc., Capital Research, Fidelity Worldwide Fund, GIC Pte, Henderson Group Plc, JPMorgan Chase & Co., Kuwait Investment Office, Lansdowne Partners LP, Lazard Asset Management LLC, Och-Ziff Capital Management Group LLC, Schroders Plc, Soros, Standard Life Plc, Third Point LLC and Threadneedle.

Stock in the 360-year-old, London-based postal service jumped 38 percent at the close on its first day of trading on Oct. 11, increasing opposition criticism of the IPO terms. The sale raised 1.98 billion pounds for taxpayers, with the government keeping a 30 percent holding that the audit office said was valued at 1.7 billion pounds as of mid-March. Royal Mail rose 1.5 percent to 529.5 pence at close in London.

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