Share

Banks get slim fees for Royal Mail

London - The investment banks working on the privatisation of Britain's Royal Mail postal service stand to share a maximum fee pot of just under £24m ($38.4m), around a third below the typical amount for a similar sized listing.

The government kicked off its disposal of a majority stake in Royal Mail on Friday, seeking to value the company at as much as £3.3bn ($5.3bn) in one of Britain's most significant selloffs since the 1990s.

It will pay the banks a maximum possible overall fee of 1.2% of the amount raised by the sale.

That is below the average of 1.6 to 2% paid for initial public offerings over $1bn in Europe, Middle East and Africa between 2010 and 2013, according to data from Thomson Reuters/Freeman Consulting.

Companies bringing large deals to market have greater power to squeeze fee percentages, as the absolute sum is higher and banks are keen to gain credit on league tables which rank the performance of firms and are fiercely competitive.

Banks also see it as prestigious to work on such high profile deals and are keen to form good relations with governments in the hope of future work.

Earlier this month the British government did not pay any fees to the banks that handled its sale of a 6 percent stake in bailed-out lender Lloyds Banking Group.

The government plans to sell as much as 52.2% of Royal Mail in the London stock market offering, banking up to £1.7bn if the sale prices at the top of its 260 pence to 330 pence per share range.

If an "over-allotment option", whereby extra stock can be sold if there is strong demand, is exercised both the offer size and amount raised could increase by 15%.

Goldman Sachs and UBS are running the sale and acting as joint-bookrunners along with Barclays and Bank of America Merrill Lynch. Investec, Nomura and RBC Capital Markets are co-lead managers.

The seven banks will share a fee of 0.8% of the final offer size, and could also receive a discretionary fee of 0.3% on top of this.

As joint-global coordinators, the top role in an initial public offering banking syndicate, Goldman Sachs and UBS will share an extra fee of 0.1%.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders