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<p>The process that set the value range comprised a combination of rigorous market testing and extensive analysis of comparable companies in the sector. Over the 12 months prior to the initial public offering (IPO), Royal Mail's management met a range of high quality institutions of the type that would form the core of a long-term, supportive investor base. In early September 2013, the management team and our advisers engaged further with a focused group of informed investors. Specific indications of valuation and demand were received from this group which informed the valuation range to be set. In addition to the market testing, a valuation assessment was made which included a review of comparable quoted postal companies (including Bpost, Deutsche Post, Austria Post and PostNL) on a range of key metrics such as valuation multiples and dividend yields.</p><p>Our long-term strategy to safeguard the universal service and deliver value for money for the taxpayer involves not only getting good value for the initial stake sold but also getting good value for the significant residual stake held by Government (30% of the Company assuming exercising in full the over-allotment option), and leaving Royal Mail in a strong, sustainable position capable of accessing the capital markets in the future. We are focused on the long-term success of Royal Mail and believe that value for money should be measured over the medium term.</p><p>The Secretary of State for Business, Innovation and Skills, the right hon. Member for Twickenham (Vince Cable), wrote to the Chairman of the Business, Innovation and Skills Select Committee on the 18 October 2013 setting out the Government's sale objectives and approach to setting the price range. A copy of his letter was laid in the Libraries of the House.</p> |