LONDON (Reuters) - Britain's biggest privatisation in years was
blighted by a fear of failure and poor advice from state-appointed
banks, a committee of lawmakers said on Friday following an inquiry into
the 2 billion pound (£3.4 billion) sale of Royal Mail (RMG.L).
Britain sold a 60 percent stake in the postal service at 330 pence
per share last October after a politically charged debate which pitted
the coalition government against Royal Mail's heavily unionised
workforce and the opposition Labour party.
The stock quickly rose by as much as 87 percent, prompting criticism
that the price had been set too low and the government had botched the
deal. The price has since fallen back, but at 473p per share remains
above where it was sold.
"We believe that fear of failure and poor quality advice led to a
significant underestimate of the demand for Royal Mail shares," said
Adrian Bailey, the Labour chairman of the cross-party parliamentary
committee which scrutinised the deal.
Some of the concerns echo those expressed earlier this year by
spending watchdog the National Audit Office, which said the 500-year-old
state postal operator was sold off too cheaply.
Ministers have staunchly defended the government's handling of the
sell-off, which followed three failed attempts by previous
administrations to privatise Royal Mail, saying they were cautious to
reduce the risk of the launch being a flop in the face of possible
strike action at the postal firm.
"The committee's views on the share price are based entirely on
hindsight and ignore that we were selling 600 million shares – they
found no evidence that the department or its advisers missed vital
information prior to sale," a business department spokeswoman said in
response to the lawmakers' report.
However on Thursday the government launched a review of the
bookbuilding process used to collect orders for shares in such
sell-offs. Over the next six years, ministers want to raise 20 billion
pounds from the sale of public assets such as stakes in the Eurostar
rail link, Royal Bank of Scotland (RBS.L) and Lloyds (LLOY.L).
Labour said the committee's report backed up their argument that the
sale had been mishandled, and that the review of the privatisation
process was effectively an admission from the government that it had
sold the firm too cheaply.
It had previously seized upon the flotation, and the quick profits
made by big banks and City investors, to reinforce one of its central
arguments ahead of next year's general election - that Conservative
Prime Minister David Cameron's government is out of touch with ordinary
voters.
ADVISERS - The committee report's criticism focussed on the actions of the
government, its independent adviser Lazard (LAZ.N), and the two banks it
hired to lead the sale of shares, UBS (UBSN.VX) and Goldman Sachs
(GS.N).
The committee said the book-building process had been carried out by
the advisers in a way that meant investors did not have to reveal the
maximum price they would be prepared to pay for the shares. As a result,
taxpayers had missed out, they said.
While it found no evidence of
impropriety by the advisers, the report criticised the fact that a
separate asset management unit of Lazard had been among those granted
preferential status in the allocation of shares. It also highlighted
that UBS and Goldman Sachs would earn fees from trading Royal Mail
shares on behalf of preferred investors, many of whom were their
clients.
"It is clear to us that any perception of financial advantage must be removed from the privatisation process," the report said
"Therefore we recommend that the department give serious
consideration to excluding any company involved in the selection of
preferred investors, as a preferred investor."
Lazard, UBS and Goldman Sachs declined to comment. The report also said that the
government had put too much emphasis on the risk of strikes by Royal
Mail staff, resulting in a share price that was too low. It criticised
the decision not to raise the price once it became clear demand was
high.
So the "advisers" got paid handsomely by the government, in order to
tell it the right price for the shares, and then make shed-load of
money, trading, buying, selling and advising their clients of those
undervalued shares...
I don't know where a conflict of interest starts or where it ends, but
you certainly couldn't make this shit up, even if you tried... And another Billion is stolen....
Winners - The usual suspects, including Lazard, UBS, Goldman Sachs
& the Chancellors best man & his firm of merry-men.... Losers, you & I...
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