UK government considers private equity route for Royal Mail

Ellie Pullen
25 April 2013

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CVC, Carlyle and KKR are among the firms that have been approached by government advisers regarding a potential buyout of Royal Mail, according to media reports.

The government is believed to be considering the idea of a private equity firm acquiring a majority stake in Royal Mail Group – but only if its preferred plan to float the postal service on the stock market is abandoned.

Regardless of the exit route the government eventually decides to pursue, a 10% stake in the business will reportedly be offered to Royal Mail's 160,000 staff.

The government-owned company is expected to be valued at £2-3bn. Revenues at the end of the financial year 2012 stood at £9.5bn, equating to roughly 8x EBITDA. In its most recent half-year report posted last November, Royal Mail recorded £4.3bn in turnover and a significant increase in operating profit to £144m, up from 2011-12's half-year figure of £12m.

CVC Capital Partners is believed to be interested in a potential buyout, having previous experience of this type of deal. The GP is currently in the process of preparing state-backed Belgian postal service bpost for its IPO.