Britain set to price Royal Mail sale at top of range -sources


* Orders below 330p/share risk missing out - sources

* Royal Mail to make market debut on Oct. 11

* Sale would value company at 3.3 bln pounds

By Kylie MacLellan

LONDON, Oct 8 (Reuters) - Britain is on track to sell sharesin Royal Mail at the top of its price range, two sources closeto the deal said, valuing the postal service at more than $5billion on the final day that investors can put in orders.

Despite the threat of strike action from delivery staff andcriticism from opposition lawmakers, the government is close tocompleting the sale of a majority stake in the near 500-year-oldRoyal Mail - the fourth attempt to sell off the postal service.

The privatisation, which at the top of the expected pricerange would value Royal Mail at 3.3 billion pounds ($5.3billion), is Britain's biggest since John Major's Conservativegovernment sold the railways in the 1990s.

The stock market offering has received strong demand fromthe outset, and investors have now been told those with ordersbelow 330 pence per share, the top of an original 260p-330prange, risk missing out, the sources said.

Institutional investors have been warned that, due to strongdemand, they should expect their orders to be scaled back.

Financial spread betting firm IG is predicting the sharescould close between 385 pence and 405 pence on their stockmarket debut on Friday.

IG Chief Market Strategist David Jones said the success ofpast big privatisations such as BT and British Gas wasprobably attracting retail investors.

"People have got memories about how well these governmentsell-offs did back in the 1980s and 90s," he said. "With those,there were decent windfall profits on the first day."

Despite the strong demand, many members of the public areagainst the sale, with a YouGov survey in July showingtwo-thirds of British adults opposed the privatisation.

The government has said around 30 percent of the shares onoffer are expected to go to individual members of the public,who must spend a minimum of 750 pounds to invest in the company.

It has also agreed to hand 10 percent of Royal Mail's sharesto staff in the largest share giveaway of any major Britishprivatisation.

Although trade unions are currently balloting for strikeaction, a source familiar with the matter said just 368 of the150,000 eligible UK-based workers had declined to take up theirfree shares, worth around 2,200 pounds per person.


The sale of Royal Mail follows the flotation of its Belgianpeer bpost in June and comes as strong equity marketshave helped to revive new listings in Europe this year. Europeanflotations raised $15.9 billion in the first nine months - threetimes the year-ago level, according to Thomson Reuters data.

On Tuesday, vodka maker Stock Spirits began taking ordersfor its London share sale, while the debt collection firm ArrowGlobal saw its shares open higher on their Londondebut.

Cantor Fitzgerald analyst Robin Byde has estimated RoyalMail is valued at around 8 times earnings, below an average ofabout 10 for the European sector, including peers such as bpostand Austrian Post.

On Monday, British Business Secretary Vince Cable accusedthe opposition Labour party, which has said taxpayers could beshort-changed by the sale, of irresponsibly talking up the valueof the postal service. He said Labour's assertions were based on"back of the envelope" calculations.

Labour is opposed to the timing of the sale, which it saysis designed to bolster Britain's public finances, but hasresisted calls from party activists and trade unions to pledgeto renationalise the firm if it wins power in a 2015 election.

"There are misgivings that the flotation has been rushed atthe expense of taxpayers, with this week's deadline for retailand institutional applications for the offer considered by manyas too soon," said Andrew Humphries, director of assetmanagement at St James's Place Wealth Management.

Three sell-off attempts in the last 19 years have failed dueto opposition from within the governing party, which feared anelectoral backlash from tampering with a revered institution.

Institutional investors have until 1600 GMT to put in ordersfor the sale, being run by Goldman Sachs and UBS, while individual retail buyers have until 2259 GMT.

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