12 September 2013
Last updated at 09:53 GMT
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Michael Fallon says the Royal Mail is getting freedom to “raise the money it needs to invest in the future”
The government has given formal notice to the stock exchange that it plans to privatise the Royal Mail “in the coming weeks”.
BBC business editor Robert Peston said he expected the sale to take place in November.
Employees will be given 10% of the shares, with the rest being offered to institutional investors and members of the public.
The minimum amount members of the public can apply for will be £750.
Free shares will be given to 150,000 UK-based Royal Mail employees, who will be able to apply for additional shares under an employee priority offer, with a minimum application of £500.
Industrial action
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Dave Ward, CWU: “The future of the universal service is now in jeopardy”
The Communication Workers Union (CWU) opposes the float and is about to ballot its members for strike action. The outcome of the ballot will be announced on 3 October.
Royal Mail expects CWU members to vote for industrial action, with the first date available for a strike being 10 October.
The government has said it will be flexible about how much of the Royal Mail to sell depending on market conditions and how much demand there is for the shares.
But it plans to sell at least 41%, which, together with giving away 10% to employees, means it will no longer own the majority of Royal Mail.
More information is available at www.gov.uk/royalmailshares which is also where online applications will be once the offer opens.
Private investors will also be able to apply for shares by post or through stockbrokers.
Continue reading the main story
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I can certainly never remember any business being sold on the stock market at a time when it had been brought to a grinding halt by a strike”
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- Read more from Robert
Royal Mail has announced that “in the absence of unforeseen circumstances” it will pay a dividend of £133m in July 2014, saying it would have paid £200m if the business had been listed for the whole of its financial year.
Robert Peston said that implied that the business was worth around £3bn.
Business minister Michael Fallon sought to reassure people that the six-day-a-week universal service was protected.
“It is the law – it’s an Act of Parliament that was passed two years ago and only Parliament could ever change that,” he told BBC News.
“I can’t think of any political party that would want to reduce the service that we all rely on.”
‘Healthy future’
As part of the privatisation, Royal Mail will take on £600m of loans from banks, with another £800m available if necessary. This will replace the loans it currently has from the government.
The Post Office was separated from Royal Mail in 2012 and is not for sale.
Business Secretary Vince Cable said: “HM Government is taking action to secure a healthy future for the company.”
“These measures will help ensure the long term sustainability of the six days a week, one-price-goes-anywhere universal postal service.”
But shadow business secretary Chuka Umunna said: “Ministers are pushing ahead with this politically-motivated fire sale of Royal Mail to fill the hole left by George Osborne’s failed plan.”
“The government has not addressed the huge concerns which remain on the impact the Royal Mail sale will have on consumers, businesses and communities.”
Do you work for Royal Mail or a rival service? What do you think of this plan? You can get in touch using the form below.