Introducing Private Capital

Derek Shakespeare, Barclays

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Last time we met...

• Approaches to introducing private capital

• Initial Public Offering (IPO)

• Sale of all or a stake in the business to a single buyer (Corporate buyer or Private Equity)

• Royal Mail’s path

Improving Financial Performance

New Regulatory Regime

Implementation of Balance Sheet Restructuring

Balance Sheet

Restructuring

Medium to Long Term

Growth Strategy in Place

Separation of Post Office

Limited (“POL”) in April 2012

Establishing a Track Record

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What is an IPO?

• An Initial Public Offering involves a company listing on a stock market and selling its shares to investors

• In recent years, most IPOs have been available only to institutional investors, but some have allowed private investors to participate alongside the institutions by way of an Intermediaries Offer- E.g. Direct Line Group, esure Group

• For major privatisations, there has historically been an element of direct participation for the general public viawhat is called a ‘Retail Offer’

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Key Parties

• Responsible for overall oversight and coordination of the flotation

• Handle a number of aspects of sale: valuation, publishing research and arranging investor meetings

• Underwrites a portion of the share offering

• Publishes research

• Arranges investor meetings

• Ensures compliance with regulatory requirements for flotation

• Makes sure proper and complete ‘due diligence’ has been conducted on the Company

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Recent News

• Minister Fallon confirmed HM Government’s plan to seek to introduce private capital to Royal Mail

• Royal Mail announced full-year results showing a significant improvement in financial performance

• HM Government announced the appointment of Joint Global Coordinators (Goldman Sachs, UBS), Bookrunners (Barclays, Bank of America Merrill Lynch) and Barclays as Sole Sponsor

• Secretary of State confirmed to Parliament the intention to pursue an IPO, to sell a clear majority of Royal Mail's shares to the public market

• 10% of the Company to be given to eligible employees, free of charge

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Preparing the company for an IPO requires many steps

• Layout the history and risks

• Prospectus

• Institutional offer

• Retail offer for members of the general public

• Employee offer

• Story for investors

• Presentation to analysts

• Presentations to investors

• Ongoing relationshipwith Government

• Underwriting Agreement

• From ‘safe’ to ‘aspirational’

• Discussions under way

• Institutional orders determine final price

• Shares listed and begin trading

• Public and employees are able to apply for shares