Bruce Barnard | Aug 01, 2011 9:42AM EDT
European Union antitrust regulators are investigating the United Kingdom’s bid to privatize Royal Mail, the state-owned postal and logistics group.
The EU’s executive Commission is assessing whether the government’s plan to take over Royal Mail’s $13 billion pension deficit and restructure its $2.8 billion debts contravenes EU’s state aid rules.
The EU is concerned these measures might give Royal Mail an unfair advantage over its European rivals including privatized Deutsche Post and TNT of the Netherlands.
The Mail Competition Forum, the lobby for private mail and logistics companies in the U.K., including TNT and Deutsche Post’s DHL unit, said it has “serious reservations” about the government taking Royal Mail’s pension and has called for conditions to be attached to the plan.
The Commission allowed France to inject public funds into the pension scheme of La Poste, the country’s state-owned postal monopoly, under certain conditions.
The Commission could force Royal Mail to dispose of assets to offset the pension support if it finds the U.K. government’s plan breaches EU state aid rules.
The most likely asset to be disposed is General Logistics Systems, the pan-European express division, which boosted 2010 profit by 5 percent to $192 million on unchanged revenues of $2.4 billion and is reckoned to be worth up to $3.5 billion.
The core letters and parcels unit, by contrast, slumped to a loss of $196 million from a year-earlier profit of $33 million.
The EU investigation likely will take at least 12 months, casting doubt on the U.K. government’s target of privatizing Royal Mail by March 2012.
The government passed legislation in June to privatize the company but has not decided if it will choose a stock market flotation or sale to a trade buyer of private equity fund.
--Contact Bruce Barnard at brucebarnard47@hotmail.com.
