Royal Mail deal delayed by pricing date – exclusive

The UK government’s attempt to offload the Royal Mail Pension Plan private equity portfolio has stalled, Secondaries Investor has learned.

A deal was on the verge of being agreed when a disagreement over pricing caused the government to withdraw, according to three sources familiar with the matter. The deal’s reference net asset value was March 2016, a source said, which the government deemed unrepresentative of changed market conditions.

Pantheon and Pomona Capital were the prospective buyers, according to two of the sources.

Talks with alternative buyers are still ongoing, a source said, and the initial reference date has been revised. Details of how the offer has been revised are unclear.

According to one of the sources, the portfolio has consistently generated cashflow for the government, which also influenced its decision not to sell.

A spokeswoman for the UK’s Department for Business, Energy and Industrial Strategy, which is responsible for the assets inherited when the business was privatised, told Secondaries Investor, “[The] government may opt to hold less liquid assets for the longer term and potentially to maturity where this protects value to the taxpayer.”

She declined to comment further, citing confidentiality.

In April 2012 the government removed Royal Mail’s estimated £10 billion ($13 million; €11.4 million) pension deficit by transferring historic liabilities from the Royal Mail Pension Plan to a new unfunded statutory pension scheme, the Royal Mail Statutory Pension Scheme.

Part of this was a private equity portfolio containing two buyout funds of funds with a combined net asset value of around $600 million as of 31 March 2016, Secondaries Investor reported. One mandate is managed by Pantheon, the other by Pathway Capital Management.

A possible sale was first mooted in March 2014, with Evercore running the process.

Secondaries Investor reported in January 2017 that first-round bids had been submitted, with one potential buyer describing the information provided as “very high level” and opaque. It led buyers to bid on a name-only basis for the underlying funds, a source said at the time.

Another source said that potential buyers had been “scared off” because Pantheon, in bidding for its own portfolio, had “an edge” and “knows the assets better than anyone else.”

Over the course of the bidding process, around 20 different investors have expressed interest in the portfolio, a source says.

Evercore declined to comment. Pantheon and Pathway could not be reached. Pomona Capital did not respond in time for publication.