By Brian Groom, Daniel Schäfer and Elizabeth Rigby
Lazard sold 6m allocation; Cable reveals priority investors; Miliband attacks ‘golden ticket’
The investment arm of the government’s independent adviser on the privatisation of Royal Mail made an £8m profit selling shares in the company during the first week of trading.
Lazard faced criticism from MPs after it was disclosed that Lazard Asset Management (LAM) had been allocated 6m of the 13m shares reserved for banks advising on the deal. LAM was among 16 preferential investors, whose identity was revealed by business secretary Vince Cable on Wednesday.
The group of 16 was given a larger allocation than others in the hope that they would be stable, long-term investors, but 12 sold some or all of their holdings quickly to take advantage of the high trading price.
Ed Miliband, Labour leader, yesterday accused David Cameron of giving out “golden tickets” to priority investors.
He asked the prime minister to explain why they were allowed to sell their holdings, when postal workers had to keep theirs for three years.
Mr Cameron said the privatisation had been successful. Royal Mail was “in the private sector, making money, succeeding for our country, and its em-ployees are now shareholders”.
The government has been under fire after its decision to sell 60 per cent of Royal Mail last October at 330p a share. The shares rose more than a third on the first day of trading, triggering criticism that taxpayers missed out on a £750m gain. They closed yesterday up 1.5 per cent at 529.5p.
Appearing before the Commons public accounts committee yesterday, Alan Custis, LAM’s managing director of UK equities, said the fund manager had sold within the first week of trading after the shares hit the “price target’’ that it had set.
The committee heard that LAM had been in negotiation with Royal Mail as a potential investor when its parent company, Lazard and Co, was hired as the government’s lead independent adviser on the flotation in February last year.
“When we became aware, having been hired, that Lazard Asset Management were on a list of investors . . . we made it quite clear that we should have no input whatsoever into any discussions about allocations for LAM. The Chinese wall is complete and utter. We have had no contact throughout.’’
However, the arrangement was criticised by Margaret Hodge, the committee chairman, who said that it undermined confidence in Lazard’s role as independent adviser.
Also on the list of priority investors were hedge funds and overseas sovereign wealth funds. The others were: Abu Dhabi Investment Authority, BlackRock, Capital Research, Fidelity Worldwide, GIC, Henderson, JPMorgan, Kuwait Investment Office, Lansdowne Partners, Och Ziff, Schroders, Soros, Standard Life, Third Point and Threadneedle. A senior executive at one of the other banks that worked on the Royal Mail IPO said of Lazard: “For the man in the street it does look very bad. But the cognoscenti can see how you get there.
“It is very dangerous to get into the territory of crossing the Chinese wall – at what point do you start telling your asset management business what it can and cannot invest in. I would put this into the stupidity bucket rather than doing something wilfully wrong.” (FT)