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Royal Mail sale could have raised extra 180 million pounds - official report

A Royal Mail postal van is parked outside homes in Maybury near Woking in southern England March 25, 2014. REUTERS/Luke MacGregor

LONDON (Reuters) - The privatisation of Britain's Royal Mail could have raised an extra 180 million pounds, according to a government-commissioned report that largely endorsed the cautious approach by ministers in the 2-billion-pound sale.

The government's decision to sell a 60 percent stake in the 500-year-old state postal operator last October for 330 pence a share was heavily criticised by the opposition Labour Party and trade unions after the stock soared by as much as 87 percent.

Lord Myners, a former Labour minister commissioned to see if the government could improve the way it sells public assets, said on Thursday "the right decisions" were made.

However, he proposed a number of changes to make floating state-owned assets - and companies in general - more transparent.

The high-profile public offering was trumpeted as a success by the Conservative-Liberal Democrat coalition. But Labour accused it of failing to look after the interests of taxpayers after the shares rose to as high as 618 pence within three months.

They have since fallen back and are trading just under 400p.

A previous report by the public spending watchdog in April said the government had been too cautious in pricing the deal, leading to missed revenue of at least 750 million pounds.

Myners, however, said his panel believed the offer could have been increased by 20 to 30 pence per share, equivalent to an additional 120-180 million pounds for the government.

"We do not believe that a price anywhere near the levels seen in the after-market could have been achieved at listing," he said.

"The after-market conditions were extraordinary, unpredictable and did not reflect significant value 'left on the table' as some concluded at the time. The government and taxpayer achieved significant value."

Myners said in future the government should consider revising the book-building process, in which large institutional investors express demand for the shares.

He said more consideration should be given to innovative book-building approaches whereby price ranges could be changed if demand levels prove unexpectedly high or low, without any of the stigma currently associated with changing the range.

Demand for Royal Mail's shares was bunched at the high end of the price range from early in the book-build, but the range was not increased, partly because it would have added uncertainty and risk, he said.

Shares could also be allocated to institutions in a more transparent way by moving the book-building process to a digital online auction based on binding bids, he said, adding that such a change was inevitable.

(Reporting by William James and Paul Sandle; Editing by David Clarke and Pravin Char)