Magic circle firms lead on Royal Mail restructuring in preparation for potential float

Freshfields Bruckhaus Deringer and Slaughter and May are playing key advisory roles in the ambitious restructuring of Royal Mail as the UK Government prepares to take on the company's multibillion-pound pension deficit ahead of a potential float.

Freshfields is advising the Government on the restructuring, which will see £37.5bn of Royal Mail's legacy pensions liabilities transferring to the state, including a deficit of around £9.5bn.

The deal will also see the company's balance sheet restructured in preparation for privatisation, which could happen through a flotation of all or part of Royal Mail on the London Stock Exchange in autumn 2013. The state-owned postal operator has been valued at between £3bn-£4bn, according to press reports.

Pensions partner Charles Magoffin and City antitrust, competition and trade head Rod Carlton are leading Freshfields' team, which also includes corporate partners Tim Jones and Martin Nelson-Jones, financial institutions partner Mark Kalderon and finance partner Nick Bliss.

Meanwhile, Slaughters is advising Royal Mail, with corporate partner Jeff Triggs leading a team alongside pensions and employment partner Sandeep Maudgil and competition partner Isabel Taylor. Both firms would be expected to advise on the initial public offering if it goes ahead.

The sell-off has been heralded as Britain's most ambitious privatisation since former UK Prime Minister John Major broke up and sold the railways in the 1990s.

The restructuring was approved by the European Commission last week when it gave the go-ahead to the Government's plans to relieve Royal Mail of excessive pension costs relating to its past monopoly position and to provide restructuring aid that will cut Royal Mail Group's debt by £1.08bn. The deal will involve the transfer of £28bn of assets from the Royal Mail pension scheme into a new statutory pension scheme providing pension benefits and an investment fund.

A City corporate partner said: "This deal is about ensuring consumers' best interests are met and the Government is trying to strike a balance between maintaining a universal postal service while also getting the best value out of the system. The focus at the moment is on getting the pension deficit transferred and sorted, but of course the Government is considering its options for the best way of privatising the Royal Mail.

"A float is definitely one strong option, but this has not been taken as a final decision yet, and any other offers from big companies would, I'm sure, be considered."