MPs To Probe 'Underpriced' Royal Mail Sale

By Mark Kleinman, City Editor

A panel of MPs is poised to extend a probe into the privatisation of Royal Mail by summoning the City bankers who advised ministers on the sell-off to give evidence.

Sky News has learnt that some members of the Business, Innovation and Skills Select Committee (BIS) want to interview executives from the syndicate of banks responsible for pricing the initial public offering (IPO) at 330p-per-share.

Following a 38% jump on Friday, the postal operator's shares closed up 4% on Monday, valuing the company at 475p-a-share, or £4.75bn - almost £1.5bn more than the level at which the Government decided to privatise it.

Conditional trading in Royal Mail shares has now concluded, with thousands of private investors likely to offload their holdings of 227 shares each when full trading begins on Tuesday.

Some City analysts believe the company's share price will continue its upward momentum in the coming days because of the scale of demand to hold the stock from institutional investors who saw their orders scaled back or rejected altogether by the Government's advisers.

Vince Cable, the Business Secretary, dismissed the initial price surge as "froth".

He told the BIS Committee ahead of the flotation last week that he was convinced the sale had been properly priced.

Adrian Bailey, the Labour MP who chairs the committee, said the appetite of its Conservative members for a full inquiry into the privatisation had yet to be established.

But he added: "I don't think we can let the matter rest.

"It seems that the Government has given its advisers a lot of money for depriving the taxpayer of £750m of value."

Another committee member said it would be important to interview the bankers on the deal to establish the precise methodology for valuing the company.

The National Audit Office is also expected to examine the sale, on which the Government was advised by Lazard, one of the City's top independent investment banks.

The bookrunners – the banks which helped to place the shares with investors – were Barclays, Bank of America Merrill Lynch, Goldman Sachs and UBS, who are each expected to take fees amounting to several million pounds.

On Saturday, the Financial Times reported that the Government had examined whether it could raise the price at which shares in Royal Mail were sold but that institutions threatened to withdraw if ministers attempted to do so.

Royal Mail and BIS declined to comment.

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Burberry Boss Angela Ahrendts To Join Apple

Burberry has confirmed its respected chief executive Angela Ahrendts is to leave the luxury goods firm next year to join Apple.

The company confirmed she would be replaced by chief creative officer Christopher Bailey by mid-2014 and that Bailey would assume both roles.

Ahrendts will assume a title of senior vice president of retail and online stores at Apple - a new position - and will report directly to CEO Tim Cook.

Angela Ahrendts has championed online growth

He said of the appointment that Ahrendts shared Apple's focus on innovation and customer experience.

Her departure saw Burberry stock lose 6% when trading began on the FTSE 100 on Tuesday morning.

Ahrendts said of her departure: "Burberry is in brilliant shape, having built the industry's most powerful management team, converted the business to a dynamic digital global retailer, created a world class supply chain, state of the art technology infrastructure, sensational brand momentum and one of the most closely connected creative cultures in the world today.

"It has been an honour to have partnered with Sir John Peace (chairman) and Christopher for the last eight years.

"I am confident that, with Sir John's continued guidance and the executive team's support, Christopher, as one of this generation's greatest visionaries, will continue to lead Burberry to new heights.

"Today, Burberry is not only a great brand, but a truly great company," she concluded.

Her successor has been at Burberry since 2001 and has held the major creative role for six years.

Burberry also updated the market on its first half progress, saying its retail revenue rose 17% to £694m in the six months to Sept. 30 - in line with analysts' forecasts.

Burberry's revenues rose 14% in the first half of the year

Retail sales from stores open at least a year grew by 13%, helped by double digit growth in Asia Pacific and the Europe, Middle East, India and Africa (EMEIA) division region and high single digit growth in the Americas.

Total revenue was £1.03bn pounds, up 14%.

Shares in Burberry, up 41% over the last year ahead of today's announcement,  valued the business at £7bn.

Ahrendts departure leaves just two female chief executives in Britain's premier share index.

She has spent a total of ten years with Burberry, transforming it into a global luxury brand with a growing presence in emerging markets.

It has been suggested that her success in growing Burberry in Asia - particularly China - will have been attractive to Apple which has struggled to secure the market penetration enjoyed there by many of the iPhone and iPad-maker's rivals.

More follows...

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Royal Mail: Value Climbs As Dealing Starts

Royal Mail's value continued to grow when full dealing began on the London Stock Exchange on Tuesday morning.

Investors - lured by the promise of healthy dividends - sought out shares with the price rising more than 3% in early trading when the stock became available to the wider market following its conditional launch.

In the first day of dealing for many of the 690,000 small investors who bought stock the shares opened at 478p - almost 45% above their privatisation price - before climbing further to 490p in the first hour.

Price correct at 08:35 BST

That made them almost 50% more valuable than the Government's price tag last week and gave Royal Mail a value of £4.9bn.

That compares with the 330p per share price they were sold for on Thursday, which valued the group at £3.3bn, meaning small investors who were allocated shares worth £750 originally are today sitting on paper profits of more than £360.

Only institutional investors such as pension funds and those individuals who ordered stock through a broker offering conditional trade were able to sell before Tuesday.

The start of full trading meant people who bought through the Government's official website or by post could cash in for the first time.

More follows...

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Buyout Firms Eye Debut On West End Stage

By Mark Kleinman, City Editor

Some of the world's biggest private equity firms are mulling takeover bids for the company behind the landmark London theatres that are home to productions including The Lion King and Dirty Dancing.

Sky News has learnt that half a dozen investment groups have been given access to financial information about Ambassador Theatre Group - owner of venues including the Donmar and Lyceum - meaning that a controlling stake in the company could change hands within months.

The interested private equity funds are understood to be BC Partners, Blackstone, Carlyle, Charterhouse, Lion Capital and Permira, which collectively manage tens of billions of pounds of investments.

Ambassador's majority shareholder, Exponent Private Equity, has invited the firms to consider making offers ahead of a wider auction that had been planned for early next year.

A number of international theatre groups are also understood to be interested in examining Ambassador's books. Any buyer is likely to want to see the company's performance during the crucial Christmas trading period, which accounts for about half of its annual trading profits.

Exponent acquired a roughly 55% stake in the UK's largest theatre operator in 2009 in a deal valuing it at just over £130m. The remainder is owned by a number of wealthy individuals and Ambassador's founders, Howard Panter and his wife, Rosemary Squire.

Ambassador's minority investors are said not to be keen to sell their shares as part of the current sale process, but one insider said the existing shareholder agreement contained a clause known as drag rights, which may mean that any buyer of Exponent's stake has the power to compel other investors to sell at the same time.

UBS, the Swiss bank, is handling the sale, which is likely to value Ambassador at between £250m and £350m. Exponent is expected to make a handsome return on its investment, which could also reap a windfall for Greg Dyke, the former BBC director-general who now chairs Ambassador as well as the Football Association.

The company owns about a dozen venues in London's theatreland, which are staging productions such as Jersey Boys, which is transferring to Ambassador's Piccadilly Theatre in March next year.

The Lion King, which is staged at the Lyceum, is one of the West End's most successful and long-running musicals.

In total, Ambassador owns 39 venues in Britain. It was established by Mr Panter and Ms Squire in 1992, and sold to Exponent four years ago in a deal that combined the existing ATG and the theatre portfolio of Live Nation, the American entertainment giant.

Since then, the company has expanded through bolt-on acquisitions including its debut appearance on New York's Broadway this year, when it paid around £40m to buy the Foxwoods Theatre, home to Spiderman: The Musical.

A sale process will take place at a buoyant time for London's theatre industry. Ambassador saw a 17% surge in sales to £111m in the 12 months to March 2012, while operating profits during the same period rose nearly 70% to £15.5m. Both measures are understood to have grown again during the subsequent 12 months.

Overall West End ticket sales were up in 2012 for the ninth consecutive year running despite an anticipated decline during the London Olympics.

Fears about the economic environment and the Games proved relatively unfounded with attendance increasing to almost 14m, up 0.56%, and box office sales setting a new record of £530m, up 0.27%.

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UK To Relax Visa Rules For Chinese Nationals

Visa rules for Chinese nationals coming to Britain will be relaxed by the Government in a drive to boost visitor numbers, Chancellor George Osborne has announced.

Mr Osborne, who is leading a UK trade delegation to China, said the changes will "streamline and simplify" the visa application process for tens of thousands of Chinese visitors.

The move comes amid signs of a thaw in relations with Beijing which have been frosty since David Cameron met the Tibetan spiritual leader, the Dalai Lama, last year.

The changes will reduce the need for Chinese visitors to the European Union to submit separate visa applications for Britain, with selected Chinese travel agents able to apply for UK visas by submitting just the EU's Schengen area visa form.

A new 24-hour "super priority" visa service will become available from next summer, while officials are also looking at expanding a VIP mobile visa service, currently operating in Beijing and Shanghai, to the whole country.

The move will make it easier for tourists to visit

The service involves visa teams going out to applicants to collect their completed forms and biometric data, with the whole process taking less than five minutes.

The move will be welcomed by businesses in the UK who have complained that the existing regime is discouraging high-spending Chinese visitors from coming to Britain.

In 2012, 210,000 visas were issued to visiting Chinese nationals who went on to contribute around £300m to the British economy.

Mr Osborne said: "These changes will streamline and simplify the visa application process for Chinese visitors, while ensuring the system is strong and secure. This is good news for British business and tourism."

Mayor of London Boris Johnson, who is also on a trade visit to China, said he was pleased the Government had listened to him on simplifying the visa system for Chinese people.

Chinese nationals contribute £300m to the British economy

He said: "I'm pleased that the Government has listened to the many voices, mine included, who have called repeatedly for a streamlining and simplification of the Chinese visa system.

"Whilst I await the detail, it would appear the Government's announcement of a pilot scheme available through select travel agents is a welcome step forward.

"The move will hopefully encourage ever greater numbers of Chinese tourists to London.

"Only today I launched the first ever Chinese language website dedicated to studying in and visiting London. Chinese visitors now have all the information they need to access London, and changes to the visa system that will hopefully make getting here a good deal easier."

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US Shutdown: Lagarde Issues Recession Warning

The head of the International Monetary Fund has warned that a political failure to break the stalemate over raising the US debt ceiling risks tipping the world into recession.

Christine Lagarde was speaking as there were few signs in Washington that solutions were close in either the row over the budget - which has left government in a partial shutdown for two weeks - or the debt ceiling dispute.

However, Harry Reid - the Democratic Leader in the Senate - painted an optimistic picture of the dialogue with Republicans late on Sunday, though nothing concrete was disclosed.

Failure to lift the debt limit by Thursday would leave the US government unable to pay its bills or service its debts, leading to a devastating default that analysts warn will devastate market values and tip the global economy back into recession.

In an interview on NBC Sunday talk show "Meet the Press," Lagarde said the US economy was already showing "real improvement," evident from indicators including those from the housing sector to household spending.

But she said it was crucial the government work out a deal to re-open the government and continue borrowing so it does not default on its debt - and not just for a few weeks.

Lagarde warned of serious consequences from  "a combination of the government shutdown for a period of time and, more seriously, more damaging, if the debt ceiling was not lifted with a degree of certainty and enough time so that people could, you know, sort of have the assurance that the economy was in good standing."

She said: "If there is that degree of disruption, that lack of certainty, that lack of trust in the US signature, it would mean massive disruption the world over. And we would be at risk of tipping, yet again, into recession."

She called on politicians to address spending on social programmes like Medicare and Social Security but cautioned that spending cuts must not be too drastic.

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London Battles For Slice Of £5bn ISS Float

By Mark Kleinman, City Editor

London is facing a battle to secure a slice of one of the biggest stock market listings anticipated next year as its owners step up preparations for a £5bn flotation.

Sky News understands that the private equity groups behind ISS, a Danish cleaning and catering company that ranks among the world's largest private sector employers, have appointed investment banks to oversee its initial public offering (IPO).

The investment arm of Goldman Sachs and EQT Partners, a Swedish buyout firm, have enlisted bankers from Goldman and UBS for the flotation.

ISS, which has around 500,000 staff, will be floated in Copenhagen but its shareholders are also evaluating the possibility of a dual listing in London, insiders said this weekend.

A decision to include London would deliver a further boost to the City's IPO market, which has been revived in the last 12 months and on Friday saw the spectacular stock market debut of the privatised Royal Mail.

ISS has made at least two previous attempts to list, in 2007 and 2010, and is best-known in the City as the aborted merger partner of G4S, the UK security firm which breached a contract to provide personnel at last year's London Olympics.

G4S and ISS agreed a merger in 2011 but it was abandoned after a revolt by G4S shareholders.

The Danish group is now chaired by Sir Charles Allen, the former ITV boss who also played a key role on the organising committee of the 2012 Olympics.

A £5bn flotation of ISS would value the company at roughly ten times its annual profits, the mid-point at which analysts expect its shareholders to be able to exit their investment.

A large stake in ISS is now owned by Ontario Teachers Pension Plan and Kirkbi, the investment vehicle of the family behind the Lego empire.

Kirkbi is also a big investor in Merlin Entertainments, the theme park operator which plans to announce a London flotation as soon as there is greater clarity about the fate of negotiations over the US government's debt ceiling.

ISS and the investment banks declined to comment.

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Boris And Osborne Make Chinese Trade Visits

By Mark Stone, China Correspondent in Beijing

The Chancellor and the Mayor of London have arrived in Beijing on separate trade visits to China.

Both George Osborne and Boris Johnson will spend a week in the country, promoting British business but also trying to attract more Chinese investment in the UK.

Mr Osborne's arrival signal's the end of a diplomatic spat between Beijing and London which has lasted more than a year.

Both men are expected to sign a number of multimillion pound investment deals in which Chinese companies will fund or part-fund UK infrastructure and building projects.

Mr Osborne is expected to announce the names of the Chinese backers behind an £800m development at Manchester Airport.

Using Chinese money, five million square feet of land next to the airport will be developed into retail, office and manufacturing space.

Creating 16,000 new jobs over 15 years, the airport will be turned into a hub destination in its own right.

Similar projects in Amsterdam and Frankfurt have proved successful and eased congestion at other airports.

An £800m investment in Manchester Airport will create thousands of jobs

Speaking in Washington before leaving for Beijing, the Chancellor said: "I want to use my visit to China this week to strengthen strategic ties between Britain and China in areas that will drive our countries' growth."

A key strand of Mr Osborne's trip will be so-called "e-trade".

He is travelling with the UK Trade Minister Lord Green, City Minister Lord Deighton and the Minister for Science and Innovation, David Willetts.

With them are executives from a variety of British technology companies who will try to showcase the best of Britain's digital technology industry in China.

The delegation will hope the trip allows UK companies to gain access to the rapidly expanding Chinese market.

"The Chinese economy is changing," Mr Osborne said.

"Those who think it is just a low wage, low tech economy are making a mistake.

"It is becoming a cutting edge player in industries like technology and this is a huge opportunity for Britain."

Chinese tech company Huawei is investing £1.3bn in British broadband

The Chancellor will lead the delegation to the Shenzhen-based headquarters of Huawei, the world's largest telecommunications manufacturer, and TenCent, the world's third largest gaming and social media firm.

Huawei's growing footprint in Europe and America has caused controversy, with some suggesting that Chinese involvement in Western telecoms firms poses a security risk.

Despite that, Huawei has already pledged to invest £1.3bn in the UK's broadband network over the next four years.

Mr Osborne's visit is a clear endorsement of the company.

Alongside the commercial strands of his visit, the Chancellor will also hold governmental meetings with his Chinese counterpart Ma Kai.

Known as the UK/China Economic Financial Dialogue, the discussions will focus on a range of financial issues including the global economic recovery, the US debt ceiling debacle and London's efforts to become a Chinese currency trading hub.

Significantly, the talks represent the first face-to-face bilateral ministerial contact between the UK and China for over a year.

The UK has been in the political dog house with China since May 2012 when David Cameron and Nick Clegg chose to meet and be photographed with the Dalai Lama, the exiled spiritual leader of Tibet.

Mr Cameron and Mr Clegg met the Dalai Lama last year

The meeting enraged Beijing given the controversial claim China holds over Tibet.

Ministerial meetings between the two countries were cancelled and Beijing made its disapproval very clear.

Diplomatic sources in the Chinese capital have suggested the move was designed by Beijing not only to punish the UK but to send a clear message to other countries that it is not worth upsetting the world's second largest economy.

However, British officials are always keen to stress that despite the Dalai Lama meeting, for which the UK refused to apologise, trade between the two countries been unaffected by the spat.

Diplomats point out that inward Chinese investment to the UK in the last 18 months has been greater than the past 30 years combined.

The London Mayor's trip is separate but the broad objectives are the same.

Mr Johnson is travelling with the chief executives of several large companies including Justin King of Sainsbury's and Marc Bolland of Marks & Spencer.

He will spend three days in Beijing, where he will visit a UK brands fair, take a ride on the subway and attend a private meeting with China's richest man, Wang Jianlin, whose company Dalian Wanda is investing heavily in the Nine Elms area of London.

Mr Johnson will then travel to Shanghai before ending his trip in Hong Kong.

Both men are effectively cashing in on the thawing of diplomatic relations between the two countries.

By the end of the week, they hope to have signed a variety of deals, forged new relationships and facilitated meetings between UK and Chinese firms.

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Unemployed Migrants: '600,000 Living In UK'

More than 600,000 unemployed migrants from across the European Union are living in the UK, according to a survey.

The 291-page report - commissioned by the Brussels commissioner for employment and social inclusion, Laszlo Andor - found there were 611,779 "non-active" EU migrants in the UK last year compared with 431,687 in 2006 - a 42% increase.

The total number of jobless migrants is greater than the population of Glasgow.

While between 2005 and 2006 the growth of non-active EU migrants in the UK stagnated, since 2006 it has been steadily rising, the report said.

The Sunday Telegraph said that the number of people arriving without employment had increased by 73% in the three years to 2011.

It reported that the figures meant the annual cost to the National Health Service amounted to £1.5bn.

The details emerged as a poll indicated there was strong public support for an early referendum on withdrawing from the European Union.

The opinion poll for the Mail on Sunday found more than half of voters want a referendum on the UK's membership before the next election.

While nearly two-thirds support a vote in the Commons on the issue as early as next month, almost half said they would vote to quit the EU if a poll went ahead in 2014.

Prime Minister David Cameron has pledged to hold a referendum by 2017, but has dismissed the idea of holding it before the next general Election in 2015.

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The Sky News Business Round-Up And Look Ahead

Sky's Naomi Kerbel offers a round-up of what's coming up in the week's business news.

:: Monday October 14

On Monday, the Eurogroup is gathering ahead of Tuesday's Economic and Financial Affairs Council meeting. Eurogroup is composed of the Eurogroup President, EU Commissioner for economic and monetary affairs, European Central Bank President and finance ministers from the member states whose currency is the euro.

:: Tuesday October 15

The chief executive of the Royal Mail will ring the London Stock Exchange bell on Tuesday as the company's shares list for the first time.The value of the Royal Mail jumped more than £1.2bn as conditional trading begins on the London Stock Exchange.

Also, the ONS will release UK monthly inflation figures. Consumer Price Index was 2.7% in August, down from 2.8% in July and within one percentage point of the government's 2% target rate.

:: Wednesday October 16

Wednesday brings UK unemployment figures for September. In the three months to July unemployment fell by 24,000 to 2.49 million, while the unemployment rate was 7.7%.

:: Thursday October 17

Thursday is the deadline for the United States debt limit, known as the debt ceiling to be extended. Republicans will not agree to lift it unless long term spending is addressed as well as delaying funding for President Obama's healthcare reforms. Parts of the US government have been shut down since October 1 due to an ongoing battle over the budget.

:: Friday October 18

Chinese quarterly GDP figure will be out at 03:00 BST on Friday morning. Figures published in July revealed  the rate of economic growth was 7.5% in the second quarter of 2013 compared to 7.7% in the first quarter.

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