Ministers had talks to sell Consignia to Dutch

Ministers were on Sunday accused of trying to conceal talks to sell Consignia's core Royal Mail business to TPG, the privatised Dutch postal group.

Insiders close to the discussions said TPG had proposed an all-share takeover of Royal Mail but talks had broken down two weeks ago and were "completely dead".

The news is in contrast to a statement given on March 21 in which the government denied it had been talking to an overseas bidder.

Lord Sainsbury, in response to a question from Baroness Miller in the House of Lords, said: "I have no indication that any negotiations have ever taken place on that."

The talks with TPG are understood to have been initiated by the government but were abandoned in favour of plans to cut 15,000 jobs as a first step in reducing Consignia's 220,000 workforce by up to a fifth over the next three years. The group is losing GBP1.5m a day and is expected to come under pressure over plans to end its monopoly.

John Whittingdale, Conservative trade and industry spokesman, said the news would cause more unease among Labour backbenchers, who have raised doubts about the restructuring.

"This is a further demonstration of the failure of the structure proposed for the postal service..I will be tabling further questions to get to the bottom of this."

The takeover talks are understood to have been called off because of government unease about foreign ownership and TPG's uncertainty about support from the unions. Ministers are understood to have favoured a joint venture but TPG wanted a controlling share.

TPG, which is regarded as one of the most efficient postal operators in Europe, had also wanted to introduce new productivity standards and ways of working. .

A Department of Trade and Industry official said it was "entirely logical" that Consignia had been considering its future. There had been no attempt to cover up the talks. "Lord Sainsbury set out the position as he was aware of it. There were only a limited number of people aware of the discussions because they were commercially confidential."

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STRUGGLING postal operator Consignia yesterday admitted that it held abortive talks with its Dutch rival TPG over a possible merger of its mail operations. The renamed Post Office, which is currently losing pounds 1.5m a day, will now face stiff competition with TPG, the most profitable postal system in Europe. A Consignia spokesman said: "We have held initial discussions with TPG about a joint venture. We are no longer pursuing that course of action." It is understood that the talks were called off two weeks ago. Consignia said the reason for this was "commercially sensitive". TPG, a listed company that owns the TNT express delivery service, said that Consignia and the Government had approached it about the possibility of a merger. "We held exploratory talks, but in the end we couldn't reach common ground," a TPG spokesman said. "We amicably decided to call it a day. "As a listed company, we have a number of strict conditions to protect our shareholders' interests. From our perspective this didn't reach our criteria." The spokesman declined to say what the criteria were. He said TPG would now "press ahead and compete with Consignia on its own". The profitable Dutch mail company, which was privatised 14 years ago, will provide stiff competition for Britain's Royal Mail. Last year's full-year figures showed sales growth of 13pc, and the group has turnover of Eu11.2 billion ( pounds 6.8 billion). TPG employs 139,000 people in 59 countries and has the second-lowest first-class domestic mail prices in Europe. A 20g letter costs Eu0.39 to post in the Netherlands. The equivalent price in the UK would be Eu0.43. The Dutch operator is believed to have put forward a number of proposals for structuring a joint venture, which were rejected by Consignia and the Government. At first, it suggested that the Government became a large shareholder in TPG, financing the merger by issuing shares. TPG is also believed to have offered between pounds 4 billion and pounds 5 billion cash for the business. Allan Leighton, Consignia's new full-time chairman, is understood to have persuaded the Government that this undervalued the organisation. Royal Mail, the postal arm of Consignia, is facing myriad problems, from poor delivery figures and striking workers to financial difficulties. Mr Leighton, announcing a restructuring of Parcelforce and other parts of the organisation, said recently that the business was "in peril". The group has already announced that 15,000 jobs will be cut and it is believed that a second, larger round of redundancies is on its way. This is likely to lead to another 22,000 staff being cut, with an announcement expected in May. The recent job cuts were condemned by the postal unions and may lead to further strike action. TPG, its rival, has not had a postal strike for more than 10 years. The Consignia spokesman said: "We are reviewing all aspects of our business and have already announced the first stage of our three-year restructuring programme to cut costs by pounds 1.2 billion. "We are focusing on delivering them. There's more work to do in the future as we review specific plans." The spokesman declined to comment on the reports about further job cuts throughout the business.