Goldman Sachs Advises the British Government in the Country’s Largest Privatization Yet

In 1986, Goldman Sachs advises the UK government and British Gas on selling shares in the United States of what is, at the time, the largest-ever privatization in the United Kingdom, at £5.6 billion.

The 1980s saw a wave of privatization across many sectors of the economy in the United Kingdom. Prime Minister Margaret Thatcher and the ruling Conservative Party sought to make British capitalism competitive by increasing the efficiency and profitability of the energy and infrastructure sectors and by curbing the power of the country’s labor unions through the placement of many state-owned companies into the hands of the public and institutional investors.

The first large-scale privatization, that of British Telecom, took place in 1984 under the leadership of the government’s advising merchant bank at the time, Kleinwort Benson. Investor interest was strong, and the offering was oversubscribed. British Gas was next on the government’s list, and as it reviewed options for bankers, it was willing to also consider American firms, believing that they may be able to contribute fresh thinking and techniques to structuring such a transaction.

Goldman Sachs was selected as the book running manager for the US portion of the British Gas common stock issue — the largest-ever global equity offering at the time, at £5.6 billion, or US$8 billion (US$22 billion in 2023 dollars). The success of this high-profile assignment helped Goldman Sachs later win roles in other significant transactions in the United Kingdom, including selling British Gas’ first bond market issue, a US$400 million dual tranche Yankee issue, and the 1987 sale of the government’s remaining interest in British Petroleum, which, at US$12.4 billion (US$32.9 billion in 2023 dollars), would surpass British Gas as Britain’s largest privatization to date.

 

This article was originally published as part of a series commemorating the 150th anniversary of Goldman Sachs’ founding in 1869.