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* Offering shares at 260-330 pence each
* Values company at as much as 3.3 bln pounds
* Expected to make market debut on Oct. 11
* Government stake could fall to 30 pct
* Sale subscribed within hours - sources
By Kylie MacLellan and Neil Maidment
LONDON, Sept 27 (Reuters) - Britain's Royal Mailprivatisation garnered orders for all of the shares on offer inthe space of a few hours on Friday, sources said, marking astrong start for a selloff that stands to flush up to 2 billionpounds ($3.2 billion) into government coffers.
The sale would be one of Britain's most significant sinceJohn Major's Conservative government sold the railways in the1990s and would give Royal Mail access to the private capital itsays it needs to modernise and better compete in a thrivingparcels market.
Kicking off the sale of the near 500-year-old company, thegovernment said on Friday it would dispose of a majority stakein Royal Mail, offering shares at between 260 pence and 330peach and valuing the whole company at between 2.6 billion poundsand 3.3 billion ($4.2 billion to $5.3 billion).
Hours later it had already received orders for all of theshares on offer, two sources close to the deal said, withoutgiving an indication of where in the range those orders hadcome.
If an "over-allotment option", whereby more stock can besold if there is strong demand, is exercised, the government'sstake in the company could fall to as little as 30 percent.
Analyst Robin Byde at brokerage Cantor Fitzgerald said thatwhile the medium-term issue remained how fast Royal Mail cangrow its parcels business to offset falling letter volumes, thevaluation range made it attractive versus European peers such asAustrian Post and Belgium's bpost.
"The headline really is that it's priced to go," Byde said,estimating Royal Mail was valued on a forward price-to-earningsmultiple of around 8 times versus an average of about 10 for theEuropean sector. "We would expect it to debut pretty well."
Royal Mail follows the initial public offering of bpost inJune and comes after stronger equity markets have helped revivenew listings in Europe this year.
European firms have raised $15.9 billion from flotations inthe first nine months, three times the year-ago level, accordingto Thomson Reuters data.
The sale is the fourth time Britain has tried to privatiseRoyal Mail, which traces its origins back to 1516 when mail wasdelivered by horse from King Henry VIII's court.
Three selloff attempts in the last 19 years have failed dueto opposition from within the governing majority, which fearedan electoral backlash from tampering with a revered institutionwhose red post-boxes are known around the world.
The latest sale effort has been criticised by the currentopposition Labour party and unions, who on Friday sent outballot papers for strike action.
The ballot will close on Oct. 16, five days after Royal Mailis scheduled to make its stock market debut, with the earliestpossible strike date being Oct. 23.
UNDER PRESSURE
Labour, which polls show is the frontrunner to win the nextelection, has come under pressure from its union backers andparty activists to pledge to renationalise Royal Mail. While ithas not ruled this out, Labour said it would be irresponsible todo so without knowing how much it could cost.
The head of equities at a UK fund manager said Labour leaderEd Milliband's promise earlier this week to freeze energy pricesfor 20 months if his party wins power in May 2015 may have madeRoyal Mail more attractive to some investors.
"The income fund managers are quite intrigued by it (RoyalMail)," said the manager, who declined to be named. "If ourfriend Ed is going to make things difficult for utilities ...this is potentially quite a nice thing coming through."
The government said it planned to pay a final 2014 dividendtotalling 133 million pounds, equating to a full-year payout of200 million had the group been listed for the full year.
Based on the offer price range, that full-year payout givesRoyal Mail an implied dividend yield of between 6.1 percent and7.7 percent - making it attractive at a time when a regular UKsavings account is yielding less than 3 percent.
Britain has also agreed to hand 10 percent of Royal Mail'sshares to staff in the largest share giveaway of any major UKprivatisation. If distributed equally among the eligible 150,000UK-based workers, each could receive 2,200 pounds worth.
The government said it expected around 30 percent of theshares on offer would go to individual members of the public,who must spend a minimum of 750 pounds to invest in the company.
Royal Mail, which no longer includes the Post Officeservices and retail business, has annual revenue of more than 9billion pounds. It more than doubled profit to 403 millionpounds in the year to March 31.
Last week Rapid Ratings, an independent U.S.-based ratingsagency, gave Royal Mail a cleaner bill of financial health thanany of the world's post or parcel companies, after a "dramatic"change at the firm over the past two years.
Goldman Sachs and UBS are running the saleof Royal Mail, and are also joint-bookrunners along withBarclays and Bank of America Merrill Lynch.
