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Czech billionaire Daniel Křetínský agrees to buy Royal Mail owner in £5.3bn deal
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Czech billionaire Daniel Křetínský has agreed to buy the owner of Royal Mail in a deal that values the group at £5.3 billion, as he promises to revive the fortunes of the former UK postal monopoly away from the glare of the public markets.
Křetínský’s EP Group said on Wednesday it had agreed a takeover price of 370 cents per share for London-listed International Distribution Services, owner of Royal Mail and international parcel business GLS, paving the way for intense political scrutiny proposal during a UK election year. .
EP Group and IDs have spent the last few weeks working out the details of a deal for the former state-owned group, which since privatization has been beset by strikes and growing competition from companies like Amazon.
The decision to place the 508-year-old postal service under foreign ownership involves several compromises, including maintaining its headquarters in the UK, recognizing the postal workers’ union and maintaining Royal Mail’s obligation to deliver mail across the UK. United at the same cost. But these commitments were made just five years ago, with the Labor Party and the union already promising to protect the group’s future.
Jonathan Reynolds, shadow business secretary, said the Labor Party, which is expected to win the general election on July 4, would “take the necessary steps to safeguard [Royal Mail’s] undeniable identity and place in public life,” adding that “work in government will ensure [EP Group’s commitments] are adhered to.”
Daniel Křetínský promised to revive Royal Mail’s fortunes © David W Cerny/Reuters
Dave Ward, general secretary of the Communications Workers Union, said: “We welcome some of the commitments that have been made, but the reality is that postal workers across the UK have lost all faith in senior management at Royal Mail.”
He said the CWU would be “engaging with the Labor Party and other stakeholders to demand a new ownership model for Royal Mail, where our members and customers have a direct say in key decisions”.
Jeremy Hunt, the chancellor, previously said a bid for Royal Mail would be subject to “normal” scrutiny on national security grounds, but added that international investment in British companies was generally welcome.
Křetínský, a lawyer turned energy tycoon, is already IDS’s largest shareholder, with a 27.5% stake. Its takeover bid marks the latest step in a wave of UK deals that has seen it acquire stakes in supermarket chain J Sainsbury and English Premier League football club West Ham United.
Křetínský said that “the IDS market is evolving rapidly and must accelerate its transformation and investments in modernization to keep up with the competition”.
EP Group’s bid follows years of losses and failure to meet Royal Mail’s performance targets, which saw IDS shares fall from more than 550p in 2018 to just 213p before the company first offer was announced in April.
Whilst required to meet Royal Mail’s historic obligation to deliver throughout the UK at the same cost, the EP Group would face the challenge of declining demand for letters and growing competition for parcel deliveries.
IDS’s previous attempts to revamp the business have been fiercely opposed by postal workers, who walked out for 18 days in 2022 over plans to bring working practices in line with more modern rivals.
IDS shares closed up 4.2% at 335p, significantly below the offer price, suggesting doubts about whether the deal will ultimately go through.
A major IDS shareholder said he was “disappointed” with the price, but warned that “if the deal doesn’t go through, you will be stuck with a management team that didn’t want the company to remain public and no longer seems to believe there is much value.” .
Analysts have previously suggested that an IDS takeover could lead to the break-up of Royal Mail and the more profitable GLS, a move strongly opposed by the postal workers’ union. Křetínský promised on Wednesday to keep the company together for three years and not benefit from any potential separation from GLS over the next two years.
The offer recommended by the EP Group comes just days after IDS said that GLS had helped the group return to profit in the 12 months up to March.
“The IDS board believes EP’s offer is fair and reasonable given the uncertainty ahead and allows investors to realize value at a significant premium,” said IDS President Keith Williams.