Daniel Kretinsky’s EP Group had upped its proposal to 370p a share, from an initial 320p-a-share approach made on April 9, to buy the shares in Royal Mail’s owner, International Distribution Services, that it does not already own
Royal Mail’s owner is leaning towards accepting a £3.5billion takeover bid from Czech billionaire Daniel Kretinsky, who has increased his initial offer.
International Distribution Services (IDS), the current owner, revealed that Kretinsky’s EP Group had increased its proposal to 370p per share, up from an initial 320p per share approach made on April 9. The deal would involve buying the shares in IDS that EP Group doesn’t already own.
Mr Kretinsky, whose EP Group holds a 27.5% stake in IDS, has agreed to a series of “contractual undertakings” to safeguard key public interest factors, acknowledging Royal Mail’s status as a significant part of national infrastructure. These commitments include maintaining Royal Mail’s six-day-a-week first-class letter deliveries, protecting workers’ rights, and preserving the Royal Mail brand and UK headquarters.
IDS stated it was inclined to agree to a deal based on the terms and price proposed, provided a firm bid is made. Kretinsky now has until 5pm on May 29 to make a solid offer. EP Group would also continue the one-price-goes-anywhere service for letter post inside the UK, it said.
Keith Williams, chairman of IDS, said the proposed offer is “fair” and reflects the value of both Royal Mail and its international parcels network, General Logistics Systems (GLS), based in Amsterdam. He said: “The board is minded to recommend this offer price, which it considers to be fair and reflects the value of GLS’ current growth plans and the progress being made on change at Royal Mail to adapt the business to a significant fall in the demand for letters and growth in parcels.
“It is, however, regrettable that despite four years of asking, the Government has not seen fit to engage in reform of the universal service and thus improve our financial position and ensure that Royal Mail could provide an economically sustainable service to the British public.”
Shares in IDS surged another 18% in Wednesday mid-afternoon trading, having already soared higher after the firm revealed last month it had rejected an initial approach from Mr Kretinsky.
But any deal to buy IDS would face intense political and public scrutiny, given the importance of Royal Mail and the postal service. Chancellor Jeremy Hunt has reportedly voiced concerns over the proposed takeover, recently saying there were “lessons” to be learned from the ownership of troubled Thames Water.
Labour’s shadow business secretary Jonathan Reynolds has written to Mr Kretinsky calling for safeguards to be put in place to protect Royal Mail and ensure it is not operated overseas. Mr Reynolds wrote: “Royal Mail is as British as it gets, and Labour will take the necessary steps to safeguard its undeniable identity and place in public life.”
Communication Workers Union (CWU) general secretary Dave Ward warned that the “future of postal services in the UK is again under threat” with the bid to buy the owner of Royal Mail. He said: “EP Group must immediately demonstrate an up-front and open commitment to working with the union to completely change the culture in workplaces across the UK, rule out any break-up of the company or raid of the pension surplus.
“The CWU are calling for a completely new ownership model – one based on innovation, growth and maintaining over 500 years of public service ethos. Whatever the result of these takeover talks, this is a position we will actively campaign for with the owners of Royal Mail, the Government and Labour.
“It cannot be right that a key part of national infrastructure is allowed to be owned by individuals or companies who have no vision for the future and no clear plan to put the workforce at the heart of turning Royal Mail around.”
The UK’s Greeting Card Association (GCA) said Royal Mail’s service “cannot be compromised” if a deal for IDS goes ahead. GCA chief executive Amanda Fergusson said: “Our 500-plus members – largely small businesses – and the consumers they serve rely on a Royal Mail that’s national, reliable and affordable. That cannot be compromised.
“We will need to see these principles enshrined in any undertakings between the Government, IDS and EP Group before any recommendation of this offer. It’s not just enough for EP Group to give contractual undertakings about first class, six days-a-week delivery – this must include an undertaking to deliver legal service standards in place at any time.”
The expansive EP Group conglomerate, has interests across energy, logistics and food retail sectors. Mr Kretinsky, often referred to as the “Czech Sphinx”, already boasts a portfolio of investments, including stakes in West Ham United and supermarket giant Sainsbury’s.