Czech billionaire Daniel Kretinsky has had an offer to buy Royal Mail approved by the board of holding company International Distribution Services plc. The £3.70 share price values Royal Mail at around £5bn, including the shares that Kretinsky’s VESA Equity already owns.
This is not a done deal however, with shares trading at around £3.34 – Investors appear a little worried that the deal won’t get sign off from the Government.
The offer comes with strings attached – the Royal Mail name remains and has to remain headquartered in the UK with UK tax status. Plus the employees and their pensions have to be taken care of which will mean some interesting chats with the CWU.
The big question many will want answered is what will happen to the Universal Service and will Royal Mail turn into a parcels company that continues to deliver letters on a sporadic basis which is the current situation – only 74.5% of first class mail was delivered within one working day in the 2023/24 year against a target of 93%. Ofcom are already investigating whether another fine is appropriate.
The next interesting question is who is in and who is out. It’s likely the entire board will go, but what about senior Royal Mail executives – some of whom appear to have been coated in teflon with multiple changes at the top table bypassing them as they kept their jobs. Who runs Royal Mail matters as they’ll be the ones that decide whether parcels or letters are prioritised. Personally, I’m relaxed about getting my spam letters and the odd birthday or Christmas card delivered the next day, but it’s worth noting that a ton of ecommerce goes through the large letter format and people do what that delivered on time.
IDS has the potential to become a leading international logistics player. Both the IDS Board and EP are acutely aware of their responsibilities to IDS and particularly to the unique heritage of Royal Mail and its obligations as the designated Universal Service Provider of postal services in the UK.
The IDS Board has negotiated a far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards. These cover the provision of the one-price-goes-anywhere Universal Service Obligation (including First Class letters still delivered six days a week), the financial stability and maintenance of the IDS Group including Royal Mail, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.
The IDS Board wishes to thank our employees across Royal Mail and GLS for the progress which is being made in both companies to transform and adapt to a rapidly changing market in both the UK and Europe.
It is the IDS Board’s belief that EP will continue to enhance IDS’ investment in strategic areas such as network and out-of-home solutions.
The IDS Board believes that the offer from EP is fair and reasonable given that there are uncertainties ahead and allows investors to realise value at a significant premium.
– Keith Williams, Chair, IDS
IDS, and Royal Mail in particular, form part of the national infrastructure of the countries they operate in. More than that, Royal Mail is part of the fabric of UK society and has been for hundreds of years. The EP group has the utmost respect for Royal Mail’s history and tradition, and I know that owning this business will come with enormous responsibility – not just to the employees but to the citizens who rely on its services every day. The scale of the commitments we are offering to the company and the UK Government reflect how seriously we take this responsibility, to the benefit of IDS’ employees, union representatives and all other stakeholders.
The EP group is a patient, supportive investor with a long-term view and decades of experience in owning critical national infrastructure. We are committed investors in the UK and first became a shareholder in IDS four years ago, as we saw the potential for the business to become one of the largest postal logistics groups in Europe. But IDS’ market is evolving quickly, and it must accelerate its transformation and investments into modernisation to keep up with the competition. We will support the business in the next critical phase of its transformation and beyond, providing our experience and financial resilience to support the management team. We look forward to working closely with all of IDS’ stakeholders to deliver against its full potential.
– Daniel Křetínský, founder and chairman, EP
