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The National Security & Investment Act is intended to protect British commerce from unwanted intrusion by overseas predators.
There can be few more obvious cases for it to be invoked than that of the £3.6billion bid by the Czech billionaire Daniel Kretinsky and associates for Royal Mail-owner International Distribution Services.
There are multiple reasons why the Kretinsky bid should be stopped by the Government.
The Royal Mail may be failing in some of its service obligations but with reform that can be put right.
More critically, it is a vital part of the UK’s communications infrastructure, used by sensitive parts of government including HMRC, the NHS, the Metropolitan Police, the Passport Office and others, to convey vital documents and decisions.
Far from strengthening a misfiring company, the takeover, approved by the Royal Mail owners’ board, would weaken the group’s finances despite promises of investment.
Questions: Czech billionaire Daniel Kretinsky (pictured) has agreed a £3.6bn deal to buy Royal Mail-owner International Distribution Services
No company taking on some £3billionn of extra leverage, together with the £2billion or so of debt already on its balance sheet, could be expected to service its borrowings and honour union agreements without dismembering the enterprise.
The record of foreign indebted takeovers is depressing. Thames Water is up to its neck in sewage and borrowings.
Asda fell on bad times after a highly leveraged takeover. The swift private equity break-up of aerospace group Cobham has been detrimental to Britain’s defences.
These deals demonstrate how imperilled the Royal Mail would be under private equity-style ownership.
Kretinsky’s past close relations with Moscow, prior to the 2022 war with Ukraine, ought to be cause for pause.
There is an ongoing dispute between the Czech adventurer’s EP Group and a Russian company over a coal contract.
As a decade long investor in the Eustream pipeline, which pumped gas into Europe via Slovakia, Kretinsky was intimately involved with Moscow.
More so than some of the UK-based Russian enterprises and tycoons who saw assets frozen, shares suspended, visas revoked and sanctions imposed after Vladimir Putin’s horrendous attack on Ukraine.
Yet Kretinsky is described by Business Secretary Jonathan Reynolds as a ‘legitimate businessman’. One suggests that Reynolds casts an eye over the Atlantic.
The Committee on Foreign Investment in the US has been holding up the sale of US Steel to Japan’s Nippon Steel.
Britain allowed Dubai-based interests to purchase P&O Ports (and later the ferries). But the US blocked the sale of P&O ports on its Eastern Seaboard to Gulf interests.
Labour’s stewardship of the economy already has alienated sections of the business community. Selling Royal Mail on the cheap to buyers with weak and insecure credentials would be a gross misjudgement.
Sweet deal
When Britain’s emblematic chocolate group Cadbury came under siege from global food giant Kraft in 2009, the then chairman Roger Carr sought a white knight deal to save the company being swallowed by the processed cheese outfit.
Both family-owned Hershey’s in the US, with which Cadbury had a US licence deal, and Italy’s Ferrero were considered as merger partners, but a transaction couldn’t be made to work.
Kraft powered ahead and eventually Cadbury was packaged up with Oreo, Milka and Toblerone, and demerged as Mondelez. In 2016, Mondelez set its sights on Hershey’s with an £18billion offer but was shown the door.
Mondelez doesn’t give up. Bloomberg reports that the Cadbury owner has revived its interest and Hershey’s shares soared.
Winning will require the support of the Hershey Trust which holds 28 per cent of the stock but retains 80 per cent of the votes. Unpicking that will require craft and big bucks.
Mad men
The power in the market for commercials has swung from widely dispersed media companies to a handful of Big Tech firms with great buying power.
It is against this background that US ad agencies Omnicom and Interpublic are proposing a £10billion all-share deal creating a firm with near £20billion of turnover.
That would put the revenues of European-based competitors, Britain’s WPP and France’s Publicis, in the shade.
Size might seem the answer. But the danger with deals among advertising firms is that intellectual capital – the creative teams – head for the door.
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