Royal Mail takeover clears major hurdle with string of commitments 

Daniel Kretinsky’s bid for Royal Mail passed a major milestone on Monday with the government’s approval, albeit reliant on a string of commitments, for the £3.6 billion deal.

Having faced a review under national security laws, the green light for the deal marked a key step for Kretinsky’s EP Group in bringing International Distribution Services PLC’s Royal Mail under foreign ownership for the first time in its 500-year history.

That said, government approval did not come lightly, with a comprehensive list of conditions needing to be met for the deal to go ahead as expected in early 2025.

A key factor was assurance Kretinsky would continue to honour its universal service obligation promises for six-day-a-week, one-price-goes-anywhere letter deliveries.

Another was the government’s procurement of a so-called golden share, granting it a decision on any major changes, such as on structural tweaks, tax residence or headquarter moves.

Kretinsky pledged to keep these within the UK for the coming five years, retain Royal Mail’s name and branding indefinitely and also maintain ownership for at least three.

Separately, a deal with unions would see workers get a 10% share of dividends paid out under Kretinsky.

Hargreaves Lansdown analyst Susannah Streeter noted that, while contingent on “significant legally binding commitments”, the deal marked “a historic moment”.

“It’s been a tough few years for Royal Mail, as it grapples with declining letter volumes and more competition for its parcels business, but Kretinsky clearly sees opportunity ahead.”

Kretinsky’s ultimate takeover was by no means set in stone though, AJ Bell’s Russ Mould pointed out, given shareholders, of which Kretinsky represented 27.5%, still needed to vote on the proposal.

“This is proving to be one of the most complicated takeovers in years,” he said, meaning shareholders could well “be ready to take the money and move on,” he said.

However, union approval was needed for the deal over worker distributions as well, while Britain’s Competition and Markets Authority could also opt to investigate the takeover.

IDS climbed 0.7% to 361.65p on Monday.