ALEX BRUMMER: Failure of duty at Royal Mail

One cannot but despair of Labour’s dealings with commerce. Despite all the pro-business rhetoric and the appearance by Keir Starmer in a white coat and protective helmet at a nuclear facility this week, he and his ministers are clueless.

Rolls-Royce still awaits the green light for mini reactors. AstraZeneca has abandoned its £450m vaccine facility, having saved countless lives in the pandemic.

And despite the acute crisis at Thames Water, after a bungled, highly leveraged overseas takeover, Business Secretary Jonathan Reynolds is carelessly allowing the same disastrous mistake at the Royal Mail.

Reynolds, the board of Royal Mail owner International Distributions Services (IDS) and the Communications Workers Union, representing Britain’s much-loved posties, have been cajoled into thinking that a highly indebted £3.6billion takeover by Czech billionaire Daniel Kretinsky is a good thing.

Nothing is further from the truth. It is my suspicion that the Royal Mail regulator, Ofcom – which recently put new proposals for the universal postal service out to consultation – is less than enamoured with the idea of ownership by a foreign mogul weighed down by loans. Under Czech ownership, the Royal Mail will have £2billion of inherited debt plus new borrowings of £3billion needed to complete the deal.

Unfortunately, the regulator has no mandate to intervene. That rests with the Department of Business unless the Competition and Markets Authority – recently defanged by Chancellor Rachel Reeves –becomes involved.

Long-term shareholders increasingly despair of the IDS board, headed by former BA chief Keith Williams.

A representative told me that the Royal Mail had been ‘deafening in its silence’ since the Ofcom review was issued last week. There was even a charge that the board might be in breach of fiduciary duty by failing to update the market on what is a material change, which might affect value of the bid.

The Royal Mail has said that changes to the postal service, an alternative weekday delivery model for non-priority letters, could save it £300m a year. An assessment by advisers suggests the saving could be £450m a year. If that were the case, there is even more reason to distrust a board sitting on its hands. By rights, postal workers, who, thanks to former Lib Dem business secretary Vince Cable still own 5 per cent of the stock, should be shouting from the rooftops about a board selling a heritage national asset on the cheap.

Complicity by government, the board and unions in the Royal Mail sell-out is disgraceful. Starmer should intervene before more damage is done to UK plc, consumers and under-siege smaller businesses.

Buyout kings

Legal & General’s newish chief executive Antonio Simoes is not letting the grass grow under his feet. Taking a leaf out of the Aviva playbook, he is busy simplifying to concentrate on what the insurer does best: pension buyouts and asset management.

To this end, it is pulling out of its US protection offshoot Banner Life and doubling down on American pension buyouts. Enter stage left Japanese insurer Meiji Yasuda. It is paying £1.8billion cash for Banner.

As part of the deal, L&G and Yasuda are forming a pension buyout partnership in the US and have their eyes on up to $500billion (£400billion) of assets buying up defined benefit schemes from companies such as Johnson & Johnson. Simoes’ new Japanese pal is also taking a 5 per cent stake in L&G.

It is being described as a strategic deal but not one signalling some kind of buyout or fuller merger.

At 5 per cent, the Japanese holding will be less than that held by BlackRock. Investors are being lured in by Simoes with the pledge of £5billion in buybacks and dividends over the next three years.

That should help to invigorate what has been a static share price over the last year.

Field position

The big sporting event of the weekend is not England v France at Twickers but the Super Bowl between the Kansas City Chiefs and Philadelphia Eagles.

A note from broker Jefferies predicts the highest ever bets on a US sporting event with £1.3billion being staked. Greatest beneficiaries will be the bookies. UK exile Flutter (now in New York) and London-quoted Entain are set for touchdowns.

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