Ministers left Royal Mail vulnerable to a takeover after refusal to back delivery reforms, say insiders

The Government left Royal Mail vulnerable to predators by delaying reforms to the postal service, senior company insiders believe.

Royal Mail’s owner International Distributions Services last week rejected as ‘opportunistic’ a £3.1 billion takeover approach from Czech billionaire Daniel Kretinsky.

Dubbed the ‘Czech Sphinx’ for his inscrutable manner, Kretinsky is already the largest shareholder in IDS with a 27 per cent stake.

He has until the middle of next month to table a formal offer or walk away.

If Kretinsky makes a formal bid, private investors, including Royal Mail’s army of posties, could play a key role in the outcome as they hold 21 per cent of the shares between them – a legacy of the company’s privatisation in 2013.

Royal Mail, which faces intense competition from rival carriers, recently proposed it should be allowed to deliver second-class letters only three times a week instead of six in a bid to cut costs and save its first-class service.

The plan would lessen the burden of its so-called Universal Service Obligation, (USO) which means Royal Mail must deliver letters to addresses everywhere in the UK for the same price every day except Sunday. Bosses at the company repeatedly have lobbied ministers for the USO to be relaxed but without success.

They have raised serious concerns about the future of the service if industry watchdog Ofcom does not act swiftly to introduce reforms by April 2025.

‘It’s remarkable that after four years of talking to the government about the USO no change has happened,’ a Royal Mail source said.

The delay ‘puts us in a vulnerable spot,’ the insider added, referring to Kretinsky’s tilt.

‘The quicker the reforms the better,’ the source said.

Kretinsky, 48, has extensive energy interests, including a stake in the largest transporter of Russian gas to Europe, as well as investments in West Ham United and Sainsbury’s.

He is understood to have been encouraged to bid outright for Royal Mail after raising his holding above 25 per cent without causing any national security concerns in Whitehall.

However, experts say he faces much tougher scrutiny if he is to own Royal Mail outright.

Politicians and unions are opposed to Kretinsky’s bid to buy the 500-year-old company, which was founded during the reign of Henry VIII.

They fear another ‘national treasure’ could fall into foreign hands and be broken up.

Royal Mail staff who own about six per cent of the company ‘are certainly going to be motivated to stand up and be counted,’ in the event of a bid, said Amit Vedhara of shareholder group ShareSoc.

The Communications Workers Union, which represents Royal Mail workers, wants to re-nationalise the service, saying foreign ownership ‘cannot be right’.

Kretinsky’s offer falls just short of the 330p a share investors paid when Royal Mail floated in 2013.

The bid ‘disenfranchises the 700,000 ordinary people who became retail shareholders’ at the time, said Sheryl Cuisia of campaign group The Engagement Appeal.

‘It’s unjust that these loyal investors now face losses as another national asset risks foreign acquisition,’ she added.

Letter volumes have declined from a peak of 20 billion a year two decades ago to around 7 billion and are likely to drop to around 4 billion in the next five years.

Royal Mail’s plans, which have yet to be approved by Ofcom, would mean daily delivery routes cut by between 7,000 to 9,000 within two years, saving up to £300 million with a loss of up to 1,000 jobs. Royal Mail lost £319 million last year.

Last night a source close to Kretinsky dismissed claims that he would try and break up IDS, which also includes the profitable GLS logistics business.

Kretinsky’s offer was ‘not contingent’ on the outcome of the USO talks and he looked forward to continuing to ‘engage constructively’ with the IDS board, the source added.

Experts said other delivery groups such as Amazon or InPost could also enter the fray now that Royal Mail was effectively ‘in play’.

IDS declined to comment.