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- Government, which left Royal Mail so vulnerable, needs to push through reforms
- These would give current boss Martin Seidenberg a fighting chance
- New ownership, even if proprietor is benign, involves disruption and risk
Czech Sphinx: Businessman Daniel Kretinsky
Daniel Kretinsky, aka the Czech Sphinx, is a smart operator. Inconveniently for those seeking a simple narrative of heroes and villains, he doesn’t seem to be the asset stripper he is sometimes painted, but a serious businessman with a long-term view.
In the UK, his holdings include West Ham United football club, a stake in Sainsbury’s and a clutch of power stations.
He is, of course, the biggest shareholder in International Distributions Services, the parent company of Royal Mail, where he has launched a full takeover bid.
The timing of his £3.1billion or 320p a share proposal is shrewd.
The Royal Mail share price is low, hovering around 270p.
He has swooped, as Royal Mail bosses warned he would, because the Government is dragging its feet on reforms to the Universal Service Obligation (USO).
This is the legal requirement for Royal Mail to deliver to all UK addresses six days a week and it is no longer fit for purpose in the age of email and WhatsApp.
Changes to the USO will have to happen for Royal Mail to have a viable future. Kretinsky knows these could unlock up to £300m of savings that would accrue to him if his bid succeeds.
He can also see that the new-ish chief executive, Anglophile German Martin Seidenberg, is energetic, clear-thinking, and might make headway with some long-running problems where his predecessors failed. These include relations with unions: Royal Mail lost £419m to strikes in the 2022/23 financial year.
The jewel in the IDS corporate crown is GLS, the parcels operation based in Amsterdam. This profit-making enterprise is propping up the traditional UK mail operation. Value could be unlocked by freeing it from those chains.
The Kretinsky camp has intimated he does not want to break up the business, but to reform it away from the scrutiny of public markets.
Be that as it may, he has no doubt also noticed some ‘hidden’ gems, such as the property portfolio, valued at around £1.4billion. This includes operational sites that are needed by the business.
Royal Mail still sorts letters in an extensive freehold complex in Mount Pleasant in central London, a prime site in one of the trendiest areas of the capital.
The site has a great heritage and is much-loved by Londoners and tourists visiting the nearby Postal Museum with its underground railway. But an unsentimental new owner might well think it could be sold off and turned into luxury flats.
The board of IDS has rebuffed Kretinsky, who has been busy purchasing German steel assets as well as eyeing the May 15 deadline to make a better offer.
He will not get an easy ride. The third largest shareholder, Redwheel, has come out in support of the board.
Unusually, employees and private investors, who own a combined 20 per cent, will have a big say in the outcome. Small investors may be tempted to cut and run.
For workers, it is not just a matter of a temptingly priced bid. They will be considering what working conditions may be like under Kretinsky ownership. He has played his hand cleverly – but a key question is what’s in it for the taxpayer and users of postal services if Kretinsky wins?
A change of ownership, even if the new proprietor is benign, involves disruption and risk. The Government, which left Royal Mail so vulnerable, needs to push through reforms quickly and give Seidenberg a fighting chance.
