Royal Mail owner IDS agrees Kretinsky’s £3.6bn takeover bid

Royal Mail owner International Distribution Services has agreed terms for a £3.57billion takeover by Czech billionaire Daniel Kretinsky’s EP Group. 

Kretinsky said he had the ‘utmost respect’ for the history and tradition of the service, which employs around 150,000 people, as he made a series of commitments to secure Royal Mail’s future. 

The offer includes commitments to retain Royal Mail’s name, brand, UK headquarters and UK tax residency, as well as protections for employee benefits and pensions.

Business Secretary Kemi Badenoch has the authority under the National Security and Investment Act to scrutinise and potentially block the deal. 

Chancellor Jeremy Hunt has said any takeover bid for Royal Mail would be subject to ‘normal’ national security scrutiny, but it would not be opposed in principle. 

The offer would see EP Group buy IDS for 370p per share, while offering a series of ‘contractual commitments and intentions’ to protect public service aspects of the Royal Mail. 

Including IDS’ debts, the offer values the group at £5.2billion. 

IDS said if the deal goes through Royal Mail would continue its universal service obligation to one-price-goes-anywhere first class post six days a week.

It also said it would protect existing employment rights of all IDS staff, and that there is ‘no intention to make any material changes to overall headcount or reductions in the number of front-line workers’ beyond existing plans.

The board said the offer reflected ‘the progress being made on change at Royal Mail, as well as the execution risks associated with delivering longer term value for shareholders in light of uncertainty over the nature and timing of universal service reform and the need for swift and significant strategic investments’.

The potential sale has already attracted heavy scrutiny, with senior politicians and unions voicing concerns over the future of the postal service, which was privatised in 2013.

Kemi Badenoch met IDS bosses earlier this month for talks on the deal, and underlined the need to protect services for the vulnerable, those in remote areas and small businesses. 

Kretinsky, who is already a 27 per cent shareholder in IDS, is known as the ‘Czech Sphinx’ and has a raft of other investments, including stakes in London football club West Ham United and supermarket giant Sainsbury’s.

Conditions: The offer includes commitments to retain the name, brand, UK headquarters and UK tax residency, as well as protections for employee benefits and pensions

Communication Workers Union general secretary Dave Ward said on Wednesday: ‘We do welcome some of the commitments that have been made but the reality is postal workers across the UK have lost all faith in the senior management of Royal Mail and the service has been deliberately run down.

‘We will meet with EP Group next week and call for a complete reset in employee and industrial relations, the restoration of postal services and further commitments on the future of the company.

‘We will also be directly engaging with the Labour Party and other stakeholders to call for a new model of ownership for Royal Mail where our members and customers have a direct say in key decisions and the creation of a golden share which will protect a key part of the UK’s communications infrastructure.’

Keith Williams, chair of IDS, said: ‘IDS has the potential to become a leading international logistics player. 

‘Both the IDS Board and EP are acutely aware of their responsibilities to IDS and particularly to the unique heritage of Royal Mail and its obligations as the designated Universal Service Provider of postal services in the UK.

‘The IDS Board has negotiated a far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards. 

‘These cover the provision of the one-price-goes-anywhere Universal Service Obligation (including First Class letters still delivered six days a week), the financial stability and maintenance of the IDS Group including Royal Mail, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.’

IDS made a small profit last year. This was generated by its German and Canadian logistics and parcels business, off-setting losses at Royal Mail. 

IDS shareholders will vote on the proposed deal in September.