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The board of Royal Mail’s parent company, International Distributions Services (IDS), is set to recommend an improved £3.5 billion takeover bid from Daniel Kretinsky, the Czech tycoon shareholder known as the “Czech sphinx.”
IDS has received a non-binding proposal of 370p per share from EP Group, a conglomerate controlled by Kretinsky. The offer includes 360p per share in cash and the remainder in dividends, featuring an 8p per share special dividend contingent upon transaction completion. This proposal represents a 72.7% premium to IDS’s share price on April 16, when EP’s interest first emerged, and follows an initial 320p approach that was rejected by IDS due to opposition from major shareholders, including Redwheel.
Shares in IDS rose 43½p, or 16%, closing at 314¾p on the London Stock Exchange, still below EP’s proposed price.
Keith Williams, IDS’s chairman, indicated the board’s inclination to recommend the offer to shareholders, deeming the price “fair and reflective of the value” of growth plans at GLS, the postal service’s European logistics business. He also noted the progress Royal Mail has made in adapting to a significant decline in letter demand and a rise in parcel deliveries.
As part of the proposal, EP Group has agreed to offer contractual undertakings to protect key public interest factors and acknowledge Royal Mail’s role as a critical part of national infrastructure. These undertakings, under negotiation, would be submitted to the government if EP makes a firm offer. They include maintaining a “financially sustainable” universal service, continuing to deliver first-class letters six days a week, protecting employee rights, preserving the Royal Mail brand and name, recognising existing unions, and retaining headquarters and tax residency in the UK.
The improved offer was made just hours before a 5pm deadline for EP to either make a firm offer or withdraw, with the deadline now extended to May 29.
The takeover approach has faced resistance from the Communication Workers Union (CWU), which represents tens of thousands of postal workers and is advocating for the Labour Party to commit to renationalising Royal Mail if it gains power. Dave Ward, CWU’s general secretary, demanded that EP must “rule out any break-up of the company or raid of the pension surplus,” warning of a potential campaign to highlight postal services in the upcoming general election.
Jonathan Reynolds, Labour’s shadow business secretary, called for “cast-iron guarantees on the Royal Mail’s future” in his communication with Kretinsky. These safeguards appear to be reflected in the ongoing discussions between IDS and EP.
Reynolds stated, “Whilst it’s important that Britain remains open and attractive to foreign investment, Royal Mail is an iconic British institution with a unique place in our society and infrastructure. Royal Mail is as British as it gets, and Labour will take the necessary steps to safeguard its undeniable identity and place in public life.”
Kretinsky, who has other UK investments including stakes in J Sainsbury and West Ham United football club, has expressed his intention not to break up IDS by separating the lossmaking Royal Mail from GLS, to protect the group’s pension scheme surplus, and to avoid compulsory redundancies.
This approach comes as Royal Mail seeks to recover from a protracted and costly industrial dispute over pay, conditions, and modernisation plans, with a focus on its more profitable parcel delivery business amidst a declining letters market.
Amanda Fergusson, chief executive of the Greeting Card Association, remarked, “We will need to see these principles enshrined in any undertakings between the government, IDS, and EP Group before any recommendation of this offer.”
