Royal Mail takeover probed over ‘national security’

The government will scrutinise the takeover of Royal Mail by Czech billionaire Daniel Křetínský over potential national security risks. 

International Distribution Services (IDS) struck a £3.5bn takeover deal with EP Group – a European industrial giant controlled by Křetínský – in May this year. However, the government has now “called in” the transaction under the National Security and Investment Act.

The act, which came into force in January 2022, gives the government the power to scrutinise and ultimately block business transactions in the interests of national security. While this legislation did not prevent Křetínský upping his stake in IDS above 25 per cent in 2022, it is possible that a full buyout will spark a different response. A report by the BBC said Křetínský will be scrutinised for potential links with Russia. 

When announcing the takeover agreement, IDS chair Keith Williams said the board had negotiated a “far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards”. These include a commitment to the ‘one-price-goes-anywhere’ system and the delivery of first class letters six days a week. However, the safeguards will only last for five years after the acquisition takes place. 

IDS grew revenue by 8.2 per cent to £3.3bn between April and June, fuelled by an 11 per cent increase in sales at Royal Mail. The courier remains on track to return to an adjusted operating profit (excluding voluntary redundancy costs) by the end of its financial year. 

However, management argued that Royal Mail needs “significant investment in automation, network changes and rapid expansion of out-of-home solutions” in order to deliver sustainable profit growth. EP Group is a long-term investor in infrastructure with “significant knowledge of the postal, logistics and distribution sectors”, it said.