Second-class service for shareholders

Get rich quick schemes don’t come along every day. So, little wonder so many in the City are piling into this one — flogging the group that owns the Royal Mail to a Czech billionaire.

The deal’s generated £146 million in banking, legal, accounting and public relations fees: £89.1 million run up by Daniel Kretinsky, the man trying to buy International Distribution Services for £3.6 billion; and £56.9 million by the board, chaired by Keith Williams, for rolling over at 370p a share. The bill for Kretinsky, who already owns 27.6 per cent of IDS, includes £2 million for PR advice from FGS Global. Anyone would think the Czech Sphinx had an image problem.

Whatever, at least some people have finally found a way of making money out of the postal group — even if a lot of them are bankers from BNP Paribas, Citi and JP Morgan Cazenove for Kretinsky and Barclays, Bank of America and Goldman Sachs for IDS. The bigger question is whether Britain should even be selling a key bit of UK infrastructure, dating back 508 years to Henry VIII, to a secretive, foreign billionaire.

There’s no point looking in the 140-page bid prospectus for the answer to that. In it is a rehash of the three-to-five year pledges Kretinksy has already made — not to fire Royal Mail’s 130,000 workers or raid the £1 billion pension surplus or take an axe to the King’s head etc etc. Plus, some new, and ridiculously vague, line about “exploring” a way of “potentially offering a form of employee participation model in the business”.

Good luck nailing that down with the Communication and Workers Union’s Dave Ward, who’s called for a “significant and meaningful stake”. In what exactly? Kretinsky’s private EP Group? Maybe Ward hasn’t noticed that thousands of his members already have a stake — in the listed IDS. They were each gifted 913 shares, now valued at £3,378, at 2013’s 330p-a-share float.

More telling is the board’s rationale for agreeing the deal. Yes, the bid’s at a 72.7 per cent premium — and listed companies are there to be sold. But parts of the document read like the case for not selling. It calls Royal Mail “a strong brand” with “unparalleled scale and reach to all 32 million UK addresses”, while GLS operates “one of the largest ground-based parcel delivery networks in Europe”. So, why’s the board loused up running them?

Yes, strike-hit Royal Mail had £348 million of operating losses last year, wiping out GLS’s £320 million profits. But, having got some productivity gains out of the CWU, Royal Mail was “close to break-even” in the second half. And, isn’t the board giving away heaps of potential value to Kretinsky?

Once again, Williams has made a justifiable complaint over “the lack of action by the UK government and Ofcom” on the universal service obligation: an issue IDS has been moaning about for “more than four years”. But Ofcom itself recently proposed reforms cutting second-class deliveries to three days a week. Implement them and Royal Mail could save £300 million a year — enough to transform profitability.

Ultimately, this deal requires not only investor approval but that of the new government, which will put Kretinsky through another National Security and Investment Act review — one reason the shares, at 316¼p, trade at a big discount to the bid. But are shareholders really happy with his price? Sure, IDS needs investment but it also has scope for self-help. Advisers parcelling up the takeover fees won’t care. But before investors sell, shouldn’t they check they’re getting a first-class price?

Tied up in red tape

A “bonfire of red tape” was one of the many promises of Liz Truss: our 44-day PM, who ended up setting fire to the entire economy instead. So, you can guess where her favourite think tank — the Institute of Economic Affairs — is coming from with its missive on the “uncosted regulatory burdens” in the election manifestos of the six main parties.

Even so, the numbers are telling. The IEA has spotted 361 policies that it says will increase regulation and only 67 that would decrease it. Some look vote winners — “compulsory hedgehog holes in all new fencing”, one of the Green’s 104-strong laundry list of policies. But as they have as much chance as a hedgehog of taking power, it’s Labour’s new rule book that counts.

Its tally? Sixty-two policies to increase the burden, 13 to decrease it. As the IEA points out, they have hidden costs. Take Labour’s plans to require all privately rented homes to meet minimum energy standards, say. On the government’s maths from 2020, that’d cost £12.2 billion.

True, individual measures aren’t like-for-like. The positive impact from Labour’s pledge to cut through planning red tape for everything from housing to gigafactories could outweigh higher costs elsewhere. And many of Labour’s tighter regulations look sensible — bans on ninja swords, say. Yet, the IEA is right to highlight how banning sales of new petrol and diesel cars from 2030, for example, is not cost-free.

Instead of new rules, too, what about sorting out some of the ineffectual regulators we’ve got — not least Ofgem and Ofwat? Room for a red tape bonfire there.

Big-screen thinking

No one succeeds in Hollywood without thinking big. So, no surprise to see the Comcast-owned Universal Destinations and Experiences trumpet a £50 billion uplift to the UK economy from its plans to build a movie-themed park on the outskirts of Bedford. Yeah, over 20 years for an extravaganza that’ll take six years to build. Still, no knocking the ambition to replicate its other parks starring the likes of Shrek, Trolls and Kung Fu Panda. You don’t find them at Whipsnade Zoo.

alistair.osborne@thetimes.co.uk