Shareholder rebellion threatens Czech Sphinx bid

A shareholder rebellion has left Czech billionaire Daniel Kretinsky’s £3.6bn bid for Royal Mail up in the air.

City investors accounting for over a fifth of the shares in Royal Mail owner International Distributions Services are planning to vote against the offer from Kretinsky in September, The Mail on Sunday reported.

A debate is currently raging over whether Royal Mail will be allowed to drop its Universal Service Obligation (USO), a commitment from the postal service to deliver to anyone in the country six days a week for the same price.

Kretinsky, nicknamed the Czech Sphinx, has faced criticism for his £3.70-a-share offer, with investors arguing it seriously undervalues Royal Mail if the USO is dropped, as the the company’s prospects would be a lot stronger.

If so, the starting price for the bid should be at least £4 a share, or even £5 based on recent UK takeover premiums, the investors argued.

The City giants told the Mail on Sunday that they believed IDS chair Keith Williams and the board would have a fiduciary duty to take back its recommendation for the £3.70 offer.

The investors also argued that a prospective buyer should take into account the value of Royal Mail’s brand, as there are not many businesses able to use ‘Royal’ in their name.

Earlier this month, Kretinsky’s company said that while he supported the USO for at least five years, following its acquisition it “intends to explore, with Ofcom and the UK Government, this approach to delivering the USO on a sustainable basis”.

The argument over the acquisition has been described as a litmus test for the new Labour government, as any changes to USO must be approved by the government.

The investors opposing Kretinsky’s takeover argued that as private equity investors start to creep into the delivery world, Royal Mail must move fast to modernise through methods like fully embracing parcel tracking, or face losing market share.

Last week, it was revealed that private equity house Apollo is on the brink of paying out £2.7bn for Evri, previously called Hermes, which could prove a direct competitor to Royal Mail on parcel delivery.