There is nothing to like about Daniel Kretinsky’s shabby offer for Royal Mail, says ALEX BRUMMER

The business of government stops during general election campaigns, with Whitehall and quangos going into purdah. 

This has provided City bankers and advisers with an opportunity to press ahead with bids and deals under the radar.

There is no more important transaction at present than the proposed takeover of International Distribution Services (IDS) – owner of the Royal Mail – by the Czech billionaire Daniel Kretinsky and his financial backers J&T, an outgrowth of a secretive private investment bank based in Slovakia.

Publication of a complex 137-page offer document, endorsed by the feeble board of Royal Mail’s owner, in the midst of governmental lockdown, is wrong. 

It risks making the takeover a fait accompli before the intense scrutiny promised in the Labour manifesto can be done.

A new government is unlikely to prioritise probing a takeover when it has great affairs of state to handle – from building a Cabinet to stabilising the economy and reaching out to global allies – all in the midst of war in Europe and the Middle East.

The whole takeover proposition for the Royal Mail is a disgrace. An institution with 500 years of history and a universal service obligation is in danger of being passed to overseas buyers, one of which, the part of J&T carrying out the bid, was formed just three years ago. How is it possible for any of this to happen?

The stakes are heavily weighted against the boards of directors of public companies, even if they are willing to engage in fisticuffs. 

Regarding Keith Williams, chairman of the Royal Mail, its German chief executive Martin Seidenberg and the rest of the board, including senior non-executive director Sarah Hogg, it has been a case of come and get us.

To understand why there is so little resistance to the deal, one only has to look at the fantastically rich pickings for advisers. 

Those acting for the Royal Mail’s owner, including Barclays, stand to collect £56.9million. 

With so much cash on the table, one can understand why they might have advised the board that it was their fiduciary duty to cave in to the offer.

This is in spite of the fact that, for most of its life as a public company, Royal Mail shares have traded at above 400p – way above the 360p offer price (which includes a final dividend).

Fees, including the cost of banking arrangements for advisers to Kretinsky’s EP UK group and his motley backers, amount to £89million. 

Bankers, lawyers and communications firms doubtless will be licking their lips at a bonanza payout and the thought of bonuses.

Royal Mail staff and IDS’s fast-growing European parcels offshoot GLS might ask themselves whether that £146million in fees would have been better spent on investment in AI, letter tracking and improving other services.

It is also worth noting that the incentives for management to take the cash and run are powerful. 

Seidenberg stands to reap millions of pounds from bonus shares, which vest with the takeover, some of which were granted as recently as this month.

Anyone hoping for more light to be shed on J&T and its principals Patrik Tkac, Adam Tomis and Libor Kaiser, their business background and risks related to legal disputes, will be bitterly disappointed.

There is minimal, sanitised disclosure. What is clear is that following the deal the bidders, spending £5.3billion on IDS, including debt, will be heavily leveraged. 

Experience of other bank-financed cash deals suggest that undertakings made at the time of the takeover, such as maintaining headcount and investment, vanish beneath a sea of interest payments.

Royal Mail workers, who were given 10 per cent of the company at the time of privatisation, are being railroaded into accepting Czech cheques. 

Funding is provided by an assortment of overseas banks, including BNP Paribas, SocGen. UniCredit and Citibank’s London branch.

There is nothing to like about the Kretinsky deal, and investors should reject an offer which can only result in ruination of a totemic national institution.

Other utilities that have fallen into over-borrowed foreign hands with unfathomable ownership structures, such as Thames Water, offer a salutary lesson. The deal for mail deliveries can only end in tears.

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