The takeover of Royal Mail by the Czech billionaire Daniel Křetínský has edged closer after its owner agreed terms and conditions on a £3.57bn offer.
In an update to the market on Wednesday, the postal service’s parent company, International Distribution Services (IDS), said it had accepted a cash offer from Křetínský’s EP Group.
The deal means Křetínský, who made his fortune in energy and owns a minority stake in one of the main gas pipelines from Russia into Europe, would pay 360p a share for the 73% of the struggling postal service he does not already own.
IDS shares rose by 3% to 331p when markets opened – still far short of EP’s offer, suggesting the market remains unconvinced the deal will definitely go through.
Shareholders are still waiting to hear whether the British government will decide to examine the sale of the formerly state-owned service to a foreign buyer under the National Security and Investment Act, which gives ministers the power to block the sale of companies considered part of critical national infrastructure. Earlier this month, IDS bosses held a meeting with the business secretary, Kemi Badenoch, to discuss the bid and reforms to the universal service obligation (USO), which guarantees delivery to every home in the UK six days a week.
A shareholder vote is scheduled for the annual general meeting on 25 September.
The chancellor, Jeremy Hunt, had previously said that any bid would face a “normal” security review but the government was not opposed to EP’s ownership in principle.
Labour, which is forecast to form the next government after the 4 July election, welcomed the assurances given by Křetínský and said the party would ensure they were adhered to if it won power.
Křetínský’s team has proposed undertakings and contractual commitments with the government and unions, including:
Retaining Royal Mail’s proposals for the USO for a first-class postal service to anywhere in the country for a fixed price six days a week for a period of at least five years. IDS has suggested second-class post could be reduced to every other weekday.
Headquarters and tax residency to remain in the UK for five years.
Maintaining base salaries and benefits for staff for at least two years.
No changes to Royal Mail’s ownership for three years.
EP also said it does not intend to make any material changes to the overall headcount or reduce the number of frontline workers, and will speak to unions about extending the current agreement of no compulsory redundancies past April 2025.
Royal Mail has asked for permission to reduce second-class letter deliveries from six days a week to every other day, a change supported by EP Group. This would see a 7,000-9,000 net reduction in daily delivery routes, and up to 1,000 voluntary redundancies.
Royal Mail’s largest union, the Communication Workers Union, said it would meet Křetínský next week to seek a reset in employee and industrial relations and further commitments on the future of the company. A CWU spokesperson said that the current contractual obligations and time limitations in the deal were not “good or strong enough”.
“We’ll be looking for pension guarantees, we’ll be looking for a stake for the employees in the future ownership model of the business,” the CWU’s general secretary, Dave Ward, told BBC Radio 4’s Today programme on Wednesday.
“I think it’s about testing Křetínský as to whether he’s got any plans for investing in the workforce and investing in growth strategies for the company, or whether his intentions are purely to asset-strip the company.”
In addition to running the postal service, Royal Mail also owns about 1,300 properties, including a number of highly valuable London sites, such as those in Paddington and Farringdon. In 2019, it sold a prime London site in Nine Elms near Battersea for £101m.
The formal submission of the £3.57bn bid, which had been improved from an earlier £3.1bn offer that IDS had said significantly undervalued the company, came in hours before a “put up or shut up” deadline of 5pm on Wednesday.
The EP offer could be worth up to £3m to Royal Mail’s current and former directors, while postal staff who held on to shares they were given during the 2013 privatisation could get a windfall of up to nearly £3,400.
The IDF chief executive, Michael Seidenberg, could recoup £264,000 from the 71,400 shares he owns, while the chair, Keith Williams, is in line to receive £210,000.
Seidenberg was also granted up to 436,000 shares for through a long-term incentive plan that could be worth up to £1.6m under the EP offer.
Křetínský, who has been nicknamed the “Czech Sphinx” because of his reluctance to speak in public, has an expanding portfolio in the UK, with stakes in West Ham football club and Sainsbury’s.
One of the Czech Republic’s wealthiest citizens, Křetínský made his fortune from gas and coal, including a minority stake in Eustream, a Slovakian pipeline that carries gas from Russia to western Europe and Ukraine.
In 2018, he controversially bought a stake in the French newspaper Le Monde, which was met with resistance from editors and journalists over his background in heavily polluting coal companies, and fears that he could seek influence over the paper.
Křetínský told the Times last summer he would not want to tamper with the editorial independence of the paper. An EP spokesperson also added that the group planned to phase out all coal from its portfolio by 2030 and it was a big investor in renewable energy.
He sold his shares in Le Monde last September to co-owner Xavier Niel, who said they would be transferred into a trust.
In a statement on Wednesday morning, Křetínský said he had the utmost respect for Royal Mail’s history and traditions and understood that owning the company came with enormous responsibility. He added: “But IDS’s market is evolving quickly, and it must accelerate its transformation and investments into modernisation to keep up with the competition.
“We will support the business in the next critical phase of its transformation and beyond, providing our experience and financial resilience to support the management team.”
