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The Guardian - UK
The Guardian - UK
Business
Alex Lawson

Royal Mail owner received takeover offer from Czech billionaire

Royal Mail vans
Daniel Křetínský already has a 27.5% stake in Royal Mail through his investment vehicle, Vesa. Photograph: Rui Vieira/PA

The owner of Royal Mail received a £3bn takeover offer from a Czech billionaire who has stakes in Sainsbury’s and West Ham United football club. Daniel Křetínský approached International Distributions Services (IDS), the owner of the struggling British postal company, this month.

In a statement, Křetínský’s EP Group said the proposal, made on 9 April, was rejected by IDS but that it “looks forward to continuing to engage constructively with the board”.

IDS said its board had “unanimously” rejected the proposal on 11 April and that Křetínský had offered 320p a share, valuing the group at £3.1bn – a significant premium on the group’s share price before his interest emerged.

Shares in IDS increased by 29% to 276p on news of Křetínský’s interest, valuing the company at £2.6bn.

Křetínský has built up a 27.5% stake in Royal Mail through his investment vehicle, Vesa. The tycoon, known as the “Czech Sphinx” for his inscrutable approach, has a string of business interests, from energy to media assets to football clubs.

EP Group said it recognised that “Royal Mail is in a challenging situation”.

“Weak financial performance, poor service delivery and a slow transformation, in the face of a market going through structural change, have put the business under unsustainable pressure,” it said. “With the increasing competition from multinational companies in the UK postal market, private investment in Royal Mail becomes crucial.

“EP Group also recognises that Royal Mail is an important national asset that would benefit from being able to take a longer-term view and is prepared to support this iconic business as it transforms and rebuilds into a modern postal operator.”

IDS said: “The board believes the timing of the proposal is opportunistic. It does not reflect the growth potential and prospects of the company under a new management team, a significant modernisation programme under way at Royal Mail, and the ongoing review by Ofcom.”

The IDS group comprises Royal Mail, which has a mandate to deliver nationwide in the UK at a fixed price six days a week under the universal service obligation, and General Logistics Group, an international parcels group based in Amsterdam.

EP has until 15 May either to announce a firm intention to make an offer for IDS or to walk away.

The takeover approach comes as Royal Mail, under group chief executive Martin Seidenberg, who joined last year, reaches a crossroads in its corporate future. The industry regulator, Ofcom, has opened the door for the postal firm to scale back its universal service obligations in the face of mounting losses.

Earlier this year, Ofcom laid out a series of options for the future of the postal service, including cutting it from six days a week to five or even three, with a more expensive option retained to allow for next-day deliveries.

Rishi Sunak said the government would oppose any reduction in the six-day service. In response, Royal Mail has asked the industry regulator to let it reduce deliveries of second-class letters to just two or three days a week, cutting nearly 1,000 jobs and saving £300m a year in the process.

Any takeover bid would be studied by the government under national security laws. In 2022, the government told Royal Mail it would study an increase in Křetínský’s stake under the National Security and Investment Act. However, that investigation was called off later in the year.

Jeremy Hunt refused to comment on the possible takeover of Royal Mail but said it was important to put in place the right regulation for former private sector monopolies.

“We need to make sure companies are regulated in a way that what happens to the balance sheet doesn’t do damage to public services,” the chancellor told reporters in Washington on Wednesday night.

Labour has yet to clarify its position on the future of Royal Mail, although Kate Osborne, the Labour MP for Jarrow, who worked at the company for 25 years, has said she would like to see it renationalised.

Dave Ward, the general secretary of the Communication Workers Union, said: “The truth is, handing over the ownership of one of the UK’s most prestigious institutions to a foreign equity investor cannot be right. But neither is the current model or direction of the company.

“Royal Mail needs a new ownership and governance model that builds a postal service for the workers and customers, and not one solely focused on shareholder payouts and driving down the service and the terms and conditions of the workers.”

Křetínský was born in communist Czechoslovakia in 1975, the son of a judge and a computer science professor. He built an empire of European energy companies, snapping up fossil fuel assets.

Last year a company owned by Křetínský was ordered to pay £23m after the energy watchdog found that it had unfairly demanded excessive payments for one of the UK’s biggest power stations.

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