The chair of Royal Mail’s owner is to conduct a charm offensive with investors in an attempt to convince them of its strategy, in the face of a potential £3.1bn hostile takeover by a Czech billionaire.
Last week, it emerged that the postal firm’s parent company, International Distributions Services (IDS), had received a preliminary offer from Daniel Křetínský, an energy tycoon whose company, EP Group, is its largest shareholder.
On Monday, IDS said its chair, the former British Airways boss Keith Williams, and its chief executive, Martin Seidenberg, would meet top investors this week.
Williams said at the meetings bosses would “make clear why the possible offer from EP Group significantly undervalues IDS and is highly opportunistic”.
Seidenberg is attempting to turn around the fortunes of the loss-making Royal Mail and continue to expand the group’s international parcels arm, GLS.
It had been assumed that Křetínský wanted to carve out the profitable GLS and sell the business off, but he has denied that this is his plan.
Křetínský, known as the “Czech Sphinx” for his low profile and inscrutable approach, is reportedly considering making an improved offer for IDS and has until 15 May to make a formal bid.
The company’s management will hope to convince investors to share the view of Redwheel, its third-largest shareholder, which holds 6.65% of the shares. The manager of its investment told the Sunday Times it did not believe it was in the interests of shareholders, employees or customers for Royal Mail to be “broken up or sold off”.
Redwheel piled pressure on the industry regulator, Ofcom, to allow reform of the universal service obligation (USO), which requires the 508-year-old Royal Mail to distribute nationwide for one price, six days a week.
In an attempt to address the collapse in letter volumes over the past two decades, the watchdog laid out potential industry reforms this year, including allowing Royal Mail to cut the number of delivery days to five or even three a week. Rishi Sunak has said the government will oppose any cuts to the six-day service.
Williams’ comments came as IDS submitted its detailed response to the potential overhaul. In a summary of its response, published this month, it asked the industry regulator to let it reduce deliveries of second-class letters to two or three days a week.
The plan involves cutting almost 1,000 jobs and saving £300m a year by reducing daily delivery routes by 7,000-9,000. The company promised to retain a six-day-a-week service for first-class letters and seven days for parcels.
The detailed plan included adding new reliability targets for first and second-class services and introducing tracking on parcels delivered under the USO.
Williams said: “Today we have published the full detail behind our proposal for universal service reform. The proposal is based on detailed modelling and customer testing and does not require legislation.
“The lack of universal service reform by government and Ofcom over the past four years has held back Royal Mail’s transformation and urgent action is needed. Reform is in the regulator’s hands and we urge Ofcom to accelerate their review.”
IDS will publish its annual results on 23 May. Its shares rose more than 1% on Monday to 276p, still well below the 320p a share that EP Group has offered.
Royal Mail was privatised in 2013 and split from the Post Office in the process. Křetínský, who also holds stakes in Sainsbury’s and West Ham United, bought into the company in 2020, benefiting from a pandemic-fuelled bump in its fortunes, and later ramped up his stake to 27.5%.
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. Any future bid could still be examined by regulators.
A spokesperson for Ofcom said: “We believe it’s important there’s a national debate, so everyone can have their say before we make any recommendations or proposals to secure its long-term future.
“Under any scenario, Royal Mail must modernise its network, become more efficient and improve its service levels.”
