Czech billionaire Daniel Křetínský’s takeover of Royal Mail has moved closer after its owner agreed terms for a £3.57 billion bid.
In a market update 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 the energy sector and has a minority stake in one of the most important gas pipelines from Russia to Europe, would pay 360 cents a share for the 73% of the troubled postal service he does not already own.
IDS shares rose 3% to 331p as markets opened – still well below EP’s offer, suggesting the market remains unconvinced the deal will definitely go through.
Shareholders are still waiting to see whether the British government will decide to investigate the sale of the former state agency to a foreign buyer under the National Security and Investment Act, which gives ministers the power to block the sale of companies owned as part are considered of crucial criticism. national infrastructure. Earlier this month, IDS bosses met with business secretary Kemi Badenoch to discuss the bid and reforms to the universal service obligation (USO), which guarantees delivery to every home in Britain six days a week.
A shareholder vote is scheduled for the annual general meeting on September 25.
The chancellor, Jeremy Hunt, had previously said any bid would undergo a “normal” security assessment, but the government was not opposed to EP ownership in principle.
Labour, which is expected to form the next government after the July 4 election, welcomed Křetínský’s guarantees and said the party would ensure they were respected if it came to power.
The Křetínský team has proposed commitments and contractual obligations to the government and unions, including:
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Maintain Royal Mail’s proposals for the USO for a first class postal service to anywhere in the country at a fixed price, six days a week, for a minimum period of five years. IDS has suggested that second class mail could be reduced to any other weekday.
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Head office and tax residence remain in Great Britain for five years.
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Maintaining basic salaries and benefits for staff for at least two years.
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No changes in Royal Mail ownership for three years.
The EP also said it has no plans to make any material changes to the overall workforce or reduce the number of frontline workers, and will speak to unions about extending the current agreement not to make redundancies beyond April 2025 .
Royal Mail has asked for permission to reduce the delivery of second-class letters from six days a week to every other day, a change backed by EP Group. This would lead to a net reduction in the number of daily delivery routes by 7,000 to 9,000 people, and up to 1,000 voluntary redundancies.
Royal Mail’s largest union, the Communication Workers Union, said it will meet with Křetínský next week to seek a reset of employee and industrial relations and further commitments on the company’s future. A spokesperson for the CWU said the current contractual obligations and time constraints in the deal were not “good or strong enough”.
“We will be looking for pension guarantees, we will be looking for a stake for employees in the future ownership model of the company,” CWU general secretary Dave Ward told BBC Radio 4’s Today program on Wednesday .
“I think it’s about testing Křetínský whether he has plans to invest in the workforce and invest in growth strategies for the company, or whether his intentions are purely to divest the company of assets.”
As well as running the postal service, Royal Mail also owns around 1,300 properties, including some highly valuable locations in London, such as those in Paddington and Farringdon. In 2019 it sold a prime London site in Nine Elms, near Battersea, for £101 million.
The formal submission of the £3.57 billion bid, which was improved on an earlier £3.1 billion offer that IDS had said significantly undervalued the company, came just hours before Wednesday’s 5 p.m. deadline o’clock.
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The EP bid could be worth up to £3 million to current and former Royal Mail directors, while postal staff who retained the shares they received during the 2013 privatization could receive a windfall of up to £3,400.
The IDF’s chief executive, Michael Seidenberg, could recoup £264,000 from the 71,400 shares he owns, while its chairman, Keith Williams, stands to receive £210,000.
Seidenberg was also awarded up to 436,000 shares under a long-term incentive plan that could be worth up to £1.6 million under the EP offer.
Křetínský, who has been nicknamed the ‘Czech Sphinx’ for his reluctance to speak in public, has a growing portfolio in Britain, with stakes in West Ham football club and Sainsbury’s.
Křetínský, one of the Czech Republic’s richest citizens, made his fortune in gas and coal, including a minority stake in Eustream, a Slovak pipeline that transports 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 because of his background in heavily polluting coal companies, and he feared he could seek influence over the paper.
Křetínský told the Times last summer that he would not want to tamper with the newspaper’s editorial independence. An EP spokesperson added that the group planned to eliminate all coal from its portfolio by 2030 and was a major investor in renewable energy.
He sold his shares in Le Monde last September to co-owner Xavier Niel, who said they would be transferred to 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 the IDS market is evolving rapidly and needs to accelerate transformation and investment in modernization to keep up with the competition.
“We will support the company through the next critical phase of its transformation and beyond, providing our experience and financial resilience to support the management team.”