Yahoo Finance Royal Mail faces foreign ownership threat after Czech billionaire’s takeover bid
Royal Mail has rebuffed a takeover approach from the Czech billionaire Daniel Kretinsky as the 500-year-old postal service faces the prospect of falling into foreign ownership.
The board of International Distributions Services (IDS), which owns Royal Mail, revealed on April 17 that it had rejected a preliminary takeover approach from Mr Kretinsky, the reclusive co-owner of West Ham Football Club who is known as the “Czech sphinx”.
The 320p-a-share offer valued the Royal Mail owner at £3.1bn, or around £4.5bn once debts are included.
The approach represented a 50pc premium to closing share price on April 16. However, IDS’s board rejected the offer and branded it “opportunistic”.
Mr Kretinsky, who is worth an estimated $7.1bn, could yet return with a new offer in the coming weeks. He has until May 15 to make a firm offer under City takeover rules.
Shares in IDS surged on news of the bid, closing 28.8pc higher at 276p.
Mr Kretinsky is already Royal Mail’s largest shareholder, owning 27.5pc, but attempts to take control of the entire business are likely to prove controversial.
Royal Mail’s historic nature and the pivotal role it plays in UK communications means a takeover would likely draw intense political scrutiny. Mr Kretinsky’s move to increase his stake in the business to more than 25pc in 2022 triggered a national security review, though was ultimately cleared.
Jeremy Hunt, the Chancellor, signalled the Government would revisit how “former public sector monopolies” are regulated to safeguard the provision of vital services.
While Mr Hunt declined to comment directly on the takeover approach, he told reporters at the International Monetary Fund meetings in Washington: “We need to make sure that companies are regulated in a way that makes sure that what happens to their balance sheet doesn’t do damage to public services on which we all depend.”
The proposal was met with dismay by powerful posties union, the Communication Workers Union (CWU), which vowed to campaign “publicly and politically” against any subsequent bid.
Dave Ward, CWU general secretary, 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 built solely focused on shareholder payouts and driving down the service and the terms and conditions of the workers.”
Mr Kretinsky’s company EP Group said on April 17 that it “recognises that Royal Mail is an important national asset” and said it would be “prepared to support this iconic business as it transforms and rebuilds into a modern postal operator”.
It added: “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.
“With the increasing competition from multinational companies in the UK postal market, private investment in Royal Mail becomes crucial.”
IDS said the offer “significantly undervalues” the company, adding: “It does not reflect the growth potential and prospects of the company under a new management team, a significant modernisation programme underway at Royal Mail, and the ongoing review by Ofcom in relation to the future of the Universal Service Obligation.”
It is understood that Kretinsky is not plotting a hostile takeover bid and would look to secure the board’s backing for any offer.
Royal Mail’s second largest shareholder, Red Wheel, has previously signalled it would back a takeover bid, but only at a price of at least 350p per share.
BNP Paribas, Citigroup and JP Morgan are said to be advising Mr Kretinsky on his bid.
Royal Mail has hired Goldman Sachs’s Mark Sorrell, son of advertising tycoon Sir Martin Sorrell, to work on its defences alongside bankers at Barclays and Bank of America.
It is not clear exactly what the Czech tycoon’s plans are for Royal Mail, but analysts speculated he could look to form a new European parcels group by merging IDS’s GLS courier business with PostNL, the Dutch parcel company in which he also holds a roughly 30pc stake. Plans for Royal Mail are less clear.
Mr Kretinsky is already a significant investor in the UK, with stakes in Sainsbury’s and a 27pc stake in West Ham. He also owns the Czech football team AC Sparta Prague.
The 48-year-old made his name as a young dealmaker in the Czech Republic at industrial investor J&T Group. He earned his sphinx nickname from his reluctance to speak publicly about his investments.
