(qlmbusinessnews.com Wed. 29th May, 2024) London, UK —
Royal Mail Owners Poised to Support £5bn Takeover Bid.
The board of Royal Mail's parent company is set to endorse a new £5bn takeover bid for the historic postal service on Wednesday. This offer comes from Czech billionaire Daniel Kretinsky and includes assumed debts.
The proposed deal, expected to include pledges to maintain the Royal Mail name, brand, UK headquarters, and tax residency, also aims to avoid compulsory redundancies.
Business Secretary Kemi Badenoch holds the authority under the National Security and Investment Act to review and potentially block the acquisition. Market sentiment reflects some scepticism, with shares in Royal Mail’s parent company trading at a 13% discount to Kretinsky's offer of 370p per share, indicating concerns over potential government intervention.
However, the government did not intervene when Kretinsky increased his stake in the company from 22% to 27.5% in 2022. Chancellor Jeremy Hunt has indicated that any takeover bid will undergo standard national security scrutiny but is not opposed in principle.
Shadow Business Secretary Jonathan Reynolds recently wrote to Kretinsky, emphasising Royal Mail's historic and vital role in the UK's economy and outlining the expected commitments from the takeover bid.
Royal Mail, which was separated from the Post Office and privatised a decade ago, is obligated to provide a universal service, delivering letters six days a week and parcels Monday to Friday. However, the company has struggled with performance issues, resulting in financial losses and delayed deliveries of important documents.
Last year, the parent company, International Distribution Services, reported a small profit, primarily from its German and Canadian logistics and parcels business, which offset Royal Mail's losses. The volume of posted letters has halved since 2011, while parcel deliveries have increased in popularity and profitability.
The universal service obligation is currently under review, with Royal Mail proposing to Ofcom that reducing second-class deliveries to every other weekday could save up to £300m annually and help stabilise the business.
Dave Ward, general secretary of the Communication Workers Union (CWU), criticised the privatisation and management of Royal Mail, attributing the company's current state to these factors. He expressed concerns about the potential foreign takeover but welcomed some of the commitments made by Kretinsky.
The CWU plans to meet with Kretinsky's EP Group next week, seeking a “complete reset” in employee relations and further assurances regarding the company's future. The union also intends to engage with the Labour Party and others to advocate for a new ownership model for Royal Mail, allowing workers a significant role in decision-making.
Daniel Kretinsky, who has diversified his investments from the energy sector into retail and logistics, owns stakes in Sainsbury’s and West Ham football club.
International Distribution Services and the Department for Business have declined to comment on the matter.
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