(qlmbusinessnews.com Wed. 17th July, 2024) London, UK
Royal Mail Takeover: New Owner Commits to Six-Day Letter Delivery Across UK
The potential new owner of Royal Mail has vowed to continue the universal service of delivering letters across the UK six days a week. Czech billionaire Daniel Kretinsky assured the public, stating, As long as I'm alive, I will not step away from this commitment.
Mr Kretinsky's £3.6bn bid for Royal Mail has been accepted by the company's board. Shareholders are expected to approve the deal in the coming months, but the government also holds the power to review and potentially veto the acquisition.
Currently, the Universal Service Obligation (USO) mandates Royal Mail to deliver letters six days a week nationwide at a uniform price. However, there have been concerns that this service might be reduced in the future.
In discussions with reporters, Mr Kretinsky expressed his willingness to share profits with employees if his bid succeeds, although he dismissed the idea of employee ownership, which unions have been advocating for.
The Royal Mail board agreed to the £3.6bn takeover offer from Mr Kretinsky in May for the 500-year-old institution, which employs over 150,000 people. Including assumed debts, the deal's value rises to £5bn.
Given Royal Mail's national significance, the government has the authority to scrutinise and possibly block the deal. Mr Kretinsky must also persuade postal unions that the proposed acquisition will benefit employees.
The USO remains a contentious issue for both the government and unions. Royal Mail is legally required to deliver letters six days a week and parcels five days a week to every UK address at a fixed price. However, meeting these targets has been challenging. Ten years ago, 92% of first-class post arrived on time, but by the end of last year, this figure had dropped to 74%, according to regulator Ofcom. Last year, Royal Mail was fined £5.6m for failing to meet its delivery targets.
Royal Mail has been pushing to reduce this obligation, proposing to cut second-class letter deliveries to every other weekday, which it claims would save £300m and result in fewer than 1,000 voluntary redundancies.
Mr Kretinsky has committed in writing to honouring the USO for five years. After that, the new owners could theoretically abandon the obligation. However, Mr Kretinsky told reporters, As long as I'm alive, I completely exclude this possibility, and I'm sure any successor would understand this.
He added that the five-year commitment is the longest commitment that has ever been offered in a situation like this.
Another challenge for the deal is the company’s structure. Unions favour renationalisation, but Dave Ward, general secretary of the Communication Workers Union (CWU), acknowledged that this would be difficult in the current political and economic environment. Instead, the CWU is pushing for employee part-ownership of the business, along with other concessions, including board representation for workers.
The union has indicated that profit sharing alone will not suffice for their support. Mr Ward warned that industrial action remains a possibility if their demands are not met. CWU members went on strike in 2022 and 2023.
Although Mr Kretinsky is very open to profit sharing, he opposes shared ownership, citing its complexity. He prefers to remunerate employees directly rather than creating an anonymous structure.
The union also worries about job losses and changes to postal workers' contracts. Mr Kretinsky has guaranteed no compulsory redundancies or changes in terms and conditions, but only until 2025.
If we are more successful and have more parcels to deliver, we need more people, not fewer, he said. Job cuts are not part of our plan.
There is also concern about the potential break-up of the business. Last year, Royal Mail's parent company's profit was generated entirely by its German and Canadian logistics and parcels business, GLS, while Royal Mail itself made a loss. Mr Kretinsky has pledged not to separate GLS or burden the parent company with excessive debt, although borrowings will increase if the deal proceeds.
Convincing the CWU remains a significant hurdle. I can't think of any other country that would just hand over its entire postal service to an overseas equity investor, Mr Ward said.
Mr Kretinsky believes that the postal unions understand that we are on the same ship and that collaboration is essential for success.
The union cannot block the deal, but the government can under the National Security and Investment Act. Business Secretary Jonathan Reynolds has said he will scrutinise the assurances and guarantees given and urged Mr Kretinsky to work constructively with the unions.
Who is Daniel Kretinsky?
Daniel Kretinsky began his career as a lawyer in Brno, before moving to Prague and making significant investments in Central and Eastern European energy interests, including Eustream, which transports Russian gas through Ukraine, the Czech Republic, and Slovakia. He diversified into other investments, including a near 10% stake in UK supermarket chain Sainsbury's and a 27% share in Premier League club West Ham United. The Czech businessman is reportedly worth around £6bn.
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