Equities

Kretinsky's £3.5B Royal Mail Bid Faces Gov Scrutiny

Czech Billionaire's £3.5 Billion Bid for Royal Mail Sparks Political and Regulatory Concerns, Promises to Maintain Services

By Athena Xu

5/16, 08:41 EDT
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Key Takeaway

  • Czech billionaire Daniel Kretinsky offers £3.5 billion ($4.4 billion) for Royal Mail's parent IDS, a 73% premium on pre-bid share price.
  • UK Business Secretary to scrutinize the foreign takeover amid concerns over national infrastructure and Royal Mail's heritage.
  • Kretinsky's EP Group promises to maintain key services, but stakeholders worry about the impact on operations and employees.

Takeover Bid for Royal Mail

International Distribution Services Plc (IDS), the parent company of Royal Mail, is currently considering a £3.5 billion ($4.4 billion) takeover offer from Czech billionaire Daniel Kretinsky. Kretinsky, who already holds a 27.6% stake in IDS, has proposed buying the remaining shares at 370 pence each, an increase from a previous offer of 320 pence per share. This revised bid values IDS significantly higher than before, with the offer price representing a 73% premium over the share price before the takeover interest was announced. IDS has expressed its inclination to recommend this offer to its shareholders, citing it as "fair" and reflective of the company's growth plans.

Political and Regulatory Scrutiny

The potential foreign takeover of Royal Mail, a former state-owned entity, has sparked concerns among UK politicians and is expected to face rigorous political and regulatory examination. UK Business Secretary Kemi Badenoch is set to discuss the bid with Martin Seidenberg, CEO of IDS, focusing on the implications of Kretinsky's offer. The government has indicated its intention to outline expectations at the relevant point in the process, with Prime Minister Rishi Sunak's spokesman mentioning that regulators would be involved. Labour’s shadow business secretary, Jonathan Reynolds, has called for commitments to safeguard the business, emphasizing Royal Mail's status as a key part of national infrastructure and its unique heritage.

Commitments and Concerns

EP Group, Kretinsky's investment firm, has proposed several undertakings to address public interest concerns. These include maintaining Royal Mail's six-day-a-week first-class letter delivery service and ensuring the company's UK headquarters and tax residence remain unchanged. Despite these assurances, the takeover bid has raised questions about the future of postal services in the UK, with the Communication Workers Union (CWU) and other stakeholders expressing apprehension about potential changes to Royal Mail's operations and its impact on employees and the universal postal service.

Management Quotes

  • Martin Seidenberg, CEO of International Distributions Services Plc:

    "IDS said it was inclined to accept a higher non-binding offer from Kretinsky’s EP Group worth 370 pence per share, having previously rejected a bid valuing it at 320 pence a share."

  • Dave Pares, Prime Minister Rishi Sunak’s spokesman:

    "The government will engage at the relevant point in the process to outline our expectations."