Royal Mail owner backs £3.5bn takeover offer by Czech billionaire
The owner of Royal Mail has accepted a £3.5bn bid for the postal company from a Czech billionaire after he ramped up the value of the takeover, creating a political headache for the government.
Last month, Royal Mail’s parent company, International Distributions Services (IDS), rejected a preliminary offer worth 320p a share, or £3.1bn, from Daniel Křetínský, an energy tycoon whose company, EP Group, is its largest shareholder.
However, on Wednesday IDS said it was recommending an improved 370p a share offer to its investors.
Keith Williams, the IDS chair, said: “The board is minded to recommend this offer price, which it considers to be fair and reflects … the progress being made on change at Royal Mail to adapt the business to a significant fall in the demand for letters and growth in parcels.”
IDS said its suitor had agreed to “protect employees’ current rights and continue to recognise the existing unions”, as well as keeping the Royal Mail brand and maintaining its headquarters in the UK.
Under British takeover rules, Křetínský had until Wednesday night to make a firm takeover bid, or walk away for six months. He already owns a 27.6% stake in IDS.
IDS had said Křetínský’s first offer “significantly undervalues” the company, and its Williams, and its chief executive, Martin Seidenberg, ttried to convince investors about their strategy.
However, the move to accept Křetínský’s latest bid creates a headache for the government amid increased scrutiny of foreign ownership of critical UK infrastructure assets.
If a takeover by Křetínský goes ahead, it is likely to be scrutinised by regulators. In 2022, the government told Royal Mail it would study an increase in Křetínský’s stake under the National Security and Investment Act. However, that investigation was called off later in the year.
Křetínský, known as the “Czech Sphinx” for his low profile and inscrutable approach, also has stakes in Sainsbury’s and West Ham United.
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His interest comes at a crucial juncture for Royal Mail, which hopes the industry regulator, Ofcom, will allow speedy reform of the universal service obligation (USO), which requires the 508-year-old Royal Mail to distribute nationwide for one price, six days a week. Ofcom set out potential changes to the USO earlier this year and is studying options.
IDS will publish its annual results on 23 May. The company’s shares have rallied from 214p before Křetínský’s interest, and rose by 19% to 322p after the improved bid was confirmed on Wednesday.
Investors will receive an 8p a share special dividend if the deal is completed.