Royal Mail rejects takeover approach from Czech billionaire

The private company that owns the Royal Mail firm has seen its market value fall to £2.1bn.

Czech billionaire Daniel Kretinsky is working on improving an offer for the owner of Britain's Royal Mail, according to a source with knowledge of the plans, after his investment vehicle said it had made a non-binding bid this month which was rejected.

Mr Kretinsky is exploring a possible bid for London-listed International Distributions Services, which has seen its market value fall to £2.1bn (€2.5bn). 

Mr Kretinsky made the cash offer on April 9 and was seeking the board's recommendation but IDS rejected it, his EP Corporate Group said in a statement. 

"While EP Group's proposal was rejected by the board of IDS, it looks forward to continuing to engage constructively with the board as EP Group considers all its options," it said.

Mr Kretinsky is the largest shareholder in IDS with a 27% stake. Britain's business ministry declined to comment.

"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," EP Group said in its statement.

"With the increasing competition from multinational companies in the UK postal market, private investment in Royal Mail becomes crucial," it said.

It added that Royal Mail would benefit "from being able to take a longer-term view" and that it is prepared to support a transformation of the business. Under UK takeover rules it has until May 15 to make a firm offer for the company. 

BNP Paribas, Citigroup, and JPMorgan are advising Mr Kretinsky on his bid. 

Union response

Britain's Communication Workers Union said that the bid was a significant moment. "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," the union said.

EP is a 100% shareholder in Vesa Equity investment which owns Mr Kretinsky's IDS stake. He founded Vesa in 2018 with business partner Patrik Tkac which also has a stake in supermarket group Sainsbury and Foot Locker.

IDS comprises two businesses, including international parcels network General Logistics Systems (GLS) based in Amsterdam, and the Royal Mail business in the UK.

Royal Mail has faced hurdles over the last couple of years with strikes by postal workers, a cyber security incident, and a fine from UK regulator Ofcom for missed delivery targets, as well as losing a 360-year monopoly to deliver parcels from post office branches.  

A deal could trigger an intervention from the British government under the terms of the National Security and Investment Act, which gives ministers a greater say over deals involving critical infrastructure.

The Department for Business, Energy and Industrial Strategy (BEIS) in 2022 reviewed VESA's plans to increase its about 22% stake in the company at the time to more than 25%.

IDS said revenues grew by 3.8% to £9.45bn for the nine months ending in 2023, according its quarterly update in January.

It expects to make an operating profit in the second half of this year that would offset the £169m loss in the first half. 

Reuters