image source, Getty Images
The board of directors of the company that owns Royal Mail is expected to propose a new takeover bid for the 500-year-old organization on Wednesday.
Czech billionaire Daniel Kretinsky will confirm a £5 billion offer, including assumed debt, for the company, which employs more than 150,000 people.
The offer is understood to include obligations to retain the name, brand, UK headquarters and UK tax residency, as well as the exclusion of compulsory redundancies.
Business Secretary Kemi Badenoch, who has yet to meet with Mr Kretinski, has powers under the National Security and Investment Act to scrutinize and potentially block the deal.
Markets appear to think there is a chance the deal will be blocked by the current or a future government as shares in parent company Royal Mail are trading at a 13% discount to the 370p per share offered by Kretinsky.
However, others point to the fact that the state did not intervene when it could have done in 2022, when the entrepreneur increased his stake from 22% to 27.5% of the shares he already owns.
Chancellor Jeremy Hunt said any takeover bid for Britain’s Royal Mail would be subject to “normal” national security scrutiny, but that he would not oppose it in principle.
Shadow business secretary Jonathan Reynolds wrote to Mr Kretinski two weeks ago to highlight the historic and key role Royal Mail has played in UK life and economy, outlining the commitments Mr Kretinski’s offer should include.
BBC News has seen Mr Kretinski’s response to Mr Reynolds’ letter, in which he wrote that the postal company would remain UK-based and tax-resident, recognize trade unions and that Royal Mail would continue to be a Universal Service Provider.
“We believe that if IDS accepts it [International Distributions Services, parent company of Royal Mail] shareholders, our offer will provide Royal Mail with an opportunity to secure its financial future,” Mr Kretinsky wrote.
Royal Mail, which was demerged from the Post Office and privatized ten years ago, is legally required to deliver a “universal service” at a single price, meaning it must deliver letters six days a week, Monday to Saturday, and parcels Monday to Friday .
But the company’s performance has deteriorated in recent years, leading to heavy financial losses, with clients regularly failing to receive letters, including important medical appointments and legal documents, on time.
Parent company International Distribution Services posted a small profit last year that was generated entirely by its German and Canadian logistics and parcels business, offsetting Royal Mail’s losses.
The volume of letters sent has fallen, with half as many letters sent compared to 2011 levels. Meanwhile, parcel deliveries have become more popular – and more profitable.
The Universal Service Obligation is ongoing, with Royal Mail suggesting to Ofcom that reducing second class deliveries to every other working day would save up to £300m a year and give the company a “fighting chance”.
Dave Ward, general secretary of the Communications Workers’ Union (CWU), which represents postal workers, said: “This situation is a direct result of failed and ideological privatization … mixed with the obvious mismanagement of the company in recent years.”
“These events have made one of the UK’s best-known and most important companies ripe for a takeover by foreign investors,” he added.
Mr Ward said he welcomed some of the commitments made so far, “but the reality is that postal workers across the UK have lost all faith in Royal Mail’s senior management and the service has been deliberately reduced.”
The union will meet with Mr Kretinsy’s EP group next week, calling for a “total reset” in employee and industrial relations, as well as further commitments on the company’s future.
They will also engage directly with Labor and others to call for a new ownership model for Royal Mail, where they hope its members will have a “direct say in key decisions”.
Entrepreneur Daniel Kretinsky made his fortune in the energy industry, but in recent years has expanded his interests to retail and logistics. He owns 10% of Sainsbury’s and 25% of West Ham football club.
The BBC understands that the Department of Business and Trade would expect any bidder for the Royal Mail Group to co-operate with ministers.
International Distribution Services declined to comment.
The Czech Republic and the Post Office: Who is Daniel Křetínský?
Daniel Křetínský, the potential owner of Royal Mail, has all the hallmarks of a modern billionaire.
The 48-year-old Czech businessman and lawyer is worth a whopping £6 billion according to the Sunday Times Rich List.
He owns fancy houses in luxury neighborhoods.
These include Heath Hall on London’s Bishop Avenue – also known as Billionaire’s Row – which he bought for £65m and once rented to pop star Justin Bieber for a reported £25,000 a week.
He also spent €21.5m (£18.3m) buying a Paris townhouse down the road from the Elysee Palace from Russian oligarch and fertilizer magnate Dmitry Rybolovlev and his ex-wife.
Mr. Křetínský also owns a stake in the private island resort of Velaa in the Maldives.
And, like others in his fortune, he has a football club or two. This includes AC Sparta Prague, as well as British West Ham in which it holds a 27% stake.
Apparently known as the “silent sphinx” for his inscrutable style, what is known about Mr. Křetínský is that he made his money in Central and Eastern European energy through a labyrinthine structure of companies.
These include Eustream, which transports Russian gas through pipelines that pass through Ukraine, the Czech Republic and Slovakia.
In the UK, Mr Křetínský has built up a sizeable portfolio in well-known brands through Vesa Equity Investment, a private company registered in Luxembourg.
These include significant stakes in supermarket group Sainsbury’s and sportswear retailer Footlocker – as well as International Distribution Services, the parent company of Royal Mail.