Daniel Křetínský has finally made his offer for Royal Mail. The Czech investor who has held 27.5% of International Distributions Services Plc (IDS) shares for several years, has made an offer for the holding company of the Royal Mail and GLS of UK£0.320 per share. In a statement to the London Stock Exchange, Mr. Křetínský’s company, EP Group, said that it had “submitted a non-binding indicative proposal to the Board of IDS” on April 9, 2024, in order to seek a “recommendation for a possible cash offer for the entire issued, and to be issued, share capital of IDS not already owned by EP Group and its affiliates”. EP Group said that its “proposal was rejected by the Board of IDS”.
The Board of IDS issued a statement on Wednesday 17th describing the proposal as “opportunistic” and that it did not “reflect the growth potential and prospects of the Company under a new management team”.
IDS is vulnerable. The Royal Mail UK business has been struggling with declining letter volumes and the shift to being an e-commerce-driven parcel delivery business. This issue is familiar to most former postal monopolies. However, IDS is quoted in the London stock market and thus is open to offers from investors such as Mr Křetínský. He already owns a 31.4% stake in PostNL, the Dutch former post monopoly and there may be synergies between the two operations. However, it is tempting to believe that what Mr. Křetínský is really after is GLS Group, the continental Europe-based parcel specialist that has been consistently profitable. Last year he denied that he would break up IDS in order to retain GLS. Yet if Mr. Křetínský took over the whole of IDS, he would still have to struggle with the shift away from mail and towards parcel deliveries. The management of Royal Mail UK has been lobbying the British Government for less demanding service criteria for its postal services, hoping that this will reduce the cost of operating the mail service. However, even if this does happen, Royal Mail UK will still have the capital investment and labor restructuring tasks required by the decline of mail and growth of parcels.
At present the mood music in the media is that the politicians will be tempted to block the bid on grounds of ‘national interest’ or ‘national security’. However, if there is no successful purchase of IDS the question will remain of where will it get the capital from to continue to invest in the business?
Author: Thomas Cullen
Source: Ti Insight
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