A major European conglomerate led by Daniel Křetínský, who is known as the Czech Sphinx, has had a bid for Royal Mail’s parent company International Distributions Services (IDS) knocked back.
EP Corporate Group submitted a proposal to IDS’s board last week, seeking to purchase all the company’s outstanding shares not already owned by EP or its affiliate group Vesa Equity.
IDS’s board rejected this proposal but EP Group remains open to further discussions with IDS.
EP Group, whose interests include energy, industrial and logistics, has revenues of around €100bn and annual pre-tax profit of €8bn from companies under its control, and Kretinsky owns more than a quarter of West Ham United.
Its investment arm, EP Equity Investment, focuses on long-term investments in publicly traded companies, particularly in food, retail, logistics, media, and e-commerce sectors.
With challenges mounting for Royal Mail, which Vesa Equity is the largest shareholder of with a nearly 28 per cent stake, EP Corporate Group has said private investment is “crucial” to the transformation and long-term success of IDS.
In a statement to the markets, EP Group said: “EP Group also recognises that Royal Mail is an important national asset that would benefit from being able to take a longer-term view and is prepared to support this iconic business as it transforms and rebuilds into a modern postal operator delivering high-quality service to its customers, stability to its workforce and sustainable financial performance.”
IDS shares jumped almost 18 per cent on the news. “Although shares have dipped back slightly from their immediate climb, they remain sharply higher on the day, an indication that investors expect discussions to be continuing,” explained Susannah Streeter, head of money and markets at Hargreaves Lansdown.
While no firm offer has been made, EP Group has until 15 May 2024 to announce its intention to either proceed with an offer or withdraw its interest.
Royal Mail is struggling to please customers and is looking to change a universal service obligation which makes much of its work loss-making; however IDS’ other business, an international distribution service, is riding high on the back of higher levels of ecommerce.
Czech billionaire Křetínský, who also part-owns West Ham, last year threw his hat into the ring in a high-profile auction for the UK’s Telegraph Media Group.
“In true fashion, it has taken eight days to deliver the message that Royal Mail’s owner has received a takeover approach,” said Dan Coatsworth, investment analyst at AJ Bell.
“Shareholders will be peeved at this second-class service as it’s in their interests to know someone is offering to put money on the table for their shares. Ironically, the news has come from the suitor rather than the target, meaning Royal Mail’s parent has delivered an even-greater disservice to its investors by keeping quiet.
“A variety of asset management firms make up the rest of the top 10 shareholder list, led by Redwheel and UBS. Given the choppy performance of the share price in recent years, these big investors will certainly want to know if EP Group is offering a decent price.
“The UK government might also want to know what’s going on, given Royal Mail’s crucial role in the distribution of information to consumers and businesses. However, it was the government’s decision to privatise Royal Mail in 2013 and so it would look a bit off if it now started saying who could and could not own it,” Coatsworth added.
