Closing post
Time to wrap up, after a dramatic day of takeover drama in the City which saw a massive mining merger bid collapse, but a firm offer for the UK’s Royal Mail.
Here’s a recap:
The takeover of Royal Mail by the Czech billionaire Daniel Křetínský has edged closer after its owner agreed terms and conditions on a £3.57bn offer.
In an update to the market on Wednesday, the postal service’s parent company, International Distribution Services (IDS), said it had accepted a cash offer from Křetínský’s EP Group.
The deal means Křetínský, who made his fortune in energy and owns a minority stake in one of the main gas pipelines from Russia into Europe, would pay 360p a share for the 73% of the struggling postal service he does not already own, plus 10p in dividends.
BHP Group has walked away from its pursuit of Anglo American, after failing to win support from its rival miner for a £39bn takeover proposal.
BHP abandoned its attempt to take control of Anglo, just before a ‘put up or shut up’ deadline, and said it was disappointed.
Mike Henry, BHP’s chief executive officer, told the City:
While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost and, despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive.
The Guardian has shown how some of the most powerful ticket touts in the UK have discussed a secret plan to try to scupper a Labour crackdown on the industry via a lobbying campaign.
Labour voters now make up the majority of customers at all leading supermarkets apart from Waitrose, according to the latest polling from retail research firm GlobalData.
Rishi Sunak’s election pledge to introduce mandatory national service would leave the UK’s poorest regions millions of pounds worse off, a thinktank has warned.
Orange juice makers are considering turning to alternative fruits such as mandarins as wholesale prices have “gone bananas” amid fears of poor harvests in Brazil.
Ofwat, the water regulator for England and Wales, is understood to be considering cutting fines for sewage-dumping water companies if they are facing financial pressures.
Křetínský: Royal Mail needs investment
Reuters’ Prague bureau have caught up with the man of the moment, Czech billionaire Daniel Křetínský, to discuss his takeover bid for Royal Mail’s parent company IDS.
Křetínský told Reuters that IDS must focus on not losing market share – something that would be “fatal” in the UK.
Here’s the story:
Royal Mail and GLS need sizable, almost immediate investments to defend market share and face shifting market trends, Czech billionaire Daniel Kretinsky told Reuters on Wednesday after the groups’ owner agreed to a £3.57bn pound takeover.
“It is important for logistics companies not to miss this out-of-home delivery wave, which means they need to be ready to invest now,” Kretinsky said.
“We believe that if the group doesn’t respond properly on the out of the home solutions it may have a detrimental impact on its market share. And specifically in the UK, any shrinkage of the market share would be fatal.”
⚠️ CZECH BILLIONAIRE KRETINSKY:
— PiQ (@PiQSuite) May 29, 2024
**GLS WOULD BE LOGICAL PLATFORM FOR POTENTIAL FURTHER ACQUISITIONS IN CONTINENTAL EUROPE
**ROYAL MAIL, GLS NEED SIZEABLE, ALMOST IMMEDIATE INVESTMENTS INTO INFRASTRUCTURE
** GROUP MUST FOCUS ON AVOIDING LOSING MARKET SHARE, UK MARKET SHARE…
Anglo: We're fully focused on accelerating value delivery.
Anglo American has responded to BHP’s decision to walk away rather than make a firm offer by 5pm today.
Stuart Chambers, chairman of Anglo American, says the company is “fully focused” on the break-up plan it announced earlier this week.
Chambers tells the City:
“Anglo American has set out a clear pathway to accelerate delivery of its strategy and to unlock significant value for its shareholders. Our shareholders will benefit from value transparency and undiluted exposure to a simpler portfolio of world class assets, consistently stronger operational performance, and highly attractive growth in copper, premium iron ore and crop nutrients. Anglo American’s management team, supported by the Board, is fully focused on delivering the plans it has set out to accelerate value delivery, and doing so at pace.
“I thank Anglo American’s shareholders and stakeholders for their constructive dialogue throughout this period, and our employees for their resilience and commitment. We look forward to delivering our plans for the benefit of our shareholders and for stakeholders, both in our host countries and more broadly.”
Other suiters could now try their chances at wooing Anglo American, suggests Dan Coatsworth, investment analyst at AJ Bell.
The attraction, he points out, is Anglo’s copper mines.
Coatsworth says:
“In effect, BHP has done all the hard work in sounding out whether Anglo American was willing to be bought and in what way it might accept a bid. BHP has fired the starting gun for others to throw their hat into the ring and it seems almost certain that another player could bid for Anglo American in the near future.
“Buying Anglo American would provide a ready-made spread of copper assets which are of increasing importance to the global energy transition from fossil fuels to renewables. Copper is used in wind farms, electric vehicles and so many other ‘new era’ energy devices. Miners are hungry for more and it is much easier to buy another company that is already sitting on proven resources than spend years on exploration.
“All eyes are now on Glencore and Rio Tinto to see if they fancy their chances at buying Anglo American.”
Shares in Royal Mail’s parent company, IDS, closed 4.3% higher tonight at 335p.
That’s their highest closing level in over two years. But, it’s also below the 370p offer which IDS’s board accepted today, suggesting uncertainty that the deal -- which must get past regulatory and political scrutiny – will happen….
At the close of trading in London, Anglo’s shares are down 3% today at £24.95.
They were trading around £21 before BHP made its first move in April – so shareholders are still in profit.
BHP’s interest also prompted Anglo to draw up plans to break itself up, including selling its famous diamond business De Beers as part of a historic corporate overhaul.
Having said it does not intend to bid for Anglo American, BHP cannot make a new approach for six months, under City takeover rules.
There are some ways, though, that the six-month cooling off period can be waived. For example, Anglo’s board could agree to it, or another company could make an offer for Anglo, or the Takeover panel could agree there’s been “a material change of circumstances”.
Updated
BHP also tells the City it is “disappointed” that the board of Anglo American has decided not to continue discussions to resolve concerns regarding the implementation of its revised proposal.
It says:
BHP had been engaging with Anglo American on these topics since the submission of its revised proposal on 20 May and believes that there was a viable pathway available to resolve Anglo American’s concerns.
In particular, Anglo American’s assertion that value risk under our proposal would be exclusively for the account of Anglo American shareholders is not accurate.
As covered earlier, Anglo insisted this morning that BHP’s proposal was “highly complex” – as it involved Anglo spinning off its South Africa-based Anglo American Platinum and Kumba Iron Ore operations.
Anglo shares drop
Shares in Anglo American have dropped by almost 4%, following BHP Group’s decision not to make a firm offer.
They’ve dropped to around £24.58, down from £25.58 last night.
BHP’s final proposal, which valued Anglo at almost £39bn, had been worth £29.34 per share.
BHP: does not intend to make a firm offer for Anglo American
NEWSFLASH: BHP Group has walked away from its pursuit of Anglo American.
BHP, which had proposed paying almost £39bn for Anglo American, has given up after failing to persuade its rival miner to accept a takeover offer or extend talks.
The announcement comes about 45 minutes before the deadline to either put up a firm offer or walk away, and also comes hours after Anglo rejected BHP’s request for more time to hammer out an agreement.
Mike Henry, BHP’s chief executive officer, says:
“BHP will not be making a firm offer for Anglo American. BHP is committed to its Capital Allocation Framework and maintains a disciplined approach to mergers and acquisitions.
While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost and, despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive
We remain of the view that our proposal was the most effective structure to deliver value for Anglo American shareholders, and we are confident that, working together with Anglo American, we could have obtained all required regulatory approvals, including in South Africa.”
Updated
Bloomberg: Sony in Talks to Buy Queen’s Music Catalog in Potential $1bn deal
Exciting news in the music industry… Sony Music is in talks to acquire Queen’s music catalog, Bloomberg reports.
The deal, to buy hits such as Bohemian Rhapsody, in what could be one of the biggest ever deals of its kind, says Bloomberg.
Here’s a flavour of the story:
Sony is working with another investor on a purchase that could potentially total $1 billion, people familiar with the matter said, asking not to be named discussing confidential information.
The talks, which also cover merchandising and other business opportunities, are ongoing and may not result in an agreement, according to the people. A spokesperson for Sony declined to comment. A representative for Queen could not be reached for comment.
Just in: Marks & Spencer has turned to property portal Rightmove for its new CFO.
M&S has told the City that Alison Dolan will join its board as Chief Financial Officer.
She will take over from interim CFO Jeremy Townsend who will remain in post until May 2025.
Stuart Machin, M&S’s chief executive officer, says:
“I am delighted to welcome Alison to M&S as our Chief Financial Officer.
We are fortunate to attract somebody of Alison’s calibre who will be a fantastic addition to the leadership team and with so much experience in fast paced, digitally led businesses, will help us in this next phase of transforming M&S.”
Dolan is currently CFO of Rightmove, who have told shareholders that she has a twelve month notice period and “a date for her departure will be agreed”.
The global unemployment rate is expected to fall slightly this year.
The International Labour Organization (ILO) forecast today that the worldwide jobless rate will dip to 4.9% this year from 5.0% in 2023, better than the 5.2% they forecast in January
The revision is mainly due to lower-than-expected unemployment rates in China, India, and high-income countries reported so far this year, the ILO said.
However, the ILO also warns that inequalities in labour markets remain, with a “persistent” lack of employment opportunities.
The election is the least interesting development in the UK right now.
That’s the verdict of City firm TS Lombard today.
They point out that there isn’t a lot of election uncertainty to excite the markets, with Labour set to gain the largest share of votes, adding:
The rumour mill over why the Conservatives called an early election has been turning, with some speculating the party wanted to avoid much worse data coming out this autumn or some other ominous event.
But the election could be seen as a positive because it reduces the economic uncertainty that might otherwise have persisted into the third quarter over which party will lead the government. What is more likely, though, is that it will prove a non-event; market pricing seems to reflect this outcome.
And indeed, the latest poll from YouGov shows Labour with a 27-point lead, at 47% support, ahead of the Conservatives with 20%.
Latest YouGov Westminster voting intention (27-28 May)
— YouGov (@YouGov) May 29, 2024
Con: 20% (-2 from 23-24 May)
Lab: 47% (+3)
Reform UK: 12% (-2)
Lib Dem: 9% (=)
Green: 7% (+1)
SNP: 3% (=)https://t.co/w6g5bmbt8K pic.twitter.com/XNmjxZViaJ
Anxiety that US interest rates may not be cut as swiftly as hoped is weighing on Wall Street today.
The Dow Jones industrial average has dropped by 316 points, or 0.8%, in early trading to 38,536 points. That adds to yesterday’s losses, taking the Dow further from its record high over 40,000 points set this month.
The Russell 2000 index of small companies is down 1.3%, at a three-week low.
John Wood Group says it is evaluating the final takeover proposal made by rival Sidara today (see 2.21pm) and will make a further announcement in due course….
More takeover news: British oil services company John Wood Group has received a fourth and final takeover offer from Dubai-based rival Sidara.
Sidara says its new offer, of 230p per share, is a 52% premium to John Wood’s share price at the end of April, before its first offer.
By my maths, it values John Wood at £1.58bn, up from an earlier rejected £1.4bn offer.
Sidara says John Wood has not engaged with it, since the initial approach, adding:
Sidara does not believe that its proposal can be progressed unless the Board of Wood engages with Sidara and an extension to the deadline is granted.
Under the Takeover Code Sidara has until 5 June 2024 either to announce a firm intention to make an offer for Wood or to announce it has no intention to make an offer.
FTSE 100 on track for 6th day of losses in a row
Despite the jump in International Distribution Services’s share price today, the London market is sliding again.
IDS are now up 4% at 334p, moving close to Daniel Křetínský’s offer of 370p/share.
That makes IDS the second-biggest rise on the FTSE 250 index of medium-sized companies listed in London, which is down 0.85% today.
The blue-chip FTSE 100 index is in the red too, down 0.5%, and on track for its sixth fall in a row.
Grocery technology firm Ocado are the top faller, down 5%, putting it on track to be ejected into the FTSE 250 when the indices are next reshuffled.
Fiona Cincotta, senior financial market analyst at City Index, explains:
“The FTSE is falling, adding to losses from the previous session, as the UK index continues to retreat from its all-time high earlier this month.
Stronger-than-expected US data and hawkish Fed comments have hurt risk sentiment across the markets.
News that the IMF has upwardly revised China’s growth forecast to 5% after a solid first quarter and recent supportive policy measures from Beijing have helped oil majors higher but have failed to boost the miners. Anglo-American is trading down 1.5% ahead of a key deadline today for a takeover deal with BHP.
The jump in German inflation this month (see earlier post) illustrates the stickiness of inflation in the entire eurozone, says Carsten Brzeski, global head of macro at ING.
Brzeski told clients:
Today’s German inflation data not only illustrates the ongoing impact of base effects and earlier government measures on present inflation but also stresses how sticky inflation remains. That stickiness looks set to continue as favourable energy base effects are petering out while, at the same time, the economy is gaining traction and wages are increasing.
However, it probably won’t stop the European Central Bank cutting interest rates next week. he adds:
Today’s increase in German headline inflation is a good reminder of how difficult the last mile of bringing inflation sustainably back to 2% will be for the European Central Bank. Still, with an entire choir of ECB Governing Council members once again singing about rate cuts, anything other than a cut of 25bp next week would be a major surprise, not to mention a severe reputational loss for the central bank.
Labour leader Sir Keir Starmer has said it he is “encouraged” by what he has seen about the takeover of Royal Mail’s parent company by EP Group.
Speaking to reporters today, Starmer said:
“I’m glad that some progress seems to be being made on Royal Mail and I hope further progress can be made so that Royal Mail can be safeguarded with a secure future.
“I’m encouraged by what has been said so far about job security and the approach that we’ve taken. Obviously it’s early days, but I do think this is a step in the right direction.”
In the media world, London’s Evening Standard has announced plans to shut its daily newspaper and replace it with a new weekly publication.
The newspaper has been hit hard by the introduction of phone signal on the London underground, a shortage of commuters owing to the growth of working from home and changing consumer habits, my colleague Jim Waterson reports.
More here:
German inflation rate rises
Newsflash: Inflation in Germany has picked up this month.
Statistics body Destatis reports that Germany’s annual inflation rate is estimated to have risen to 2.4% for May, up from 2.2% in April.
On an EU-harmonised basis, inflation rose to 2.8% from 2.4%.
Core inflation, which excludes food and energy, was unchanged at 3%.
German CPI in May grew 0.1% MoM and 2.4% YoY, up from 2.2% YoY in Apr, indicating steady inflation pressures. This was in line with expectations of 2.4% YoY.
— MTS Insights (@MTSInsights) May 29, 2024
• Core inflation (ex-food and energy) held steady at 3.0% YoY in May, unchanged from Apr.
• Services prices rose 3.9%… pic.twitter.com/sEt4FPdVJt
Pound highest against euro since August 2022
Good news for UK holidaymakers heading across the Channel this summer – the pound has reached a near two-year high against the euro today.
Sterling hit €1.1785 this morning, meaning one euro was worth 84.8p. That’s the pound’s strongest level since August 2022, before the mini-budget crisis sent it reeling against rival currencies.
The euro is weaker, as traders expect the European Central Bank to cut interest rates next week, while the Bank of England may not lower rates until November, according to the money markets today.
Chance of 25bp cut in June...
— Michael Brown (@MrMBrown) May 28, 2024
FOMC: 2%
ECB: 92%
BoE: 7%
BoC: 66%
SNB: 57% (delivered 1st 25bp cut in Mar)
RBA: 28%
RBNZ (Jul): 2%
Updated
This chart shows how Royal Mail/IDS’s share price has fluctuated since it was floated in 2013.
As we blogged at the time, Royal Mail’s shares surged 38% on the first day’s trading, in October 2013, leading to claims the government had sold it too cheaply.
Members of the public who took part in the 2013 Royal Mail flotation will also make a profit.
There was a big rush to take part, meaning people were allocated 227 shares each, worth £749.
At Křetínský’s 370p offer, those shares (bought for 330p each) are worth £840, meaning those who held onto them will make a paper profit of about £90. They’ll also have received dividends over the years.
However, they’d have made a bigger killing if they’d sold straight away, as Royal Mail shares soared to around £5.80 in the weeks after the float.
UPDATED: Křetínský’s takeover offer for Royal Mail should deliver a windfall to postal staff who received shares though its flotation over a decade ago.
When the government floated Royal Mail on the stock market in 2013, it awarded 10% of its shares to its staff, with 150,000 employees sharing 100m shares.
Most staff received 913 shares each. If Křetínský offer’s goes through, those stakes would be worth around £3,380 each.
However, at Royal Mail’s alltime share price high above £6, those stakes were worth around £5,500.
Updated
Here’s our news story on Ofwat’s plans:
Water company shares rally as Ofwat 'rewards failure'
Shares in UK water companies are rallying today, following reports that Ofwat is planning a more lenient regulatory regime for poorly performing firms.
United Utilities, which operates in North West England (where it recently pumped raw sewage into Windermere for hours) are up 2.8%.
Severn Trent have gained 1.5%, while Pennon Group (owner of South West Water, hit by the waterborne disease outbreak in Devon) are up 2.1%.
Greenpeace fears Ofwat is rewarding failure.
Dr Doug Parr, policy director for Greenpeace UK, said:
“If the story is correct the regulator has decided to reward failure, and punish the water companies for devaluing the UK’s water supply by giving them less stringent targets, a holiday on regulatory enforcement and more shareholder dividends.
Thames Water have got exactly what they were asking for - because it seems that in order to encourage other foreign investors to degrade UK infrastructure and turn our rivers into open sewers, they need to get a reasonable rate of return.”
Anglo American rejects BHP's bid to extend takeover deadline
Newsflash: Anglo American has rejected this morning’s request from rival miner BHP Billiton for an extension for the deadline to make a takeover offer.
Anglo tells the City that it has held “extensive engagement with BHP and its advisers”, having rejected BHP’s three takeover proposals so far.
And it remains unimpressed by BHP’s proposal, saying:
The BHP Proposal includes the same highly complex and unattractive structure as the proposals previously rejected on 26 April 2024 and 13 May 2024.
Anglo cites BHP’s demand that it spins off its stakes in its South African platinum and iron ore units, before a deal is done, saying:
The requirement to pursue two contemporaneous demergers of publicly listed companies alongside a takeover and the inter-conditional nature of the three transactions is unprecedented. Undertaking a takeover in parallel with two demergers would result in additional material approvals.
Anglo is also unimpressed by the “socioeconomic measures” proposed by BHP to smooth the deal, saying they would still leave its shareholders carrying most of the risk from the deal:
As Anglo puts it:
On 28 May 2024, BHP put forward a limited number of socioeconomic measures that were confined in scope, impact and duration and that BHP stated would support regulatory approvals.
This approach does not sufficiently address the fact that Anglo American’s shareholders would bear disproportionate execution and value risks and uncertainty over an extended period, nor does it consider that material conditions would likely be imposed in relation to both Anglo American Platinum and Kumba which would require the approvals of their respective boards.
This means BHP has until 5.00 pm today to either announce a firm intention to make an offer for Anglo American, or walk away for six months…..
Postal unions are pushing for a new ownership model for Royal Mail, in which both staff and customers would have “a direct say” in how the company is run.
Dave Ward, general secretary of the Communication Workers Union, is also calling for a ‘golden share’ to be created (which would give special powers to block certain decisions).
Ward says:
“We do welcome some of the commitments that have been made but the reality is postal workers across the UK have lost all faith in the senior management of Royal Mail and the service has been deliberately run down.
“We will meet with EP Group next week and call for a complete reset in employee and industrial relations, the restoration of postal services and further commitments on the future of the company.
“We will also be directly engaging with the Labour Party and other stakeholders to call for a new model of ownership for Royal Mail where our members and customers have a direct say in key decisions and the creation of a golden share which will protect a key part of the UK’s communications infrastructure.”
Ward also told Radio 4’s Today Programme that the CWU was seeking more extensive assurances about the future of postal services, and pension guarantees, as you can hear:
General Secretary Dave Ward on the today programme today calling our the gross mismanagement from the Royal Mail Board which has destroyed postal services in the UK.
— CWU (@CWUnews) May 29, 2024
Only workers and customers can rebuild it. pic.twitter.com/ntESZ6qUmR
BHP seeks more time in £34bn battle for Anglo
Another takeover battle could be going into extra time.
BHP Group, the mining giant, has told the City it believes a further extension of the deadline for it to bid for rival Anglo American is needed, so there can be further engagement on its proposal.
BHP says it has proposed a number of “socioeconomic measures” to address Anglo American’s concerns about its proposal, which has been consistently rejected by Anglo.
BHP, which has until 5pm to bid or walk away, says its proposed measures would provide greater economic benefits to South Africa than the break-up plan announced by Anglo American this month.
These measure include a series of steps aimed at addressing concerns over BHP’s condition that Anglo divest some South African assets – its shareholdings in Anglo Platinum and Kumba Iron Ore – before BHP’s proposal, currently valued at £34bn, can go ahead.
The company says:
BHP believes that its proposal will contribute to South Africa and allow the benefits of South African mining to be shared with more South African stakeholders.
There is still ‘some caution’ about whether this deal to acquire Royal Mail’s parent company will go through, says Susannah Streeter, head of money and markets at Hargreaves Lansdown:
Royal Mail owner IDS has rallied again after news broke that the board has agreed to a formal takeover offer from its major shareholder, EP Group, led by Czech billionaire Daniel Kretinsky.
Crucially, the offer is believed to deliver extra commitments to keep the name and the brand, rule out compulsory redundancies and keep the company headquartered in the UK. There is still some caution about whether the deal will go ahead, given that the government has the power under the National Security and investment act to potentially block the deal. IDS comes with a lot of Royal Mail baggage, particularly the obligation to deliver letters six days a week as the UK’s universal postal service, at a time when volumes are in sharp decline.
But the group’s international arm GLS has long been considered the jewel in the company’s crown, enjoying a level of success which Royal Mail has found elusive and EP Group will have been eyeing up the long-term opportunities here, particularly if inflation subsides further which should help margin growth.
IDS shares hit two-year high
Shares in International Distribution Services have jumped 3% at the start of trading, as traders react to the news that Křetínský’s recommended cash offer for International Distribution Services.
That have hit 335.2p, their highest level in over two years.
But, that’s still shy of Křetínský’s offer (which is 360p per share in cash, plus a special dividend of 8p, plus a planned final dividend of 2p).
That suggests the City aren’t 100% certain that the deal will go through. It requires IDS shareholders to vote for it, and will surely also have to clear a national security review.
Křetínský’s EP Group points out that the 370p offer is a 72.7% premium to IDS’s closing share price of 214p on 16 April, the day before his first offer (worth £3bn) was announced.
Křetínský already owns 27.5% of IDS.
Updated
Labour: We'd hold Křetínský to his assurances
The Labour Party has said it will make sure that Křetínský sticks to his promises regarding Royal Mail, should it win July’s general election.
In a statement, Labour welcomes Křetínský’s commitments (see earlier post), saying:
“These assurances are welcome that Royal Mail will retain its British identity and safeguard its workforce with no compulsory redundancies. Labour in government will ensure these are adhered to.”
What guarantees are there for Royal Mail’s staff?
Daniel Křetínský’s EP Group says it will abide by the deal reached between the postal operator and its unions, and will “enter into pay deal discussions with Royal Mail’s unions in good faith.”
It also pledges to maintain pay and benefits packages, saying that it has committed, for at least two years, that:
base salaries, wage rates and cash/equity incentive opportunities will, at a minimum, be maintained (save for any adjustments to cash/equity incentive opportunities to take into account the de-listing of IDS Shares); and
benefits and allowance packages (including pension benefits) will be no less favourable than those in place as at completion of the Acquisition.
Křetínský's commitments to Royal Mail
The board of IDS agreed to Křetínský’s takeover offer after hammering out a package of legally binding undertakings and commitments.
They include a list of Undertakings to the UK Government, which include ensuring that Royal Mail remains the Universal Service Provider (USP) for postal services, for five years after the deal is completed.
That includes complying with the regulatory conditions imposed by Ofcom on Royal Mail for the next five years – including continuing to provide the “one-price-goes-anywhere” service in the United Kingdom and delivering first class letters six days a week.
[However, Ofcom is currently pondering reforms to the universal service obligation, which could include watering down second-class post, or reducing the service to as little as three days a week]
Křetínský also pledges that Royal Mail wouldn’t make any return of capital, asset transfers, loans or loan repayments that would raise its net leverage ratio above 2:1, or undermine its ability to operate as the USP – basically a pledge not to asset-strip the company.
As flagged earlier, both IDS and Royal Mail would maintain their headquarters in the UK for at least five years and remain tax resident in the UK.
The takeover agreement also touches on GLS – IDS’s rather profitable international parcels operation run out of Amsterdam. Křetínský pledges that there will be no change of control for either GLS or Royal Mail for three years.
He is also pledging not to dip into any surplus in the Royal Mail pension scheme, and to continue to recognise the CWU and CMA Unite unions.
Křetínský: owning Royal Mail would come with enormous responsibility
Daniel Křetínský says he knows that owning Royal Mail comes with “enormous responsibility” – both to staff and customers.
In a statement released in today’s takeover announcement, Křetínský says:
“IDS, and Royal Mail in particular, form part of the national infrastructure of the countries they operate in. More than that, Royal Mail is part of the fabric of UK society and has been for hundreds of years. The EP group has the utmost respect for Royal Mail’s history and tradition, and I know that owning this business will come with enormous responsibility - not just to the employees but to the citizens who rely on its services every day. The scale of the commitments we are offering to the company and the UK Government reflect how seriously we take this responsibility, to the benefit of IDS’ employees, union representatives and all other stakeholders.
Křetínský - known as the ‘Czech Sphinx‘ due to his enigmatic approach to business – also promises to support International Distribution Services to transform its business:
The EP group is a patient, supportive investor with a long-term view and decades of experience in owning critical national infrastructure. We are committed investors in the UK and first became a shareholder in IDS four years ago, as we saw the potential for the business to become one of the largest postal logistics groups in Europe. But IDS’ market is evolving quickly, and it must accelerate its transformation and investments into modernisation to keep up with the competition. We will support the business in the next critical phase of its transformation and beyond, providing our experience and financial resilience to support the management team. We look forward to working closely with all of IDS’ stakeholders to deliver against its full potential.“
Updated
Ofwat 'to cut fines to help stressed UK water companies'
Britain’s struggling water companies are about to get a hand-up from regulators, according to reports this morning.
Water regulator Ofwat is drawing up plans for a special “recovery regime” for Thames Water and other financially stressed UK water companies, the Financial Times reports.
Under this regime, the water companies could receive fewer or no regulatory penalties to encourage them to invest in infrastructure improvements instead.
They would also be given more “realistic” targets for reducing sewage and water leaks and outages – despite some companies having spectacularly failed to hit targets in the past.
One person close to the plan has told the FT that while Ofwat recognises the “moral hazard involved in letting poor performers off the hook, it is also keen to put these companies on an upward trajectory”.
News of Ofwat’s planned leniancy comes a day after the Guardian reported that the regulator was poised to refuse most water companies’ requests to ratchet up consumer bills. Some are expected to get as little as half of what they have asked for, in the next review of bills and spending plans.
The new special “recovery regime” could be announced within weeks, to avoid Thames Water being taken into the government’s special administration regime, the FT adds.
Updated
Introduction: Royal Mail agrees £3.5bn takeover
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It’s deadline day in the City today, with suitors for two UK-listed companies – mining giant BHP Billiton and Royal Mail – given until 5pm today to put up a formal bid, or walk away for six months.
And in the last few minutes, Czech billionaire Daniel Křetínský has announced a recommended cash offer for Royal Mail’s parent company International Distribution Services has been agreed.
IDS’s board has agreed to back a takeover worth £3.57bn, or 370p per share.
Earlier this month, IDS said it was minded to approve this improved offer from Křetínsy’s EP Group…
…and this morning Keith Williams, the chair of IDS, says the offer is”fair and reasonable” given the uncertainties ahead.
Williams says various guarantees have been reached with Křetínský, which will be presented to the government as soon as possible.
Those guarantees include ensuring that Royal Mail continues as the Universal Service Provider for five years after the deal is concluded, and maintaining a UK headquarters and tax residency for that period too (but what happens after that, you may wonder….).
Williams says:
The IDS Board has negotiated a far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards.
These cover the provision of the one-price-goes-anywhere Universal Service Obligation (including First Class letters still delivered six days a week), the financial stability and maintenance of the IDS Group including Royal Mail, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.
The deal could still face hurdles, though – chancellor Jeremy Hunt has indicated that the national security implications of such a bid would need to be scrutinised….
The agenda
7.45am BST: French consumer confidence for May
Noon BST: US weekly mortgage applications
1pm BST: German inflation data for May
Updated
