The owner of Royal Mail says it is ‘minded to’ accept a huge £3.5 billion offer from Czech West Ham co-owner Daniel Křetínský.
EP Group, a business owned by Křetínský, made an approach last month to acquire International Distribution Services, which owns Royal Mail as well as a Dutch postage business, but was rebuffed by the IDS board.
The blockbuster potential deal, at 370p per share, would be a 72.7% premium from IDS’ closing share price on 16 April, before the first approach, which was at 320p per share.
The current proposal is not a binding offer, and therefore cannot be accepted by IDS. However, its board said it would be “minded to” accept a firm offer that comes in at that price.
A deal would see the 500-year-old institution Royal Mail taken off the stock market just under 11 years after it was privatised in an initial public offering.
Given the public role of Royal Mail, the IDS board said it sought certain assurances from the Czech billionaire. The offer comes as the Government considers changes to the Universal Service Obligation, which could lead to an end to six-days-a-week postal deliveries. Royal Mail’s own proposal for the future of the Obligation would keep six-day-a-week service, but only for first-class post.
It said: “Both Royal Mail and GLS perform critical functions in the markets where they operate, and the Board is particularly mindful of Royal Mail's unique heritage and responsibilities as the designated Universal Service Provider in the United Kingdom and a key part of national infrastructure. In assessing the Proposal, the Board has also been very mindful of the impact on Royal Mail and GLS and their respective stakeholders and employees, as well as broader public interest factors.
“The Board has sought, and EP Group has agreed to offer as part of the Proposal, a set of contractual undertakings to protect key public interest factors and recognise Royal Mail's status as a key part of national infrastructure. It is anticipated that the commitment to offer these contractual undertakings to the UK Government (or, where applicable, to the Company and/or other stakeholders directly) would be reflected in the cooperation agreement between the parties if a firm offer is made.
“Under the proposed contractual commitments, key elements of the proposals Royal Mail has put forward for a financially sustainable Universal Service in the future, namely a one-price-goes-anywhere service for the entire United Kingdom and the continuance of six-day delivery for First Class letters, would be maintained. EP Group has agreed to offer contractual commitments to protect employees' current rights and continue to recognise the existing unions of both Royal Mail and GLS. The parties agree that Royal Mail's name and brand should be protected, and Royal Mail should remain headquartered and tax resident in the United Kingdom.”
Keith Williams, Chairman of IDS plc, said: "The Board is minded to recommend this offer price, which it considers to be fair and reflects the value of GLS' current growth plans and the progress being made on change at Royal Mail to adapt the business to a significant fall in the demand for letters and growth in parcels.
"It is however regrettable that despite four years of asking, the Government has not seen fit to engage in reform of the Universal Service and thus improve our financial position and ensure that Royal Mail could provide an economically sustainable service to the British public.
Shares in IDS jumped by 19% to 327p after the latest proposal was announced, but that is still far from the offer price, suggesting the markets see some degree of uncertainty in getting the deal over the line.
Křetínský made much of his fortune in energy and media, and bought a 27% stake in West Ham in 2021.
