Royal Mail faces takeover bid from Czech billionaire

Daniel Kretinsky has signalled he will continue his pursuit for full control of IDS – a company in which he already has a 27pc stake – Joel Saget/AFP/Getty Images

Royal Mail is facing a takeover bid from the Czech billionaire who co-owns West Ham United.

Daniel Kretinsky, known as the “Czech sphinx”, has had a cash bid for the company rejected, but has signalled he will continue his pursuit of the troubled postal service.

Mr Kretinsky, who is worth $7.2bn (£5.8bn), made an offer for Royal Mail’s parent company, International Distribution Services (IDS), through his EP Group. The billionaire already owns a 27pc stake in IDS.

Shares in IDS surged 15pc on the news.

The takeover bid comes at a torrid time for Royal Mail, which is battling to stem large losses amid a sharp decline in letter sending.

Any sale of the business would be highly politically sensitive given the central role of Royal Mail in British life. Mr Kretinsky’s move to increase his stake in the business to more than 25pc triggered a national security review in 2022.

Mr Kretinsky’s company EP said on Wednesday it “recognises that Royal Mail is an important national asset” and said it would be “prepared to support this iconic business as it transforms and rebuilds into a modern postal operator”.

Royal Mail is currently trying to refocus its business on parcels as it looks to cash in on the boom in ecommerce, though it faces tough competition from rivals such as Amazon.

The company is also battling to change its so-called universal service obligation, which requires it to deliver letters six days a week. Royal Mail has said the onerous requirement threatens the viability of its business.

Royal Mail lost £319m in the first half of the year, following a loss of £1bn last year as it was hit by crippling strike action.

EP said in a statement: “Weak financial performance, poor service delivery and a slow transformation, in the face of a market going through structural change, have put the business under unsustainable pressure.

“With the increasing competition from multinational companies in the UK postal market, private investment in Royal Mail becomes crucial.”

EP also owns Netherlands’ PostNL and a person familiar with the matter said Mr Kretinsky was possibly exploring a plan to carve out the parcels arm of IDS and merge it with Dutch operator PostNL.

IDS comprises the Royal Mail business, focused on letters and parcels, and a European business courier business, GLS.

Mr Kretinsky is already a significant investor in the UK, with stakes in Sainsbury’s and a 27pc stake in West Ham. He also owns the Czech football team AC Sparta Prague.

EP said: “As a committed long-term investor in the UK, EP Group recognises the importance of the Royal Mail business to its various stakeholders, including employees, trade unions, customers and Government, as the UK’s sole designated universal service provider.

“EP Group has submitted its non-binding indicative proposal to IDS with the interests of these important stakeholders in mind.”

Mr Kretinsky, 48, made his name as a young dealmaker in the Czech Republic at industrial investor J&T Group.

He earned his sphinx nickname from his reluctance to speak publicly about his investments.

His ownership of significant stakes in Royal Mail and Sainsbury’s has forced him to be more open and, in his first British interview last year, he pledged to keep Royal Mail listed on the stock market, saying it was good if “every British citizen can invest in the shares”.

Royal Mail was privatised in 2013 by the then-coalition government led by the Conservatives and Liberal Democrats, leaving it vulnerable to takeover bids.

The Government has powers under the National Security and Investment Act to probe deals that affect nationally important assets.

In August 2022 the business department under Kwasi Kwarteng launched a review of Mr Kretinsky’s plans to increase his stake in Royal Mail from 22pc to 25pc, ultimately clearing the deal.

Despite an initial share price spike after listing, Royal Mail has struggled with increased competition since then and the stock is down almost 50pc since its debt.

The company has repeatedly fallen short of delivery targets and was fined a record £5.6m by regulator Ofcom last year after it failed to deliver more than a quarter of first class post on time.

Earlier in April, the company set out proposals to deliver second class letters just three times a week and water down quality of service targets. It said the moves would help it to save up to £300m.

The changes are being reviewed by Ofcom as part of a consultation on the universal service obligation. It is due to provide an update in the summer.

However, the watchdog has already warned that quality of service must not be reduced as part of any reform. The planned changes have already been met with opposition from Prime Minister Rishi Sunak, who said the Government was committed to Saturday letter deliveries.

The crisis has posed a major headache for Martin Seidenberg, chief executive of IDS who took over the top job last year. In March he appointed Emma Gilthorpe, a former Heathrow executive, as chief executive of Royal Mail. She is the postal service’s fourth boss in five years.

Royal Mail also comes under recent pressure after an investigation by The Telegraph revealed that China was flooding Britain with counterfeit stamps.

Royal Mail was contacted for comment.

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