Royal Mail owner rebuffs bid from Czech billionaire Kretinsky

FILE PHOTO: A Royal Mail sign is pictured on a delivery van outside a Post Office, in St Albans, Britain, May 3, 2022. REUTERS/Peter Cziborra/File Photo

By Amy-Jo Crowley, Emma-Victoria Farr and Marek Strzelecki

LONDON (Reuters) -Czech billionaire Daniel Kretinsky made a non-binding bid to acquire the owner of the UK’s Royal Mail earlier this month which was rejected, according to his investment company which said private investment in the firm was crucial for its success.

Czech businessman Daniel Kretinsky speaks at a conference in Prague, Czech Republic, October 17, 2023. REUTERS/David W Cerny/ File photo

Reuters reported earlier on Wednesday that Kretinsky was exploring a possible bid for London-listed International Distributions Services (IDS), which has seen its market value fall to 2.1 billion pounds ($2.62 billion) over recent years.

Kretinsky made a non-binding cash offer on April 9 and was seeking the board’s recommendation but IDS rejected it, his EP Corporate Group said in a statement.

“While EP Group’s proposal was rejected by the Board of IDS, it looks forward to continuing to engage constructively with the Board as EP Group considers all its options.”

Kretinsky is already the largest shareholder in IDS with a 27% stake. IDS did not respond to a request for comment.

The UK business ministry also declined to comment.

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

It added that Royal Mail would benefit “from being able to take a longer-term view” and that it is prepared to support a transformation of the business.

Under UK takeover rules it has until May 15 to make a firm offer for the company.

Shares of IDS rose 24% to 265p after Reuters and the FT reported the potential bid. The shares have fallen by two-thirds from its most recent peak of 571p in June 2021 to open at 213p on Wednesday before the deal talk emerged.

By 1127 GMT the stock was up 15%.

EP is a 100% shareholder in VESA Equity investment which owns Kretinsky’s IDS stake. He founded VESA in 2018 with business partner Patrik Tkac and also has a stake in J Sainsbury and Foot Locker, according to VESA’s website.

IDS comprises two businesses, including international parcels network General Logistics Systems (GLS,) based in Amsterdam, and the Royal Mail business in the UK.

Royal Mail has faced hurdles over the last couple of years with strikes by postal workers, a cyber security incident, a fine from regulator Ofcom for missed delivery targets as well as losing a 360-year monopoly to deliver parcels from post office branches.

Any bid by Kretinsky for one of the world’s oldest postal firms would follow a buying spree in Europe, including of indebted French supermarket group Casino last year, as well as attempts to buy half of Thyssenkrupp’s steel business and Atos’s loss-making IT services unit.

The UK has seen an uptick in approaches for its London-listed companies, which have struggled with low valuations.

The Sunday Times in May 2023 reported that Kretinsky told the paper that he had no intention of bidding for Royal Mail and it was beneficial for the company to remain listed.

A deal could trigger an intervention from the British government under the terms of the National Security and Investment Act, which gives ministers a greater say over deals involving critical infrastructure.

The Department for Business, Energy and Industrial Strategy (BEIS) in 2022 reviewed VESA’s plans to increase its about 22% stake in the company at the time to more than 25%.

IDS said revenues grew by 3.8% to 9.45 billion pounds for the 9 months ending in 2023, according its quarterly update in January. It expects to make an operating profit in the second half of this year that would offset the 169 million pound loss in the first half.

($1 = 0.8021 pounds)

(Reporting by Amy-Jo Crowley, Emma-Victoria Farr and Marek Strzelecki. Additional reporting by Jan Lopatka and Alistair Smout. Editing by Anousha Sakoui and Elaine Hardcastle)