London (Parliament News) – The New Křetínský bid initiates a headache for the UK government amid increasing scrutiny on foreign appropriations of critical infrastructure.
The owner of Royal Mail has taken a £3.5bn bid for the postal company from a Czech billionaire after he ramped up the worth of the takeover, forming a political headache for the government.
Last month, Royal Mail’s parent company, International Distributions Services (IDS), denied a preliminary offer worth 320p a share, or £3.1bn, from Daniel Křetínský, an energy capitalist whose company, EP Group, is its most extensive shareholder.
What implications does the Czech billionaire’s bid have?
On Wednesday IDS stated it was recommending an enhanced 370p a share offer to its investors. Keith Williams, the IDS chair, stated: “The board is minded to recommend this offer price, which it considers to be fair and reflects … 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.”
IDS expressed its suitor had agreed to “protect employees’ current rights and persist to recognise the current unions”, as well as keeping the Royal Mail brand and keeping its headquarters in the UK.
What are the next steps following the backing of the offer?
Under British appropriation rules, Křetínský had until Wednesday night to make a strong takeover bid or walk away for six months. He already holds a 27.6% stake in IDS. IDS had expressed that Křetínský’s first offer “significantly undervalues” the business, and Williams, and its chief executive, Martin Seidenberg, attempted to convince investors about their strategy.
However, the move to receive Křetínský’s latest bid creates a headache for the government amid expanded scrutiny of foreign ownership of critical UK infrastructure assets.
If an appropriation by Křetínský goes ahead, it is likely to be scrutinised by controllers. In 2022, the government revealed to the Royal Mail it would study an expansion in Křetínský’s stake under the National Security and Investment Act. However, that examination was called off later in the year.
Křetínský, understood as the “Czech Sphinx” for his low profile and inscrutable strategy, also has stakes in Sainsbury’s and West Ham United
His interest comes at a critical juncture for Royal Mail, which hopes the industry regulator, Ofcom, will permit speedy reform of the universal service obligation (USO), which needs the 508-year-old Royal Mail to distribute nationwide for one price, six days a week. Ofcom set out potential modifications to the USO earlier this year and is studying options.
IDS will publicise its annual results on 23 May. The company’s shares have rebounded from 214p before Křetínský’s interest and increased by 19% to 322p after the improved bid was confirmed on Wednesday. Investors will obtain an 8p a-share special dividend if the deal is completed.