Royal Mail owner IDS agrees to £3.6 billion takeover

The owner of Britain’s Royal Mail has agreed to a £3.57 billion takeover by Czech billionaire Daniel Kretinsky, it said today, in a take-private deal of one of the world’s oldest postal firms.

The formal offer valued International Distributions Services, owner of Royal Mail and international parcels network GLS, at 370 pence per share.

Shares in IDS rose 2.8% to 330 pence in morning trading.

Royal Mail was privatised in 2013 in one of Britain’s biggest state sell-offs in decades at an initial public offering price of 330 pence per share.

IDS said it had negotiated a package that includes provision of the “one-price-goes-anywhere” service six days a week, maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.

Kretinsky’s investment vehicle EP Group would continue to recognise Royal Mail’s labour unions for at least five years after the deal’s completion, committing to maintain salaries and wages, with no compulsory layoffs.

“The scale of the commitments we are offering to the company and the UK Government reflect how seriously we take this responsibility,” Kretinsky said.

The CWU, Royal Mail’s largest union, said it would meet with EP Group next week to seek a re-set 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,” it said.

Jonathan Reynolds, the business spokesman for the opposition Labour Party, welcomed the assurances given by Kretinsky.

“Labour in government will ensure these are adhered to,” he said.

Royal Mail has been trying to transform itself into a parcel-led business as letter volumes have shrunk over the years.

Kretinsky has said that private investment in Royal Mail was crucial, given its poor service delivery, slow transformation and increasing competition.

Any takeover bid for Royal Mail would be subject to “normal” national security scrutiny but would not be opposed in principle, Finance Minister Jeremy Hunt said earlier.

EP Group raised its bid earlier this month for the shares Kretinsky does not already own in IDS to 370 pence per share after a previous 320 pence bid was rejected by the firm in April.

VESA Equity owns Kretinsky’s IDS stake of about 27.6%. EP is a 100% shareholder in VESA Equity.

Last week IDS posted a narrower pre-tax annual loss and announced a special dividend.