close
close
Skip to main content
Camilla Care

Ministers left Royal Mail vulnerable to a takeover after refusing to back delivery reforms, insiders say

Vaseline 4 weeks ago



The government has left Royal Mail vulnerable to predators by delaying postal service reforms, senior company insiders believe.

Royal Mail’s owner International Distributions Services last week dismissed a £3.1 billion takeover approach from Czech billionaire Daniel Kretinsky as ‘opportunistic’.

Kretinsky, nicknamed the ‘Czech Sphinx’ because of his inscrutable behavior, is already IDS’s largest shareholder with a 27 percent stake.

He has until the middle of next month to submit a formal offer or walk away.

If Kretinsky makes a formal bid, private investors, including Royal Mail’s army of postmen, could play a key role in the outcome as they collectively control 21 percent of the shares – a legacy of the company’s 2013 privatization .

Royal Mail, which faces stiff competition from rival carriers, recently proposed allowing second-class letters to be delivered only three times a week instead of six, in a bid to cut costs and maintain a first-class service.

Related articles

HOW THIS MONEY CAN HELP

The plan would ease the burden of the so-called Universal Service Obligation (USO), which means Royal Mail must deliver letters to addresses anywhere in Britain every day except Sundays for the same price. Bosses at the company have repeatedly lobbied ministers to relax the USO, but without success.

They have raised serious concerns about the future of the service if industry watchdog Ofcom does not act quickly to implement reforms before April 2025.

“It’s remarkable that after four years of talking to the government about the USO there has been no change,” a Royal Mail source said.

The delay “puts us in a vulnerable position,” the insider added, referring to Kretinsky’s inclination.

“The faster the reforms, the better,” the source said.

Kretinsky, 48, has extensive energy interests, including a stake in the largest transporter of Russian gas to Europe, as well as investments in West Ham United and Sainsbury’s.

It is believed he has been encouraged to bid directly for Royal Mail after increasing his stake above 25 per cent without raising any national security concerns in Whitehall.

However, experts say he will face much heavier scrutiny if he wants to fully own Royal Mail.

Politicians and unions are opposing Kretinsky’s bid to buy the 500-year-old company, which was founded during the reign of Henry VIII.

They fear that a new “national treasure” could fall into foreign hands and be broken up.

Royal Mail staff, which own around six percent of the company, “will certainly be motivated to stand up and be counted,” said Amit Vedhara of shareholder group ShareSoc.

The Communications Workers Union, which represents Royal Mail employees, wants to renationalise the service, saying foreign ownership ‘cannot be right’.

Kretinsky’s offer is just below the 330 cents that investors paid when Royal Mail went public in 2013.

The offer “takes away the 700,000 ordinary people who became private shareholders at the time,” said Sheryl Cuisia of campaign group The Engagement Appeal.

“It is unfair that these loyal investors are now suffering losses because another national asset is at risk of foreign acquisitions,” she added.

Letter volumes have fallen from a peak of 20 billion per year 20 years ago to around 7 billion and are likely to fall to around 4 billion over the next five years.

Royal Mail’s plans, which are yet to be approved by Ofcom, would see daily delivery routes cut by between 7,000 and 9,000 within two years, saving up to £300 million and losing up to 1,000 jobs. Royal Mail lost £319 million last year.

Last night, a source close to Kretinsky dismissed claims that he would try to break up IDS, which also includes GLS’ profitable logistics operations.

Kretinsky’s offer was “not dependent” on the outcome of the USO talks and he looked forward to “continuing to work constructively” with the IDS board, the source added.

Experts said other delivery groups such as Amazon or InPost could also join the fray now that Royal Mail was effectively ‘in the game’.

IDS declined to comment.

Some links in this article may be affiliate links. If you click on it, we may earn a small commission. That helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow a commercial relationship to compromise our editorial independence.