Dan Coatsworth, investment analyst at AJ Bell, comments on Czech billionaire Daniel Křetínský’s International Distributions Services takeover bid:
“In true fashion, it has taken eight days to deliver the message that Royal Mail’s owner has received a takeover approach. Shareholders will be peeved at this second-class service as it’s in their interests to know someone is offering to put money on the table for their shares. Ironically, the news has come from the suitor rather than the target, meaning Royal Mail’s parent has delivered an even-greater disservice to its investors by keeping quiet.
“The bidder is Daniel Křetínský’s EP Group, a conglomerate with interests in energy, industrial and logistics among other areas. It has been slowly building a stake in International Distributions Services and now owns 27.52% via the Vesa Equity vehicle, making it by far the largest shareholder. This vehicle also has stakes in Sainsbury’s, Foot Locker and Fnac Darty, among others.
“Until IDS makes a statement, all we know is that it rejected a cash proposal for an unspecific amount.
“International Distributions Services’ overseas parcels business has been going from strength to strength but the Royal Mail business in the UK has struggled for years.
“Different management teams have tried to automate services, change the frequencies of deliveries and slash costs where possible. The workforce has rebelled and the company has battled endless fights with the workers’ union. While a new pay deal was finally agreed last summer, it’s fair to say that morale is still not high in the business, and households are certainly sick of letters taking ages to arrive. Posties are being worked to the bone and the system radically needs changing.
“EP Group implies that Royal Mail could do with a new owner who takes a longer-term view and is prepared to invest to make the business stronger. It’s a bold move, particularly as competition is fierce on the parcels side.
“A variety of asset management firms make up the rest of the top 10 shareholder list, led by Redwheel and UBS. Given the choppy performance of the share price in recent years, these big investors will certainly want to know if EP Group is offering a decent price.
“The UK government might also want to know what’s going on, given Royal Mail’s crucial role in the distribution of information to consumers and businesses. However, it was the government’s decision to privatise Royal Mail in 2013 and so it would look a bit off if it now started saying who could and could not own it.”