Deal sealed

Royal Mail owner backs takeover by Czech tycoon

Royal Mail and post
Royal Mail has been given a series of guarantees (pic: Terry Murden)

Royal Mail will pass into the ownership of a Czech billionaire after parent company International Distributions Services recommended a £3.57 billion cash offer.

Daneil Kretinsky’s EP Group already owns 27.6% of the business and will pay 370p per share to investors in IDS, including 360p cash and 10p in dividends.

Shareholders will vote on the deal, which has an enterprise value of £5.3bn, at IDS’s annual general meeting in September.

EP has given commitments to maintain the universal service obligation for five years and to retain the Royal Mail’s headquarters in the UK.  IDS said it had negotiated a “far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards”.

The offer represents a 72.7% premium to the IDS closing price of 214 pence on 16 April 2024 (being the last Business Day before the commencement of the offer period).

The IDS Directors intend to recommend the 2024 final dividend of 2p per IDS share for the financial year ended 31 March 2024 and a special Dividend of 8p conditional on the acquisition becoming unconditional.

Keith Williams, chairman of IDS, said: “IDS has the potential to become a leading international logistics player. Both the IDS Board and EP are acutely aware of their responsibilities to IDS and particularly to the unique heritage of Royal Mail and its obligations as the designated Universal Service Provider of postal services in the UK.

“The IDS Board has negotiated a far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards. 

“These cover the provision of the one-price-goes-anywhere Universal Service Obligation (including First Class letters still delivered six days a week), the financial stability and maintenance of the IDS Group including Royal Mail, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.

“The IDS Board wishes to thank our employees across Royal Mail and GLS for the progress which is being made in both companies to transform and adapt to a rapidly changing market in both the UK and Europe.

“It is the IDS Board’s belief that EP will continue to enhance IDS’ investment in strategic areas such as network and out-of-home solutions.

“The IDS Board believes that the offer from EP is fair and reasonable given that there are uncertainties ahead and allows investors to realise value at a significant premium.”

Mr Křetínský, founder and chairman of EP, said: “IDS, and Royal Mail in particular, form part of the national infrastructure of the countries they operate in. More than that, Royal Mail is part of the fabric of UK society and has been for hundreds of years.

“The EP group has the utmost respect for Royal Mail’s history and tradition, and I know that owning this business will come with enormous responsibility – not just to the employees but to the citizens who rely on its services every day.

“The scale of the commitments we are offering to the company and the UK Government reflect how seriously we take this responsibility, to the benefit of IDS’ employees, union representatives and all other stakeholders.

“The EP group is a patient, supportive investor with a long-term view and decades of experience in owning critical national infrastructure. We are committed investors in the UK and first became a shareholder in IDS four years ago, as we saw the potential for the business to become one of the largest postal logistics groups in Europe.

“But IDS’ market is evolving quickly, and it must accelerate its transformation and investments into modernisation to keep up with the competition.

” We will support the business in the next critical phase of its transformation and beyond, providing our experience and financial resilience to support the management team. We look forward to working closely with all of IDS’ stakeholders to deliver against its full potential.”

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