Royal Mail takeover deal is a quagmire, says ALEX BRUMMER

Remember the Royal Mail? It was on May 15, when the Tories were in Downing Street, that the flaccid board of International Distribution Services (IDS), which owns the Royal Mail, decided to hand over the keys to Britain’s 500-year-old postal service to Czech billionaire Daniel Kretinsky and his mysterious Slovak backers J&T.

Royal Mail is a company in crisis, facing a rapidly shrinking mail market, competition from ambitious rivals and a tortuous relationship with the Communications Workers Union.

The great hope of Kretinsky, his supporters and City advisers was that a deal could be completed quickly, perhaps before a Labour government came to Downing Street.

The election put an end to that, with Labour promising to “rigorously scrutinise” the deal, putting the £146m in fees to City advisers at risk.

IDS Chairman Keith Williams and his team tried to clear the air by accepting commitments from Kretinsky, including a promise to maintain the universal service obligation (USO) — the requirement to deliver within six days to every corner of the country — for five years.

In the context of Royal Mail’s Tudor history and its work as a delivery service used by HMRC, the NHS, electoral authorities and others, such a promise, coupled with a promise to preserve jobs, is scarcely credible.

Among supporters of Mr Kretinsky’s opportunistic 370p-a-share, £3.57bn bid, there has been a naive belief that regulator Ofcom would present firm plans for the future of the USO this summer.

They know little about how Britain’s stagnant regulatory agencies work. Only now is a proposal on the table.

Ofcom has given the green light to Royal Mail’s proposal to scrap Saturday deliveries for second-class mail, which would be delivered two or three days a week. A higher-priced first-class service would be offered for delivery six days a week.

The proposal needs to be tested in the market. What do commercial, government and ordinary citizen customers think?

After that, there will be a consultation that will last until next summer.

Royal Mail’s competitors, Evri (formerly Hermes now privately owned), DHL, Federal Express and others, must be licking their lips at the prospect of securing more letter and parcel deliveries.

The USO is not the only sticking point. The agreement has been called for under the National Security and Investment Act.

This might seem like a formality, given that the Conservatives had approved Kretinsky’s 27 percent stake.

Total control is a very different matter.

The government has yet to make clear its intentions regarding foreign takeovers. Keir Starmer hinted that he did not think they were very good when he recently launched Great British Energy.

We have also learned that the Prime Minister’s previous role in the Crown Prosecution Service, as Director of Public Prosecutions, means he is very particular about the law.

We saw it in Rwanda, in the riots and in the terrible decision to impose a limited ban on export licenses in Israel on the day the bodies of six hostages, brutally murdered by Hamas, were returned.

If the Department for Business and the Cabinet Office, together with the security services, decided there was even the slightest concern about Kretinsky, J&T, Slovakia’s connections to Moscow or other dubious relationships, they could stop the deal.

One could take the example of Joe Biden and Kamala Harris. Much to the dismay of Japanese prime ministerial candidate Taro Kono, the US is blocking a £13bn bid by Nippon Steel to acquire US Steel after the US foreign investment committee ruled it could harm steel production.

The final regulatory hurdles for Royal Mail could be Competition and Markets

Authority, which has an obligation to the consumer, and the EU.

Meanwhile, shareholders in the big battalion sit back and wait to see how regulatory scrutiny plays out.

In his view, if USO is modified sufficiently, Kretinsky’s offer underestimates the value of IDS.

There is plenty of time and space for political maneuvering that could result in a deal that goes against the national interest.