- The government, which left Royal Mail so vulnerable, needs to push for reforms
- This would give current boss Martin Seidenberg a fighting chance
- New ownership, even if the owner is benign, involves disruption and risk.
Czech sphinx: businessman Daniel Kretinsky
Daniel Kretinsky, also known as the Czech Sphinx, is a smart operator. Inconveniently for those looking for a simple hero-villain narrative, he doesn’t appear to be the asset stripper he’s sometimes made out to be, but rather a serious businessman with a long-term vision.
In the UK, its holdings include the West Ham United football club, a stake in Sainsbury’s and a set of power stations.
It is, of course, the largest shareholder in International Distributions Services, the parent company of Royal Mail, where it has launched a full takeover bid.
The timing of its £3.1bn or 320p per share proposal is astute.
Royal Mail’s share price is low, hovering around 270p.
It has been pounced, as Royal Mail bosses have warned, because the Government is delaying reforms to the Universal Service Obligation (USO).
This is the legal requirement for Royal Mail to deliver to all UK addresses six days a week and is no longer appropriate in the age of email and WhatsApp.
Changes will have to be made to the USO if Royal Mail is to have a viable future. Kretinsky knows this could unlock up to £300m of savings that would accrue to him if his bid is successful.
You can also see that the new chief executive, the German Anglophile Martin Seidenberg, is energetic, has clear ideas and could make progress on some long-standing problems where his predecessors failed. These include relations with unions: Royal Mail lost £419m due to strikes in the 2022/23 financial year.
The jewel in IDS’s corporate crown is GLS, the Amsterdam-based parcel delivery company. This for-profit company is propping up the UK’s traditional postal operation. Value could be unlocked by freeing it from those chains.
Kretinsky’s camp has hinted that it does not want to break up the business, but rather reform it away from the scrutiny of public markets.
Be that as it may, you have also no doubt noticed some “hidden” gems, such as the property portfolio, valued at around £1.4bn. This includes the operational sites that the company needs.
Royal Mail still sorts letters at a sprawling freehold complex in Mount Pleasant, central London, a prime location in one of the capital’s most fashionable areas.
The site has a rich heritage and is much loved by Londoners and tourists who visit the nearby Postal Museum with its tube. But an unsentimental new owner might well think he could sell it and turn it into luxury flats.
IDS’ board of directors has rejected Kretinsky, who has been busy buying German steel assets and keeping in mind the May 15 deadline to make a better offer.
It won’t be easy. The third largest shareholder, Redwheel, has supported the board.
Unusually, employees and private investors, who together own 20 percent, will have a big say in the outcome. Small investors may be tempted to fold and run.
For workers, it is not just an offer with a tempting price. They will consider what working conditions will be like under Kretinsky ownership. He has played his hand wisely, but a key question is what do taxpayers and postal service users gain if Kretinsky wins?
A change of ownership, even if the new owner is benign, involves disruption and risk. The Government, which left Royal Mail so vulnerable, needs to push through reforms quickly and give Seidenberg a fighting chance.