Scrap deal with Royal Mail – don’t sell our cheap postal service to buyers with weak credentials, says ALEX BRUMMER

The National Security and Investment Act aims to protect British trade from unwanted intrusions by foreign predators.

There can be few more obvious cases to invoke it than the £3.6bn bid by Czech billionaire Daniel Kretinsky and his associates for International Distribution Services, owner of Royal Mail.

There are multiple reasons why the Government should stop Kretinsky’s candidacy.

The Royal Mail may be failing to meet some of its service obligations, but reform can correct this.

More importantly, it is a vital part of the UK’s communications infrastructure, used by sensitive parts of the government, including HMRC, the NHS, the Metropolitan Police, the Passport Office and others, to transmit vital documents and decisions.

Far from strengthening a failing business, the takeover, approved by Royal Mail’s board of owners, would weaken the group’s finances despite promises of investment.

No company taking on some £3bn of additional leverage, alongside the £2bn of debt already on its balance sheet, could be expected to repay its loans and honor union agreements without breaking up the company.

The history of foreign debt acquisitions is depressing. Thames Water is neck-deep in sewage and borrowing.

Asda fell on hard times after a highly leveraged takeover. The rapid dissolution of private equity in the Cobham aerospace group has been detrimental to British defences.

These deals demonstrate how endangered Royal Mail would be under private equity style ownership.

Kretinsky’s past close relations with Moscow, before the 2022 war with Ukraine, should be cause for pause.

There is currently a conflict between the Czech adventurer’s EP group and a Russian company over a coal contract.

As an investor for a decade in the Eustream pipeline, which pumped gas to Europe through Slovakia, Kretinsky was intimately involved with Moscow.

More so than some of the UK-based Russian companies and tycoons who saw their assets frozen, shares suspended, visas revoked and sanctions imposed after Vladimir Putin’s horrendous attack on Ukraine.

However, Business Secretary Jonathan Reynolds describes Kretinsky as a “legitimate businessman.” One suggests that Reynolds takes a look at the Atlantic.

The Committee on Foreign Investment in the United States has been delaying the sale of US Steel to Japan’s Nippon Steel.

Britain allowed Dubai-based interests to buy P&O Ports (and later the ferries). But the United States blocked the sale of P&O ports on its east coast to Gulf interests.

Labor management of the economy has already alienated sectors of the business community. Selling Royal Mail cheaply to buyers with weak and insecure credentials would be a serious error of judgement.

sweet deal

When iconic British chocolate group Cadbury was besieged by global food giant Kraft in 2009, then-chairman Roger Carr sought a white knight deal to save the company from being swallowed up by the processed cheese group.

Both U.S. family-owned Hershey’s, with which Cadbury had a U.S. licensing agreement, and Italy’s Ferrero were considered merger partners, but a workable transaction could not be made.

Kraft moved on, and eventually Cadbury integrated with Oreo, Milka, and Toblerone, and spun off as Mondelez. In 2016, Mondelez set its sights on Hershey’s with an £18bn bid, but was shown the door.

Mondelez does not give up. Bloomberg reports that Cadbury’s owner has revived interest and Hershey’s stock has soared.

Winning will require support from the Hershey Trust, which owns 28 percent of the shares but retains 80 percent of the votes. Undoing it will require skill and a lot of money.

mad Men

Power in the commercial market has shifted from widely dispersed media companies to a handful of large technology companies with great purchasing power.

Against this backdrop, US advertising agencies Omnicom and Interpublic are proposing a £10bn equity deal to create a company with a turnover of close to £20bn.

That would put the revenues of European-based competitors, Britain’s WPP and France’s Publicis, in the shadows.

Size might seem like the answer. But the danger of deals between advertising companies is that intellectual capital (the creative teams) is headed out the door.