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As keepers of the flame of free market capitalism, one can understand the government’s reluctance to get involved in procurement.
The idea that the £3.5bn bid made by Czech sphinx Daniel Kretinsky “is ultimately a matter for the current owners” is misplaced.
You only have to look at the disastrous track record of privatized utilities that have fallen into foreign or private equity hands to know that handing the keys to the Royal Mail’s national and European fleet to a mysterious Czech billionaire can only cause pain to the concerned parties.
It is easy for any bidder to promise to comply with regulatory standards such as the Universal Service Obligation (USO).
Enforcing them once the property has moved abroad is a different matter.
Uncertain future: International Distribution Services, owner of Royal Mail, is willing to accept a £3.5bn takeover bid from Czech billionaire Daniel Kretinsky
The government also needs to recognize that stakeholders, the workforce, customers, Whitehall, the security services and many others have a strong interest in what happens to Royal Mail.
His flaccid response was a sharp reminder of events a decade ago, when the American Pfizer made its bid for AstraZeneca.
The immediate response from Chancellor George Osborne and others was “go ahead.” If that had happened, Astra’s progress towards becoming the most valued company in the FTSE 100 would have been hampered.
There is so much about Kretinsky’s approach that we don’t know. Where does his wealth originate?
Will this be a deal paid for with structured debt and what will it mean for future investments in the postal service?
Will Kretinsky want his image on stamps and mailboxes?
Financing is essential. You only have to look at Thames Water to recognize that the aim of the greedy foreign owners is to extract money while things are going well and flee for the hills when things go wrong.
The departure from the board of directors of Michael McNicholas, of the Canadian pension fund Omers, symbolizes the cut-and-exit effect.
Royal Mail will have to overcome several regulatory barriers. If the National Security and Investment Act, passed under the Conservative government, was working, the deal would be blocked at the first hurdle.
At the time of privatization, the Government effectively assumed responsibility for a pension fund that swung wildly between deficit and surplus.
It would be necessary to clarify whether taxpayers should be obliged to assume this risk in the event that control passes to a foreign owner.
Ofcom’s plan for the USO, which includes a more expensive but reliable first class service, must be implemented quickly.
The agreement with Kretinsky must be blocked for reasons of public interest. Free market advocates must understand that there are limits that should never be crossed.
Timbre changes
The former subsidiary of Correos, BT, spun off in 1981, also has a multimillionaire in its share registry.
Franco-Israeli telecoms tycoon Patrick Drahi increased his stake to 24.5 percent a year ago and there has been endless speculation that, along with another big shareholder, Deutsche Telecom, he could also be a bid target.
BT is taking steps to restore shareholder confidence after a bout of short selling. Chief Allison Kirkby is making some big decisions.
It will withdraw from global services at a cost of £488m, but will focus on UK businesses and growing security revenues.
More efficient broadband deployment should reduce the cost of the commitment to provide full fiber broadband to 25 million homes by 2026.
A cash flow pledge of £1.5bn in 2025 has been put in place up from £1.3bn and the dividend has been lifted. Kirkby and chairman Adam Crozier have more than a passing interest in how the Royal Mail raid unfolds.
Royal flush
Just as the Royal Mail is threatened, the National Portrait Gallery strikes back with an exhibition of photographs of members of the Royal Family from the last hundred years.
The exhibition includes Andy Warhol’s ‘diamond dust’ tribute to Queen Elizabeth II and the 40th birthday portrait of the Princess of Wales.
The message: don’t you dare touch the King’s best profile on our postage stamps.