Czech billionaire Daniel Křetínský says Royal Mail owner rejected takeover approach

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Royal Mail owner International Distributions Services has rejected a takeover approach by Czech billionaire Daniel Křetínský’s investment group.

Křetínský, a lawyer-turned-energy tycoon, is the largest shareholder in IDS with a 27.5 per cent stake and has been a prolific dealmaker in the UK with stakes in supermarket chain J Sainsbury and London football club West Ham United.

Křetínský’s EP Group confirmed on Wednesday that it had “submitted a non-binding indicative proposal” to IDS on April 9, in response to an earlier report by the Financial Times that he was seeking to take the business private.

IDS rejected the proposal, EP said without disclosing the terms of its approach. EP said it had sought the IDS board’s backing for a possible cash offer. IDS is comprised of Netherlands-based parcels business GLS and the UK’s Royal Mail.

Shares in IDS climbed as much as 26 per cent, before settling around 14 per cent higher in early afternoon trading, giving IDS a market capitalisation of £2.3bn. IDS has about £1.5bn of net debt.

EP now has until May 15 to table a firm offer under UK rules that govern takeover bids for public companies, though it said there was no guarantee it would do so. It is working on its approach with advisers from JPMorgan Chase and Citigroup, people close to the situation said. Both banks declined to comment. IDS did not immediately respond to a request to comment.

Royal Mail was privatised between 2013 and 2015 but has been grappling with the difficulties of maintaining its expensive delivery network in the face of a sharp decline in its traditional letter-delivery business.

The company delivered 20bn letters to 28mn addresses in the 2004-05 financial year, while this year it expects to deliver 7bn letters.

The postal business remains regulated. Royal Mail proposed last month that it should be allowed to deliver second-class letters only three times a week instead of six. The plans would reduce the burden of the universal service obligation, which forces the company to deliver items everywhere in the UK for the same price.

It has been trying to resolve the problems partly by capturing a larger part of the UK’s fast-growing parcels delivery business, in which it is the market leader. However, it faces fierce competition from rivals such as Amazon Logistics.

EP said Royal Mail was in a “challenging situation”. “Weak financial performance, poor service delivery and a slow transformation, in the face of a market going through structural change, have put the business under unsustainable pressure,” it said.

These factors, along with rising competition, meant private investment in the business was “crucial”, it added.

In 2022, the UK government called off a probe under national security rules into Křetínský’s plans to increase his stake in Royal Mail to more than 25 per cent.

EP said on Wednesday that Royal Mail was “an important national asset” and that it would rebuild the business into a modern postal operator.

The Sunday Times reported in May 2023 that Křetínský’s had said in an interview that he had no intention of bidding for Royal Mail.