Royal Mail could be set for a £3.5billion takeover bid from a billionaire nicknamed the ‘Czech Sphinx’ for his inscrutable nature – taking the UK’s 500-year-old postal service into fully foreign ownership for the first time.
But Daniel Kretinsky’s bid for the service would just be another finger in a series of British pies for the business mogul – with stakes aplenty in West Ham, supermarket Sainsbury’s and energy giant EPH, which has power plants across England.
There are concerns over Kretinsky’s EP Group taking International Distributions Services (IDS) Ltd, the Royal Mail’s parent company that was established in 2013 following its privatisation, out of British hands altogether.
But IDS says it is requiring his bid – at 370p per share, up from a 320p-per-share approach last month – to include commitments to protect six-day-a-week first class letter deliveries and a requirement to keep its tax and corporate base in the UK.
Postal union the CWU has also called for any buyout to include assurances over working with its representatives to look after posties and sorting office staff and to avoid breaking up the UK’s historical postal service.
Czech billionaire Daniel Kretinsky, whose investment firm is intent on gobbling up Royal Mail’s parent firm for £3.5billion
His proposal – the second in a month – comes amid a time of extreme pressure for Britain’s centuries-old postal service, which was privatised a decade ago
The service has contended with a number of walkouts by staff over pay – and has since cut around 10,000 jobs as it tries to save cash
The future of the Royal Mail is uncertain as it seeks to cut back services to save cash – and could find itself owned by someone with profits in mind rather than public service
‘Czech Sphinx’ Daniel Kretinsky, 48, (middle) with his girlfriend, 27-year-old showjumper Anna Kellnerova. They are seen together at a Sparta Prague game
Kretinsky owns a 27 per cent stake in West Ham. He is seen celebrating after the team won their UEFA Europa Conference League final football match against Fiorentina in June 2023
But Kretinsky’s bid comes at a time of extreme duress for the Royal Mail, which is facing backlash over its suggestion that it might deliver non-first class letters every other day in order to save money.
The proposal, it says, could save up to £300million a year – but would also see 1,000 roles scrapped through voluntary redundancy.
It’s a climb-down from a previous suggestion of scrapping Saturday deliveries altogether, which was roundly met with criticism from government and opposition MPs alike.
The postal service says a peak of 20 billion letters sent in 2004/05 has fallen to seven billion last year and is expected to fall further despite the fact the number of addresses in Britain has grown by four million in the same period.
As a result, postal workers are delivering fewer letters to more addresses – an unsustainable model in its current form, the Royal Mail says.
It claims the cost of fulfilling its universal service obligation – the legal requirement to deliver post six days a week – is as much as £2million a day.
Royal Mail’s perilous financial situation has not been helped by workers walking out several times between May 2022 and July 2023 amid a row over proposed pay rises at the peak of the cost-of-living crisis.
Postal workers had their wages frozen in 2021 and were offered a two per cent increase plus a £250 one-off payment – which union the CWU balked at amid inflation rates of around nine per cent.
It led to the now infamous images of cage upon cage of undelivered post sitting outside postal depots across the country – and eventually Royal Mail convinced unions to back a 10 per cent pay rise and a £500 lump sum.
Nevertheless, the service has since axed around 10,000 jobs – made up of 6,000 redundancies and thousands of other workers not being replaced upon leaving.
Amidst this, spiralling costs and competition from other couriers like DPD, Yodel, Evri and Whistl eating away at its customer base, Royal Mail reported a loss of £1.044billion in the year to March 2023.
Results for last year are due any day now – but the half-year results to September show an operating loss of £383million, up from £278million the previous year.
That doesn’t include the period that saw Royal Mail fined £5.6million by Ofcom after failing to hit delivery targets.
Only IDS’s international shipping arm, the Amsterdam-based GLS, is profitable, helping to offset the woes of the British business.
So why is Kretinsky interested in taking a bigger piece of the pie?
Kretinsky – seen at a conference in Prague last year – is known as the ‘Czech Sphinx’ for his inscrutable manner
In 2015, he bought 15-bedroom Heath Hall in Hampstead for £65million, and once rented out to Justin Bieber for £27,000 a week during a British tour
Kretinsky already owns part of a European postal service, the Netherland’s PostNL – prompting speculation he may seek to merge the two.
He also has stakes in several British companies already – and is said to be something of an anglophile with a heavy interest in Britain and its history.
The majority of Kretinsky’s wealth derives from his control of energy giant EPH, which has power plants in Devon, Lincolnshire, North Yorkshire and Northumberland.
A sports fan, he has been chairman of his boyhood club, 37-time Czech champions Sparta Prague, since 2004, and owns 27 per cent of West Ham.
He holds a stake in the French edition of Elle and previously owned part of Le Monde. The billionaire has also explored a bid for the Telegraph.
He and his girlfriend Anna Kellnerova, an heiress and champion showjumper, are one of the world’s richest couples.
At 27, she is one of four children of Petr Kellner, who was the Czech Republic’s richest man until he died in a helicopter crash in Alaska in 2021, aged 56.
But it remains to be seen whether Kretinsky is a friend or foe – at a time when Royal Mail’s reputation is in the gutter.
Less than half of the British public have a positive impression of the UK’s primary postal delivery service, according to YouGov.
Last year, former Ocado boss Simon Thompson quit as boss, leaving the company hunting for its fourth leader in four years.
And its declining reputation will not be helped by the rising cost of posting letters and parcels through the network, which has risen exponentially since privatisation.
Last month, the price of a first class stamp was increased to £1.35 and a second class stamp rose to 85p. Two years ago, they cost 85p and 66p respectively.
In 2015, he bought 15-bedroom Heath Hall in Hampstead for £65million, and once rented it out to Justin Bieber for £27,000 a week during a British tour.
Vesa Equity Investment, part of his EP Group, bought a five percent share in IDS in 2020, and then ate up more of the company over the next two years until a bd to increase its share beyond a quarter was called in by the government.
Then-business secretary Kwasi Kwarteng ultimately opted not to take any action and allowed Kretinsky’s firm to increase its share to 27.5 per cent.
His first £3.2bn bid for total control last month excited traders, with the share price rising more than a quarter in a single day, and the news of his latest bid today has had a similar effect on the parent firm’s share price.
That might be good news for shareholders – but whether it will please the public, and the postal service employees set to work under a new foreign owner, remains to be seen.
Kretinsky has vowed to protect employee rights if his investment firm is successful in buying out Royal Mail’s parent company
Strikes in 2022 and 2023 saw sorting offices overflow with undelivered mail amid dropping staff dissatisfaction
The previous strikes led to a 10 per cent pay rise for staff – but Royal Mail nevertheless announced during the action that it was cutting 10,000 jobs
Royal Mail says it will also seek to cut another 1,000 jobs if its proposal to cut back on non-first-class postal deliveries is accepted by regulators
Then-business secretary Kwasi Kwarteng waved through Daniel Kretinsky’s bid to take his ownership of the Royal Mail above the 25 per cent mark
But Chancellor Jeremy Hunt is wary of the bid, and says lessons need to be learned about foreign buyouts of British utilities after the Thames Water debacle
IDS is ‘minded’ to accept the deal – as long as EP Group agrees to a series of demands that would protect the Royal Mail’s 500-year-old British heritage, such as keeping it headquartered and taxed in the UK.
EP Group also says it would protect employee rights and continue to recognise the unions that represent both Royal Mail and GLS staff.
Keith Williams, IDS chair, said the offer was ‘fair and reflects… the progress being made on change at Royal Mail to adapt the business to a significant fall in the demand for letters and growth in parcels.’
The positive words from IDS do not mean the deal is a dead cert. Kretinsky has until 5pm on May 29 under ‘put up or shut up’ rules to make a firm offer.
And he will have to deal with the government, which has say in Royal Mail’s universal service obligations under law.
The UK government said it was ‘monitoring these developments closely’ and that it would ‘engage with the bidder at an appropriate time to explain our expectations for the future of Royal Mail.’
‘Our priority is to ensure that Royal Mail customers get the service they deserve… regardless of the owner,’ it said on Wednesday.
But chancellor Jeremy Hunt is wary of any foreign takeovers of British institutions following the crisis at Thames Water, which could yet be renationalised because investors are refusing to pump additional money into the provider.
Thames, which has £18bn of debts, could be taken into government ownership if it cannot find short-term cash – but it wants permission to hike bills by 40 per cent, pay lower fines and still be allowed to pay out dividends to shareholders.
Reports this week suggest the company is heading for special administration and that directors of its controlling firm – all international investors with no interests in the UK – are walking out.
Asked about a foreign takeover of Royal Mail owner IDS, Mr Hunt said: ‘Do I look at what’s happened to some of the water companies and say that we shouldn’t learn any lessons? Absolutely not.’
In response, Kretinsky’s EP Group have sought to offer reassurances, including committing to Royal Mail’s plans to keep six-day-a-week first class letter deliveries under the universal service, protect workers’ rights and keep the Royal Mail brand, as well as its UK headquarters and tax residence.
But the Communication Workers Union (CWU), representing postal workers, has suggested the Czech businessman has ‘no vision for the future and no clear plan’.
General secretary Dave Ward said on Tuesday: ‘The future of postal services in the UK is again under threat.
‘EP Group must immediately demonstrate an upfront and open commitment to working with the union to completely change the culture in workplaces across the UK, rule out any break-up of the company or raid of the pension surplus.
‘It cannot be right that a key part of national infrastructure is allowed to be owned by individuals or companies who have no vision for the future and no clear plan to put the workforce at the heart of turning Royal Mail around.
‘Royal Mail must make use of its unrivalled fleet of vehicles, take advantage of having feet on the ground in every community and leverage the trust that postal workers have on every doorstep.
‘To do anything else would be reckless and a clear sign that the only interest of both the current board – and those readying to take over the company over – is to run letter deliveries into the ground and become just another glorified parcels company.’