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Royal Mail owner accepts £3.5bn takeover bid from Czech billionaire

The board of Royal Mail owner International Distribution Services (IDS) said it has agreed to a £3.57 billion takeover offer from Czech billionaire Daniel Kretinsky’s EP Group.

Mr Kretinsky’s EP Group vehicle, which already owns 27.6 per cent of the business, made a formal offer for the business, which employs more than 150,000 people, after initial proposals earlier this month.

The takeover would see Royal Mail continue its universal service obligation to one-price-goes-anywhere first class post six days a week, and keep the company’s branding and UK headquarters, IDS said.

In a statement, Mr Kretinsky said the EP Group has “the utmost respect for Royal Mail’s history and tradition”, but that IDS must “accelerate its transformation and investments into modernisation to keep up with the competition”.

The deal announcement comes days after regulators launched an investigation into Royal Mail after it delivered less than three quarters of first class post on time in the last year.

And IDS said it would protect existing employment rights of all IDS staff, and that there is “no intention to make any material changes to overall headcount or reductions in the number of front-line workers” beyond existing plans.

CHILCOMPTON, UNITED KINGDOM - JULY 17: A Royal Mail van waits beside an original red post box as its driver collects post left at a branch of the Post Office on July 17, 2023 in Somerset, England. (Photo by Matt Cardy/Getty Images)
Royal Mail missed its first and second class letter delivery targets, Ofcom said.
(Photo: Matt Cardy/Getty)

Mr Kretinsky said: “Royal Mail is part of the fabric of UK society and has been for hundreds of years.

“The EP group has the utmost respect for Royal Mail’s history and tradition, and I know that owning this business will come with enormous responsibility – not just to the employees but to the citizens who rely on its services every day.

“The scale of the commitments we are offering to the company and the UK Government reflect how seriously we take this responsibility, to the benefit of IDS’ employees, union representatives and all other stakeholders.”

The EP group had a “long-term view” and decades of experience in owning critical national infrastructure, he said.

“But IDS’ market is evolving quickly, and it must accelerate its transformation and investments into modernisation to keep up with the competition,” he added.

“We will support the business in the next critical phase of its transformation and beyond, providing our experience and financial resilience to support the management team.”

In a statement to shareholders, IDS said the deal provided commitments to the universal service obligation, including first class letters delivered six days a week, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.

The takeover would see EP boost IDS’ investment in strategic areas such as network and out-of-home solutions, a delivery system that sees customers collect mail.

Keith Williams, chairman of IDS, said: “EP are acutely aware of their responsibilities to IDS and particularly to the unique heritage of Royal Mail and its obligations as the designated Universal Service Provider of postal services in the UK.

“The IDS Board has negotiated a far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards.

“These cover the provision of the one-price-goes-anywhere Universal Service Obligation (including First Class letters still delivered six days a week), the financial stability and maintenance of the IDS Group including Royal Mail, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.”

Shareholders will vote on the deal at IDS’s annual general meeting in September.

In its yearly financial results on Friday, IDS said only 74.5 per cent of first-class mail was delivered within one working day as Ofcom opened an investigation into Royal Mail.

The regulator’s rules state 93 per cent of first-class mail must be delivered within the timeframe, excluding Christmas.

In another failure, it only delivered 92.4 per cent of second class mail within three working days, below the required 98.5 per cent.

Before the takeover announcement, Communication Workers Union (CWU) general secretary Dave Ward warned the “future of postal services in the UK is again under threat” with the bid to buy the owner of Royal Mail.

Mr Ward said: “This situation is a direct result of a failed and ideological privatisation over a decade ago, combined with blatant mismanagement in recent years.

“These events have left one of the UK’s most iconic companies ripe for a takeover by foreign investors. While we welcome some of the commitments, postal workers across the UK have lost all faith in Royal Mail’s senior management.”

(This story is being updated)

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