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This morning, the owner of Royal Mail accepted a substantial offer from Daniel Kretinsky’s EP Group, potentially leading to the historic UK firm transitioning to private foreign ownership.
The board approved the £3.5 billion offer from Kretinsky, often referred to as the ‘Czech Sphinx,’ as announced in a market statement today. This deal values Royal Mail at over £5.2 billion. Kretinsky’s affiliated entities already hold more than 25 per cent of the company.
The offer includes provisions to protect jobs, maintain UK tax residency, and address other concerns, but it will face regulatory review in the coming months.
Shareholders are set to receive 360p per share, plus a special dividend if the offer becomes unconditional, totalling 370p per share. This price marks a 72 per cent premium compared to the stock’s value before Kretinsky’s interest was made public.
Despite this, shares have been trading below Kretinsky’s initial offer value recently, reflecting investor concerns about regulatory approval. Today’s trading continued this trend, indicating scepticism about the deal’s certainty.
Liberum analyst Gerald Khoo noted the significant challenge of obtaining government clearance under the National Security & Investment Act. He anticipates a thorough review process, which could be lengthy and potentially hindered by the upcoming pre-election period, making it difficult for the current government to make long-term commitments.
Khoo’s base case remains that the deal could be blocked by the government.
Kretinsky stated that EP Group is a “patient, supportive investor” but emphasized the need for transformation to elevate IDS (International Distributions Services) into a leading European logistics company. He acknowledged Royal Mail’s crucial role in national infrastructure and UK society, pledging to honour its history and tradition.
He stressed the significant responsibility that comes with owning Royal Mail, highlighting the commitments made to the company and the UK Government as a reflection of their serious approach to this responsibility, benefiting IDS employees, union representatives, and other stakeholders.
Kretinsky also emphasized the potential for IDS to become a prominent international logistics player, with both the IDS Board and EP being aware of their duties towards the company and its legacy as the Universal Service Provider of postal services in the UK.
