News / Royal Mail sale agreed by parent IDS, but it's not a done deal yet

© Mike Clegg

The owner of Royal Mail has agreed to a £3.57bn ($4.55bn) takeover by Czech billionaire Daniel Křetínský – but the deal still might not go through as regulatory and shareholder scrutiny is expected.  

The offer price of 37 pence per share, accepted today, is well above the current share value of International Distribution Services (IDS), which according to Reuters rose 3.5%, to 33.2p this morning. 

The deal must undergo shareholder approval at IDS’s annual general meeting in September, and John Manners-Bell, CEO of Transport Intelligence (Ti),  told The Loadstar the sale would likely “not be allowed”.  

“Given the highly controversial and political nature of the deal – related to selling a highly unionised company which is regarded still by many as a public service – I think the chances of a sale after the general election and a probable change of government are remote,” he said.  

“The share price of the group is still below the offer price, so this view is probably shared by shareholders.” 

But chief analyst at Ti Thomas Cullen said: “There might be some political problems, however I am sure the shareholders – who include the workforce – would like the money. Certainly, the government doesn’t have any to invest in the considerable requirements for capital that IDS/RM need.” 

The acquisition, if agreed, will be completed in Q1 25 and is contingent on the five-year maintenance of ‘one price goes anywhere’ first class post six days a week, and on no change of ownership to Royal Mail or subsidiary GLS for three years. 

GLS is the group’s continental Europe-based parcel specialist and has been highly profitable.    

Ti previously speculated: “It is tempting to believe that what Mr Křetínský is really after is GLS Group… Last year he denied he would break up IDS in order to retain GLS. Yet if Mr Křetínský took over the whole of IDS, he would still have to struggle with the shift from mail and towards parcel deliveries.”  

And Mr Cullen had told The Loadstar: “You have to ask, who else will buy it? GLS may be attractive, but then what do you do with Royal Mail UK?” 

For most of its history, Royal Mail operated as a public service, but in 2011, the Postal Services Act meant 90% was privatised and the remaining 10% distributed, as shares, among Royal Mail employees. It was floated on the London Stock Exchange with an initial public offering (IPO) price of 33p per share, valuing it at £3.3bn.  

Mr Křetínský’s company, EP Group, submitted an initial bid for IDS of 32p ($0.40) per share in mid-April, which was rejected on the grounds that it “significantly undervalued IDS and its future prospects”.   

Despite the initial rebuff, however, EP Group said it was keen to continue discussions with the IDS board, and Mr Křetínský already owned approximately 27% of the shares in IDS. 

EP Group operates energy and infrastructure assets across Europe, including gas pipelines and gas storage facilities, power plants and electricity networks. Companies in which EP Group is the controlling shareholder or exercises the majority of voting rights have revenues of around €100bn ($106.4bn) and annual ebitda of €8bn.