17 April 2024 , 14:00
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International Distribution Services, the parent company of Royal Mail, has seen a significant surge in shares after it came to light that the group rejected a takeover proposal from shareholder and Czech billionaire Daniel Kretinsky.
EP Group, owned by Mr Kretinsky, confirmed that on the April 9, it proposed an all-cash offer to purchase the remaining shares in International Distributions Services (IDS) that are not currently under its ownership. The expansive EP Group conglomerate, which has interests across energy, logistics and food retail sectors, already possesses approximately a 27.5% stake in the Royal Mail owner through Mr Kretinsky's investment firm, Vesa Equity Investment, making it the biggest investor in IDS.
Despite the bid being rejected by the IDS board, EP Group expressed its intention to "engage constructively with the board as EP Group considers all its options". IDS stock increased by 16% during Wednesday afternoon trading following news of the attempted acquisition was validated subsequent to speculation about bid interest.
EP Group addressed the "challenging situation" confronted by the Royal Mail and stated its willingness to back "this iconic business as it transforms and rebuilds into a modern postal operator". Poor financial performance, faltering service delivery and sluggish evolution in response to a structurally shifting market have applied untenable pressure on the business, according to EP Group.
EP Group said: "With the increasing competition from multinational companies in the UK postal market, private investment in Royal Mail becomes crucial." The statement further read that Royal Mail is an "important national asset that would benefit from being able to take a longer-term view".
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The group stated: "As a committed long-term investor in the UK, EP Group recognises the importance of the Royal Mail business to its various stakeholders, including employees, trade unions, customers and government, as the UK's sole designated universal service provider. EP Group has submitted its non-binding indicative proposal to IDS with the interests of these important stakeholders in mind."
Under UK takeover rules, EP Group has until May 15 to either make a bid or withdraw. Mr Kretinsky, often referred to as the "Czech Sphinx", already boasts a portfolio of investments, including stakes in West Ham United and supermarket giant Sainsbury's.
His investment in IDS has been controversial, attracting government scrutiny in 2022 over national security concerns after he increased his shareholding. However, the then business secretary, Kwasi Kwarteng, chose not to intervene following a review of the stake.
This bid interest emerges at a pivotal time for Royal Mail, which recently proposed plans to Ofcom to eliminate second-class letter deliveries on Saturdays and reduce the service to every other weekday as part of its restructuring efforts. In a U-turn from previous calls to scrap all Saturday letter deliveries, Royal Mail has stated in its submission to Ofcom's consultation on the future of the universal postal service that it will maintain a six-day-a-week service for first-class mail.
However, it also disclosed that up to 1,000 jobs could be at risk under plans to reduce the second class service. Ofcom is currently considering postal reforms, with Royal Mail arguing that the universal service is neither practical nor cost-effective due to the decrease in addressed letter post. In addition to the Royal Mail business in the UK, IDS also owns the international parcels network General Logistics Systems (GLS), which is based in Amsterdam.