International Distribution Services (IDS), the owners of struggling Royal Mail in Britain, has accepted a takeover proposal from Czech billionaire Daniel Kretinsky’s conglomerate, EP Group. IDS chairman, Keith Williams, described it as “fair and reasonable” for £3.6bn ($4.6bn). EP Group is already in possession of 27.6% shares of IDS and therefore this acquisition will be subject to shareholders’ approvals as well as regulatory endorsements.
After its privatization in 2013, Royal Mail has suffered challenges with its core letters business because most people are increasingly using digital means of communication. However, this move has been beneficial to GLS-its international parcels business.
Ofcom, the UK’s communications regulator has put forward proposals to reduce Royal Mail’s delivery frequency to five or even three days per week which could save the company hundreds of millions of pounds. IDS has long advocated for a reform of the universal service obligation (USO) that requires Royal Mail to deliver letters six days a week across all 32 million addresses in the UK at the price of a stamp.
In order for it to modernize and also reform USO, EP Group sees IDS as “a strong business with solid foundations and the potential to become one of the leading postal logistics groups in Europe.”
“I can tell you that we have complete respect for Royal Mail’s history and tradition,” said Kretinsky on behalf of his group. The acceptance offer was 370 pence per share when priced while IDS stock went up by 2.9% following announcement to stand at 330.5 pence during early London trading hours.
For years now GLS has been view as “the jewel in their crown” according to Susannah Streeter who is currently Head of Money & Markets at Hargreaves Lansdown although Royal Mail itself has struggled greatly with this success; so this long-term possibility is likely what EP Group has been looking at. EP Group will honor IDS management’s pledge against compulsory redundancies at Royal Mail until next April.
Next week, Dave Ward the General Secretary of Communication Workers Union, is planning to meet with EP in order to seek for more commitments about what the company has in store. The majority of IDS’ approximately 153,000 staff are employed by Royal Mail.
