Royal Mail: owner International Distribution Services declines 'Czech Sphinx' billionaire's takeover bid

International Distribution Services (IDS), the company that owns Royal Mail, saw a sharp increase in its share price following the news that it had turned down a takeover bid from Daniel Kretinsky, a Czech billionaire and shareholder.

The EP Group, led by Kretinsky, submitted an all-cash offer on 9 April to purchase the shares of IDS that it did not already own.

With interests in energy, logistics and food retail, the vast EP Group conglomerate is the largest investor in IDS, having amassed a stake of approximately 27.5% in the owner of Royal Mail through Kretinsky's Vesa Equity Investment vehicle.

It said while the takeover proposal was rejected by the IDS board, it would continue to “engage constructively with the board as EP Group considers all its options”.

Shares in IDS jumped 16% in Wednesday (17 April) afternoon trading after news of the approach was confirmed following reports of bid interest.

EP Group said it recognises the “challenging situation” faced by Royal Mail, but would be prepared to support “this iconic business as it transforms and rebuilds into a modern postal operator”.

It said: “Weak financial performance, poor service delivery and a slow transformation, in the face of a market going through structural change, have put the business under unsustainable pressure.

“With the increasing competition from multinational companies in the UK postal market, private investment in Royal Mail becomes crucial.” It added that Royal Mail is an “important national asset that would benefit from being able to take a longer-term view”.

The group said: “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.” EP Group has until 15 May to make a bid or walk away under UK takeover rules.

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Kretinsky, who is said to be known as the “Czech Sphinx”, already has a raft of investments, including stakes in London football club West Ham United, supermarket giant Sainsbury’s and French newspaper Le Monde.

His investment in IDS has long been a source of controversy, coming under government scrutiny in 2022 amid national security worries after he built up his shareholding.

In the end, the then business secretary, Kwasi Kwarteng, did not intervene following a review of the stake.

The bid interest comes at a crucial time for Royal Mail, which put forward plans to Ofcom earlier this month to scrap second-class letter deliveries on Saturdays and cut the service to every other weekday as part of overhaul efforts.

In its submission to Ofcom’s consultation on the future of the universal postal service, Royal Mail said it would keep a six-day-a-week service for first-class mail in a climbdown on previous calls for all Saturday letter deliveries to be scrapped.

But it revealed up to 1,000 jobs could be axed under the plans to cut back the second class service. Ofcom is looking at postal reforms, with Royal Mail insisting the universal service is no longer workable or cost effective, given the decline in addressed letter post.

As well as the Royal Mail business in the UK, IDS also owns international parcels network General Logistics Systems (GLS), based in Amsterdam.