aDaniel Krzytinski’s new offer to the owners of Royal Mail is satisfactory on almost every aspect, including the price, the identity of the bidder and sketchy ‘promises’ to protect the UK postal service. It’s not something I can do.
First, the terms of 370 pence per share, or £3.5 billion, look attractive if this government or the next maintains its current dizzying stance of refusing to reform Royal Mail’s six-day delivery requirement. Only when thinking about it.
Keith Williams, chairman of parent company International Distribution Services (IDS), harshly criticized the government’s stubborn stance on universal service obligations despite giving a “willing to recommend” verdict on the terms. . And his judgment was correct. I’ll do that. It should be abundantly clear that Royal Mail needs some deregulation to compensate for the significant decline in letter volumes over the past 15 years. The issue was delayed by the pandemic, which temporarily cost Royal Mail huge profits, but it should have been tackled years ago.
However, therein lies the strangeness of the timing of this acquisition proposal and IDS’s support for it. Williams is being toppled just as the government and regulator Ofcom are undertaking a review that could make Royal Mail financially sustainable in the form of cuts to second class services. be. No one imagines regulation going away, but the £300m in cost savings proposed by Royal Mail will clearly improve its financial position in the medium term. This is why the ostensibly huge 73% premium to the pre-offer share price of 214p is not as much as it seems.
Second, the bidders here are pretty much the definition of the problem. Krzetinski is a billionaire whose clear and open approach to communication has earned him the nickname “Czech Sphinx.” In his last interview with a British newspaper, he apparently said: to Sunday Times A year ago, he declared he would not bid for IDS.
Many European countries, including the UK, have privatized or partially privatized their postal services, but none allow privatization from overseas. The tragic example of the water sector is a neon-lit example of the dangers of allowing ownership of critical parts of infrastructure to disappear from view. This expression still fits Royal Mail perfectly. A stock market listing, which guarantees a modest level of accountability to the outside world, is a much better model.
Third, the series of “contractual initiatives” that the IDS board is negotiating with Krzetinski is a work in progress at best and junk mail at worst. Of course, we would be happy for Royal Mail’s head office to remain in the UK and for the business to maintain UK tax residence. However, in the next sentence we see that the “exact scope and duration” of such a pledge has not yet been determined.
There is also the possibility that GLS, a highly profitable parcel business based in Amsterdam and worth far more than Royal Mail, will be formally separated under Krzetinski’s ownership. There is no mention of whether there is. This is a serious issue because it raises the big question of how to finance the independent Royal Mail, which is currently in the red. Given that Krzetinski’s group owns 30% of Dutch parcel operator PostNL, one has to assume that the Dutch side of IDS is central to his takeover logic.
After newsletter promotion
Last month, when he rejected an initial offer of 320p a share, it looked like the deal might quietly die. This made it easy for government ministers and Labor opponents to flinch and appear noncommittal when asked about national interests and foreign ownership. Now that’s not an option. This proposal requires the utmost scrutiny.
