The sale of Royal Mail's parent company to Czech billionaire Daniel Krzetinski has been approved by the UK government following a review under national security laws.
Mr Krzetinski's EP Group's £3.6bn takeover of International Distribution Services (IDS), owner of the 508-year-old Royal Mail, was confirmed on Monday morning.
This is the first time in Royal Mail's history that it has been run by overseas owners, which can be traced back to 1516 during the reign of Henry VIII.
The government will retain a “golden share” of IDS, meaning any changes to Royal Mail's ownership, tax residence or headquarters will require government approval. As long as EP owns the company, the Royal Mail brand is also protected.
IDS's board agreed to the acquisition in May after rejecting an initial lower price approach.
The EP Group agreed to a series of efforts to persuade the government to pass the agreement. These include maintaining the universal service mandate during the Krzetinski administration to provide first-class postal service anywhere in the country at a fixed price, six days a week, which is higher than the previous five-year commitment. This is a strong commitment.
The government also blocked dividends and similar payments to Royal Mail's owners unless the company met financial targets and improved its postal delivery performance. Dividends and asset sales would also be blocked if they would jeopardize universal services.
IDS has suggested that the number of second-class posts may be reduced to every other weekday. Keith Williams, non-executive chairman of IDS, said the approval of the deal was an “important milestone” but said: “We need urgent reform of the universal service and the continued transformation of this great British company. ”
Dame Melanie Dawes, the chief executive of regulator Ofcom, told BBC Breakfast on Monday that there were “a lot of changes that need to be made” at the company due to a decline in letter volumes, adding that the watchdog is considering future regulations. He said he would make suggestions regarding the issue. Postal services will also begin next year.
Other commitments include keeping Royal Mail's head office and tax residence in the UK for five years and retaining staff's basic pay and benefits for at least two years.
Mr Krzetinski said: “EP Group is a long-term and committed investor with a mission to build Royal Mail into a successful modern postal operator.”
Business Secretary Jonathan Reynolds said discussions with the EP and Krzetinski had been “constructive”. “We look forward to working with them to repair the foundations and ensure we can continue to serve the communities and businesses that rely most on Royal Mail,” he said.
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The acquisition was called for review in August on national security grounds, as Royal Mail's letter delivery service remains a vital, albeit diminished, part of the country's communications infrastructure. Britain owns golden shares in companies deemed critical to national security, including arms makers BAE Systems and Rolls-Royce.
Approval of the deal, which values IDS at £5.3bn including debt, comes after the businessman has shown clear interest in buying British assets despite its reputation as the low-profile “Czech Sphinx”. would be considered a victory. Alongside EP's core coal, gas and power generation businesses, Mr Krzetinski owns a 27% stake in football club West Ham United and a 10% stake in supermarket chain Sainsbury's.
The deal is expected to close in the first quarter of 2025 and will likely prompt further scrutiny of Kshetinsky's business dealings in Russia. EP Group has a stake in the Slovakian gas pipeline that continues to transport Russian gas to Europe. The Guardian reported that Kshetinsky had met with Alexei Miller, the head of Russian state gas company Gazprom and a close ally of Vladimir Putin.
EP Group is also co-owned by Patrick Tkach. In June, The Guardian reported that Tkach's J&T Banka was in litigation over a $6 million loan it provided to former Turks and Caicos Prime Minister Michael Misick, who is facing corruption charges. It was revealed that he was involved. J&T denied any wrongdoing to the Guardian at the time.
EP Group announced on Monday that it had reached an agreement with the Communications Workers Union (CWU) and Unite on terms for workers and managers at Royal Mail.
CWU general secretary Dave Ward said the union wanted to bring it into public ownership, but it needed to be practical and work with Krzetinski. In a sign of deep discord between workers and Royal Mail management, Mr Ward said the Czech offered better prospects than the Royal Mail board, and said the board was “abandoned”. “I did it,” he accused.
“The way forward is to get investment into the business and diversify the revenue,” he said, adding that the government “cannot continue to sit on the sidelines” because of its involvement in negotiations.
