- The government, which has left Royal Mail so vulnerable, needs to make reforms
- These would give current boss Martin Seidenberg a fighting chance
- New ownership, even if the owner is benign, brings disruption and risk
Czech Sphinx: Businessman Daniel Kretinsky
Daniel Kretinsky, also known as the Czech Sphinx, is a clever operator. Awkwardly for those looking for a simple story of heroes and villains, he appears not to be the wealth stripper he is sometimes portrayed as, but a serious businessman with a long-term vision.
In Britain, his holdings include the West Ham United football club, a stake in Sainsbury’s and a number of power stations.
He is, of course, the largest shareholder in International Distributions Services, the parent company of Royal Mail, where he has made a full takeover bid.
The timing of his £3.1 billion or 320p per share proposal is smart.
Royal Mail’s share price is low, hovering around 270p.
He has taken a dive, as Royal Mail bosses warned, as the government drags on Universal Service Obligation (USO) reforms.
This is the legal requirement for Royal Mail to deliver to all UK addresses six days a week and this is no longer fit for purpose in the age of email and WhatsApp.
If Royal Mail is to have a viable future, changes will have to happen in the USO. Kretinsky knows these could result in up to £300 million in savings that would accrue to him if his bid is successful.
He also sees that the new CEO, Anglophile German Martin Seidenberg, is energetic and clear-minded, and could potentially make progress on some long-standing problems where his predecessors failed. This includes relations with trade unions: Royal Mail lost £419 million due to strikes in the 2022/2023 financial year.
The jewel in IDS’s corporate crown is GLS, the parcel company based in Amsterdam. This profitable business supports the traditional British postal operation. Value could be unlocked by freeing it from those chains.
The Kretinsky camp has signaled that he does not want to break up the company, but wants to reform it away from the scrutiny of public markets.
Be that as it may, he’s also undoubtedly noticed some ‘hidden’ gems, such as the property portfolio, worth around £1.4 billion. This includes operational locations that the company needs.
Royal Mail still sorts letters in its own extensive complex in Mount Pleasant in central London, a prime location in one of the capital’s trendiest areas.
The site has a great heritage and is much loved by Londoners and tourists who visit the nearby Postal Museum and its underground railway. But an unsentimental new owner might think it could be sold and turned into luxury apartments.
The IDS board rejected Kretinsky, who has been busy buying up German steel assets and also eyeing the May 15 deadline to make a better offer.
He won’t have an easy ride. The third largest shareholder, Redwheel, has expressed its support for the board.
Unusually, employees and private investors, who together own 20 percent, will have a major say in the outcome. Small investors may be tempted to cut and run.
For employees, it is not just a matter of a temptingly priced offer. They will wonder what working conditions might be like under Kretinsky ownership. He has played his hand smartly – but an important question is: what will be in it for taxpayers and users of postal services if Kretinsky wins?
A change of ownership, even if the new owner is benign, brings disruption and risk. The government, which has left Royal Mail so vulnerable, must make rapid reforms and give Seidenberg a fighting chance.