Winners (and losers) of Royal Mail’s £3.6bn takeover – as investors prepare to give the deal their seal of approval

The proposed sale of Royal Mail to a foreign billionaire for £3.6 billion will result in a windfall for some investors – but others will lose out if the deal goes through.

Czech tycoon Daniel Kretinsky has received permission from ministers to buy the postal service’s parent company International Distribution Services (IDS) for 370 cents per share.

That paves the way for Royal Mail to fall into foreign hands for the first time in its 508-year history.

The final decision will fall to shareholders, who must vote to approve the deal, while regulators can still have a say.

So what does it mean for investors: will they make or lose money on the deal, and is there still time for others to make money?

Anyone who bought shares in Royal Mail when it listed on the London stock market over a decade ago seems likely to receive a small windfall.

The shares sold for 330 cents each when the coalition government privatized the company in 2013.

Kretinsky – known as the Czech Sphinx – is now offering to pay 370p per share. That means a profit of 40 cents per share for those who bought in at 330 cents.

Due to overwhelming demand at the time of privatization – 700,000 members of the public applied for shares – private investors were allowed to purchase a maximum of 227 shares each.

Those who bought the maximum paid £749.10. They can now receive £839.90 if the sale to 49-year-old Kretinsky goes through. That amounts to a profit of more than € 90.

Postal workers will do better. Around 150,000 staff, including postal workers, were given 613 shares worth just over £2,000 each at the privatisation.

Employees who have retained all their shares will earn £2,268 if the deal goes through.

The takeover may therefore appear attractive to both staff and those who bought shares in the company at the start. Others will have bought and sold shares since privatization.

Some will be sitting on nice profits. Others with significant losses. The shares peaked at 631p in 2018.

Someone who bought €1,000 worth of shares at this price will only get €586 back upon takeover.

But an investor who bought when Royal Mail shares fell to 118p in 2020 is now in the money. A stake that cost €1,000 at the time is worth €3,136 under the terms of the deal.

Shareholders now have to make a decision after the government approved the Czech businessman’s bid.

Once investors own 75 percent of the shares, the deal will go through – unless it is blocked by regulators.

Shares closed down 0.8 percent, or 2.8p, at 361.8p last night, which is below the offer price and suggests there is still some doubt over whether the deal will go ahead.

An investor who bought £1,000 shares today at 362p would earn around £22 if the takeover goes through at 370p.

This may even be less than the transaction fee, so it may not be worth it unless an investor is willing to pump in a large amount of cash. And if the deal is blocked by investors or regulators, the stock price could plummet.

As such, investors may be tempted to sell their shares now, even though they are trading at slightly less than the 370p they will get from the takeover.

Richard Hunter, head of markets at broker Interactive Investor, said: ‘For investors it is a matter of deciding whether they believe the deal will go through, which seems highly likely but not guaranteed.

“Government approval is certainly one of the last and most important hurdles.

‘The news lifted IDS shares to 362p, versus an offer of 370p.

‘The reason for the difference between those prices is that the market recognizes the admittedly unlikely outcome that shareholders do not vote on the deal, or that the Competition and Markets Authority decides to investigate the takeover.

‘If the deal were to be called off, the shares would fall sharply.

‘The current share price suggests the deal will go through sooner rather than later, in which case existing IDS holders could wait until the 370p is received, probably early next year.

“At the same time, however, it must be recognized that this is not yet a slam dunk deal.”

Dan Coatsworth, investment analyst at investment platform AJ Bell, said: ‘The news from the government and unions implies that the fate of the company is now in the hands of shareholders.

“They have to choose whether or not to accept the deal.”

He added: ‘The final stages of the takeover appear to be a formality and the clock is counting down towards IDS’ likely exit from the UK stock market.

‘It’s been a whirlwind ride for investors who originally bought at 330p in 2013, saw the share price soar above 630p in 2018 and hit a record low of 118p in 2020.’