Czech Billionaire's £3.6 Billion Royal Mail Takeover Approved.
The government has granted approval for the acquisition of Royal Mail's parent company by a Czech billionaire.
The £3.6 billion takeover by Daniel Kretinsky's EP Group is expected to be officially announced on Monday morning. The government will hold a "golden share," which will necessitate its consent for any significant alterations to Royal Mail's ownership, headquarters location, and tax residency.
Additional commitments made to unions include a provision for workers to receive 10% of any dividends distributed to Kretinsky, along with the establishment of a workers' group that will convene monthly with Royal Mail's directors to enhance employee input in the company's operations. In an effort to facilitate the acquisition, Mr. Kretinsky has already pledged the following assurances: -
- The preservation of a one-price-goes-anywhere Universal Service Obligation (USO), ensuring delivery of letters six days a week, from Monday to Saturday, and parcels from Monday to Friday.
- A commitment not to deplete the pension surplus.
- The retention of the Royal Mail brand name, as well as its headquarters and tax residency in the UK for a minimum of five years
- Adherence to union requests for a moratorium on compulsory redundancies until 2025.
Earlier this year, Mr. Kretinsky assured the BBC that he would uphold the USO "in whatever form it takes" for as long as he is alive. The USO is currently under review, with Royal Mail proposing to the regulator Ofcom that reducing second-class deliveries to every other weekday could save up to £300 million annually and provide the business with "a fighting chance."
In addition to his 27% stake in West Ham United football club and 10% in Sainsbury's, Mr. Kretinsky's enterprises also manage a gas transmission service that continues to transport significantly reduced quantities of Russian gas to Europe, with funding and approval from the EU. The takeover has been subjected to a review under national security legislation, as it is deemed critical national infrastructure.
In November, during a presentation to Members of Parliament, Business Secretary Jonathan Reynolds characterized Mr. Kretinsky as a "legitimate business figure."
He noted that the alleged connections to Russia had been previously examined and dismissed when Mr. Kretinsky acquired the largest shareholding in the company nearly two years ago. Over the weekend, unions engaged with Kretinsky's EP Group to negotiate additional commitments, reaching an agreement in principle, although it must undergo "the internal democratic process."
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Royal Mail, which was separated from the Post Office and privatized a decade ago, has experienced a decline in performance in recent years, resulting in significant financial losses. Customers have raised concerns regarding delivery issues, particularly with critical medical appointments and legal documents not arriving on time.
Recently, Royal Mail was penalized £10.5 million by the regulator Ofcom for failing to meet delivery targets for both first and second class mail. Ofcom indicated that Royal Mail's inadequate service is "now eroding public trust in one of the UK's oldest institutions." International Distribution Services (IDS), the parent company of Royal Mail, stated that it has implemented "substantial" reforms this year aimed at enhancing service quality.
The volume of letters sent in the UK has drastically decreased, with current figures at half of those recorded in 2011. Conversely, parcel deliveries have gained popularity and profitability. Last year, IDS reported a modest profit, entirely derived from its logistics and parcels operations in Germany and Canada, which helped offset the losses incurred by Royal Mail. Mr. Kretinsky informed the BBC of his plans to invest significantly in the deployment of delivery lockers to enhance the efficiency of online deliveries, similar to initiatives seen across Europe.
Who is Daniel Kretinsky?
Daniel Kretinsky is a prominent figure who began his professional journey as a lawyer in Brno, his hometown, before relocating to Prague. He subsequently achieved significant financial success in the energy sector across Central and Eastern Europe. His ventures include Eustream, a company responsible for transporting Russian gas through pipelines that traverse Ukraine, the Czech Republic, and Slovakia. Kretinsky later expanded his portfolio to include various investments, such as an almost 10% ownership in the UK supermarket chain Sainsbury's and a 27% stake in the Premier League football club West Ham United. Current estimates place his net worth at approximately £6 billion.
