New £3.5bn offer poses questions for regulators and ministers as key postal service is poised to be sold overseas

The Royal Mail said it is “minded” to accept the latest takeover bid by Czech billionaire Daniel Kretinsky.

The improved offer values the Royal Mail parent company International Distribution Services (IDS) at £3.5bn. IDS, which also owns GLS, a thriving parcels delivery service based in the Netherlands.

“The Board is minded to recommend this offer price, which it considers to be fair and reflects the value of GLS’ current growth plans and the progress being made on change at Royal Mail to adapt the business to a significant fall in the demand for letters and growth in parcels,” Keith Williams, IDS chair said.

IDS said Mr Kretinsky had also agreed to offer a set of “undertakings” to protect key public interest factors recognising Royal Mail’s status as a vital part of national infrastructure under the deal. Other commitments reported to have been agreed include keeping the Royal Mail brand as well as its headquarters in the UK.

These include continuing to “deliver the key elements of the Universal Service in the UK and protect the interests of the workforce at both Royal Mail and GLS.

Under the terms of the Universal Service obligation, Royal Mail, which was split from the Post Office and privatised a decade ago, is legally obliged to deliver a one-price-goes-anywhere universal postal service, which currently means it has to deliver letters six days per week, Monday to Saturday, and parcels Monday to Friday.

Royal Mail has been lobbying ministers strongly to relax the six-days delivery obligation. Postal regulator Ofcom is currently reviewing proposals from the delivery group and others about the UK mail service.

Royal Mail blamed strike action and a falling demand for letters and parcels as it recorded a loss of more than £1bn last year

Keith Williams, IDS chair, said it was “regrettable that despite four years of asking, the Government has not seen fit to engage in reform of the Universal Service and thus improve our financial position and ensure that Royal Mail could provide an economically sustainable service to the British public.”

Jonathan Reynolds, Labour’s shadow business secretary, called on Daniel Kretinsky to commit to safeguards to protect the business. “Royal Mail is as British as it gets, and Labour will take the necessary steps to safeguard its undeniable identity and place in public life,” he told the company.

The UK’s Greeting Card Association (GCA) said Royal Mail’s service “cannot be compromised” if a deal for IDS goes ahead.

GCA chief executive Amanda Fergusson said: “Our 500-plus members – largely small businesses – and the consumers they serve rely on a Royal Mail that’s national, reliable and affordable. That cannot be compromised.

“We will need to see these principles enshrined in any undertakings between the Government, IDS and EP Group before any recommendation of this offer.

“It’s not just enough for EP Group to give contractual undertakings about first class, six days-a-week delivery – this must include an undertaking to deliver legal service standards in place at any time.”

IDS rejected Mr Kretinsky’s first offer saying it “significantly undervalues” the company. IDS has struggled to adapt to changing delivery patterns which has seen a marked fall in letter sending from a peak of 20 billion a year in 2004/5 to seven billion in 2022/3.

Royal Mail forecasts volumes are likely to drop to about four billion in the next five years. At the same time, the growth of online shopping has seen the number of parcels delivered increase.

Mr Kretinsky’s firm EP Group, has been slowly building a stake in IDS and already owns a 27.6 per cent stake. The businessman, who made his fortune in the energy sector, has also acquired stakes in Sainsbury’s and West Ham United as well as a major French supermarket chain.

The businessman now has until May 29 to make a firm offer. Any deal will be subject to intense scrutiny and approval.

Communication Workers Union (CWU) general secretary Dave Ward warned that the “future of postal services in the UK is again under threat” with the bid to buy the owner of Royal Mail.

He said: “EP Group must immediately demonstrate an up-front and open commitment to working with the union to completely change the culture in workplaces across the UK, rule out any break-up of the company or raid of the pension surplus.

“The CWU are calling for a completely new ownership model – one based on innovation, growth and maintaining over 500 years of public service ethos.
“Whatever the result of these takeover talks, this is a position we will actively campaign for with the owners of Royal Mail, the Government and Labour.
“It cannot be right that a key part of national infrastructure is allowed to be owned by individuals or companies who have no vision for the future and no clear plan to put the workforce at the heart of turning Royal Mail around.”

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