A Royal Mail investor has spoken out to oppose ‘Czech sphinx’ Daniel Kretinsky’s £3.6billion take over of the postal firm.
Jeremy Smith, a top-ten shareholder in International Distributions Services — the parent company of Royal Mail — has today said that current management can add more value to the struggling company.
It comes after the board of International Distributions Services said it had agreed to an offer of £3.57 billion from Czech billionaire Daniel Kretinsky’s EP Group.
But Columbia Threadneedle Investments believes that Kretinsky’s current offer of 370p-a-share undervalues the postal company.
The Times newspaper has reported concerns among investors, that ‘operational benefits’ of an agreement between Royal Mail and the Communication Workers Union — including a workforce pension scheme surplus and property estate — have not been properly valued.
Businessman Mr Kretinsky, 48, already owned more than a quarter of IDS, which controls Royal Mail, Parcelforce and international mailing service GLS.
Jeremy Smith (pictured) co-head of UK equities at Columbia Threadneedle Investments
Known as the ‘Czech Sphinx’ for his inscrutable nature, his purchase of IDS — which may yet be subject to government scrutiny — could take the UK’s 500-year-old postal service into fully foreign ownership for the first time.
The IDS’ board rejected EP Group’s initial 320p-a-share offer last month and has since been engaging with investors.
According to The Times, shares in the Royal Mail hit a two-year high after the board recommended the takeover by Mr Kretinsky.
But the stock actually remains short of the 370-p-a-share value of the offer.
There are also doubts that a Labour government, which could potentially be elected in July, would approve the deal and the offer is too low for some shareholders.
The EP Group’s offer has acquiesced to a demand from IDS bosses to keep the Royal Mail name and brand, and for the postal service to retain its UK headquarters and tax residency, in order to keep it tied to Britain.
Czech billionaire Daniel Kretinsky (pictured) who has offered £3.5billion to take over the postal firm
The deal looks set to include Royal Mail’s proposal to deliver second class post every other weekday, which it applied to Ofcom for earlier this month, pending consultation.
Shareholders will vote on the deal at IDS’s next annual general meeting in September – at a perilous time for Britain’s universal postal service. The deal values the group at £5.2bn.
Gerald Khoo at investment bank Liberum Capital told The Times he believes the deal would not receive government approval under the National Security and Investment Act. He warned investors that shares could fall to as low as 200p.
Keith Williams, chairman of the company, said: ‘IDS has the potential to become a leading international logistics player.
‘Both the IDS board and EP are acutely aware of their responsibilities to IDS and particularly to the unique heritage of Royal Mail and its obligations as the designated Universal Service Provider of postal services in the UK.
According to The Times, shares in the Royal Mail hit a two-year high after the board recommended the takeover by Mr Kretinsky (stock image)
‘The IDS Board has negotiated a far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards.
‘These cover the provision of the one-price-goes-anywhere Universal Service Obligation (including First Class letters still delivered six days a week), the financial stability and maintenance of the IDS Group including Royal Mail, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.’
However, these commitments are only guaranteed for the first five years of Mr Kretinsky’s ownership of IDS – alongside a pledge not to strip its assets, and a promise to keep using the Royal Mail name and to use the Royal Cipher.
There is no guarantee that these promises, along with pledges to recognise unions and continue delivering first-class post six days a week, will remain in place after five years have elapsed.
Mr Kretinsky said he had the ‘utmost respect for Royal Mail’s history and tradition’. The deal is not believed to come with any requirements of redundancies beyond those factored into the Royal Mail’s existing cost-cutting plans.