International Distribution Services (IDS), the company that owns Royal Mail in Britain, has agreed to a takeover by Czech billionaire Daniel Kretinsky’s EP Group. The deal is worth £3.6 billion ($4.6 billion) and has been described as “fair and reasonable” by IDS chairman Keith Williams.
EP Group already owns 27.6 percent of IDS, and the takeover still needs approval from shareholders and regulators.
Royal Mail, which was once a government-run service before being privatised in 2013, has been struggling. Fewer people are sending letters because they use the internet for communication. However, Royal Mail’s international parcels business, GLS, has been doing well.
Britain’s communications regulator, Ofcom, has suggested that Royal Mail could save a lot of money by reducing its delivery days to five or even three per week. This could save the company hundreds of millions of pounds.
IDS has been pushing for changes to the universal service obligation (USO), which currently requires Royal Mail to deliver letters six days a week to every address in the UK for the cost of a stamp.
EP Group sees IDS as a strong company with the potential to become one of Europe’s top postal logistics groups. They believe this can happen with modernisation, including changes to the USO.
Kretinsky has expressed respect for Royal Mail’s long history and tradition, acknowledging the responsibility that comes with owning such an old and important business.
Financial Details and Market Reaction
The accepted offer values IDS shares at 370 pence each. After the announcement, IDS shares rose 2.9 percent to 330.5 pence in early trading in London.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said that GLS is considered the best part of IDS, and EP Group likely sees long-term opportunities there.
EP Group has promised not to impose compulsory redundancies at Royal Mail until at least April next year. IDS employs around 153,000 people, most of whom work for Royal Mail. Dave Ward, the general secretary of the Communication Workers Union, plans to meet with EP Group next week to discuss further commitments regarding the company’s future.
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