Royal Mail: Czech billionaire offers to buy back all staff shares

Image source, Getty Images

Author, Simon Jack
Role, BBC Business Editor
June 25, 2024

Updated 2 hours ago

Thousands of current and former Royal Mail employees are being urged to sell their shares to a Czech billionaire.

Mr. Kretinsky can now officially begin pressuring investors to accept the offer.

He needs the agreement of three-quarters of the shareholders of the parent company, but this task will be all the easier since he already owns 27.5%.

Large asset managers, including Blackrock, UBS, Vanguard and Schroders, own most of the remaining 72.5% of International Distribution Services (IDS) that Mr. Kretinsky does not own.

Meanwhile, Royal Mail staff still collectively hold 5.5% of the shares after eligible staff received 600 shares in the company when it was privatized in 2013. This offer values these staff shares at almost 200 million pounds sterling.

Mr. Kretinsky made his fortune in energy companies. It also has stakes in Sainsbury’s and West Ham Football Club.

That’s higher than the 315p it’s currently trading at and significantly above the 220p it was worth before Mr Kretinsky’s company was first offered.

However, the government still has the option to block this deal, which it could do given the importance of Royal Mail to the UK.

Mr Kretinsky’s EP Group has offered a series of limited-term guarantees, including the retention of the Royal Mail logo, its UK headquarters and its UK tax base.

He also offered to honor existing labor agreements with unions and promised not to spin off the profitable parcel business, which IDS also owns.

Nick Pendelton, former director of strategy at Royal Mail at the time of its privatization, told the BBC’s Today programme: “A lot of people are going to have a decision to make.”

Royal Mail has faced the rise of online shopping and the decline of letter deliveries, particularly as consumer habits have changed during the pandemic.

“Things have not gone the way Royal Mail has done over the last 10 years, and we all wish they had,” he said.

“It takes time, money, commitment, a reform of the universal service obligation to guarantee the sustainability of the company for another 500 years,” he declared, adding that we could argue in favor of private property.

“But of course it’s not a result that most Britons would be happy with.”

Chancellor Jeremy Hunt said the deal would be subject to the usual scrutiny, but he was not opposed to it “in principle”.

Shadow business secretary Jonathan Reynolds has written to Mr Kretinsky seeking assurances that Royal Mail will retain its UK headquarters and tax residence.

Mr Reynolds also wants Mr Kretinsky to commit to “working closely with the Communications Workers’ Union (CWU) to build a sustainable Royal Mail”.

The CWU is pushing for “a new ownership and governance model that creates a postal service for workers and customers.”

Wednesday’s official offer confirmed that the new owners would consider a new model involving an employee shareholding or profit-sharing mechanism.