Thousands of former and current Royal Mail staff are being asked to sell their shares to a Czech billionaire.
On Wednesday morning, Daniel Kretinsky’s investment group, which wants to buy Royal Mail’s parent company, published its formal offer online and sent it by post.
Mr Kretinsky can now formally start lobbying investors to accept the offer.
He needs the approval of shareholders of three quarters of the parent company, but this task will be made easier because he already owns 27.5% of it.
Big asset managers including Blackrock, UBS, Vanguard and Schroders own most of the other 72.5% of International Distribution Services (IDS) that Mr Kretinsky does not own.
Meanwhile, Royal Mail staff still collectively own 5.5% of the shares after qualifying staff received 600 shares in the company at the time of its privatisation in 2013. This offer values those staff shares at nearly £200m.
Mr Kretinsky made his fortune in energy companies. He also has stakes in Sainsbury’s and West Ham Football Club.
The board of IDS has already recommended that shareholders big and small accept his offer of 370p per share.
This is more than the 315p it is currently trading at and substantially above the 220p it was worth before Mr Kretinsky’s first offer to buy the company.
However, the government still has the ability to block this deal, which it may do given Royal Mail’s importance to the UK.
Mr Kretinsky’s EP Group has offered a series of time limited guarantees including the retention of the Royal Mail logo, its UK headquarters, and its UK tax base.
It also offered to honour current employment agreements with unions and promised not to split off the profitable parcels business, which IDS also owns.
Nick Pendelton, a former strategy director at Royal Mail at the time of its privatisation, told the BBC’s Today programme: “A lot of people are going to have a decision to make.”
Royal Mail has struggled with the rise of online shopping and the decline of letter deliveries, particularly as consumer habits shifted during the pandemic.
“Things haven’t gone over the last 10 years as Royal Mail, and we all, would have liked,” he said.
“There needs to be time, money, commitment, reform to the Universal Service Obligation to make sure the company is sustainable for another 500 years,” he said, adding that an argument could be made for private ownership.
“But of course, this is not an outcome most people in the UK would be happy with.”
Chancellor Jeremy Hunt has said that the deal would be subject to the normal scrutiny but he was not opposed “in principle”.
Shadow Business Secretary Jonathan Reynolds has written to Mr Kretinsky to seek assurances that Royal Mail will remain headquartered and tax-resident in the UK.
Mr Reynolds also wants a commitment from Mr Kretinsky to “work closely with the Communication Workers Union (CWU) to build a sustainable Royal Mail”.
The CWU is pushing for “a new ownership and governance model that builds a postal service for the workers and customers”.
Wednesday’s formal offer confirmed that the new owners would consider a new model which involved some employee ownership or profit-share mechanism.
