Royal Mail owner International Distribution Services has seen shares soar higher after it was revealed the group rejected a takeover approach from shareholder and Czech billionaire Daniel Kretinsky.
Mr Kretinsky’s EP Group said it put forward an all-cash proposal on April 9 to buy the shares in International Distributions Services (IDS) that it does not already own.
IDS confirmed that it had considered the offer but concluded that it “significantly undervalues IDS and its future prospects” and therefore the board unanimously rejected it on April 11.
It also branded the timing of the proposal as “opportunistic”.
The group said: “It does not reflect the growth potential and prospects of the company under a new management team, a significant modernisation programme underway at Royal Mail, and the ongoing review by Ofcom in relation to the Future of the Universal Service Obligation.”
The sprawling EP Group conglomerate – which has interests spanning energy, logistics and food retail – has already built up a stake of around 27.5% in the Royal Mail owner through Mr Kretinsky’s Vesa Equity Investment vehicle, making it the biggest investor in IDS.
It said while the takeover proposal was rejected by the IDS board, it would continue to “engage constructively with the board as EP Group considers all its options”.
Shares in IDS jumped nearly 30% in late Wednesday afternoon trading after news of the approach was confirmed following reports of bid interest.
EP Group said it recognises the “challenging situation” faced by Royal Mail, but would be prepared to support “this iconic business as it transforms and rebuilds into a modern postal operator”.
It said: “Weak financial performance, poor service delivery and a slow transformation, in the face of a market going through structural change, have put the business under unsustainable pressure.
“With the increasing competition from multinational companies in the UK postal market, private investment in Royal Mail becomes crucial.”
It added that Royal Mail is an “important national asset that would benefit from being able to take a longer-term view”.
The group said: “As a committed long-term investor in the UK, EP Group recognises the importance of the Royal Mail business to its various stakeholders, including employees, trade unions, customers and government, as the UK’s sole designated universal service provider.
“EP Group has submitted its non-binding indicative proposal to IDS with the interests of these important stakeholders in mind.”
EP Group has until May 15 to make a bid or walk away under UK takeover rules.
Mr Kretinsky, who is said to be known as the “Czech Sphinx”, already has a raft of investments, including stakes in London football club West Ham United and supermarket giant Sainsbury’s.
His investment in IDS has long been a source of controversy, coming under government scrutiny in 2022 amid national security worries after he built up his shareholding.
In the end, the then business secretary, Kwasi Kwarteng, did not intervene following a review of the stake.
The bid interest comes at a crucial time for Royal Mail, which put forward plans to Ofcom earlier this month to scrap second-class letter deliveries on Saturdays and cut the service to every other week day as part of overhaul efforts.
In its submission to Ofcom’s consultation on the future of the universal postal service, Royal Mail said it would keep a six-day-a-week service for first-class mail in a climbdown on previous calls for all Saturday letter deliveries to be scrapped.
But it revealed up to 1,000 jobs could be axed under the plans to cut back the second class service.
Ofcom is looking at postal reforms, with Royal Mail insisting the universal service is no longer workable or cost effective, given the decline in addressed letter post.
As well as the Royal Mail business in the UK, IDS also owns international parcels network General Logistics Systems (GLS), based in Amsterdam.