The deal to sell Royal Mail by IDS looks as if it is moving to a conclusion.
The Board of Directors of ‘International Distributions Services plc’(IDS), which is the group that owns both Royal Mail and GLS, has recommended that a proposed revised offer from EP Group be accepted. Since EP Group, owned by the investor Daniel Křetínský, made its first offer on April 9, there have been discussions with the Board over the deal.
The Directors of IDS have now stated that the offer of UK£0.37 per share which is worth £3.5bn, is a good valuation of the company. They also seem to have discussed issues other than price, such as what they describe as “a set of contractual undertakings to protect key public interest factors and recognise Royal Mail’s status as a key part of national infrastructure” such as “a financially sustainable Universal Service in the future, namely a one-price-goes-anywhere service for the entire United Kingdom and the continuance of six-day delivery for First Class letters”. In addition, the Board states that it has sought “contractual commitments to protect employees’ current rights and continue to recognise the existing unions of both Royal Mail and GLS”. The Board of Directors of IDS has also requested that EP Group maintains “an investment grade rating profile” for IDS.
Formerly, it is not certain that Daniel Křetínský will accept this new revision of the original proposal, although that seems unlikely as EP Group has been involved in its formulation. It is also possible that another bidder could emerge, although at this stage there is no sign of one. What seems most likely is that sometime in the near future EP Group will take ownership of IDS. Then Daniel Křetínský will have the task of making money from these assets. How he will do this is unknown. It is quite possible that he will break up the group, selling GLS, which may emerge as an attractive asset to either a financial buyer or a rival express provider. He will also be faced with the task of improving the financial performance of Royal Mail. Bearing in mind the commitments to service levels, employees, and the level of debt that Royal Mail has, this may prove to be hard work.
Author: Thomas Cullen
Source: Ti Insight
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