Values group at £3.5bn

Royal Mail: IDS takeover bid upped by 15.6%

Royal Mail: takeover offer includes contractual undertakings to protect the public interest

Foreign investor EP Corporate Group has returned to the table with a much higher offer for Royal Mail owner International Distributions Services – and the IDS board is minded to accept it.

With the 5pm, 15 May deadline looming on EP’s initial approach of 320p share, the group has now sensationally upped it to 370p a share.

EP is affiliated to IDS’s biggest shareholder Vesa Equity Investment, which already holds a 27.6% stake.

Czech billionaire Daniel Křetínský, nicknamed 'The Sphinx' because of his inscrutable nature, is behind both Vesa and EP.

A deal under the new terms would value IDS at approximately £3.5bn. The offer price is 72.7% higher than the share price was on 16 April, prior to the first offer.

However, after privatisation in 2013, the group’s share price reached a high of 631p in May 2018.

IDS chairman Keith Williams issued a statement that once again hit out at government inaction over the ongoing issues about Royal Mail’s Universal Service Obligation, which remain unresolved.

He said: “The board is minded to recommend this offer price, which it considers to be fair and reflects the value of GLS' current growth plans and the progress being made on change at Royal Mail to adapt the business to a significant fall in the demand for letters and growth in parcels.

“It is however regrettable that despite four years of asking, the government has not seen fit to engage in reform of the Universal Service and thus improve our financial position and ensure that Royal Mail could provide an economically sustainable service to the British public.”

IDS said that as part of the proposed deal, EP Group had agreed to a set of contractual undertakings to protect key public interest factors, and recognised Royal Mail's status as a key part of national infrastructure.

"The board believes that the proposed contractual undertakings to be offered by EP Group should ensure that IDS continues to deliver the key elements of the Universal Service in the UK and protect the interests of the workforce at both Royal Mail and GLS."

IDS also pointed out that there can be no certainty that any offer will be made. 

The revised offer has resulted in an extension of the 'put up or shut up' deadline under the takeover code, to 5.00pm London time, on 29 May 2024.

CWU general secretary Dave Ward and Martin Walsh, deputy general secretary postal, issued a response to the latest turn of events on X [Twitter], and warned that postal services were again under threat.

“The CWU are calling for a completely new ownership model – one based on innovation, growth and maintaining over 500 years of public service ethos.

“Whatever the result of these takeover talks, this is a position we will actively campaign for with the owners of Royal Mail, the government and Labour,” the duo stated.

IDS is set to file its full year results on 23 May. It has previously said that performance in FY2023-24 will show good revenue and parcel volume growth across both Royal Mail and overseas parcels wing GLS.

In the year to 26 March 2023, overall sales at IDS fell by 5.3% to £12.04bn, with a group loss of £748m.

Sales were down 13% to £7.41bn at Royal Mail, which posted a statutory operating loss of £1.04bn.

The adjusted operating loss at Royal Mail was £419m, an £835m reversal on the prior year’s £416m profit by the same measure.