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Highlights:
- Government Approval Secured: Daniel Kretinsky's £3.6 billion bid for Royal Mail gains conditional approval under national security laws.
- Binding Commitments Required: Assurances include maintaining the universal service obligation, UK headquarters, and Royal Mail branding.
- Stakeholder Challenges Ahead: Shareholder and union votes, along with possible regulatory review, remain hurdles for the deal.
Daniel Kretinsky’s EP Group has taken a significant step closer to acquiring Royal Mail, with the UK government granting conditional approval for the £3.6 billion deal. The transaction, which brings International Distribution Services PLC (IDS) under foreign ownership for the first time in its 500-year history, still faces key stakeholder approvals before its anticipated completion in early 2025.
Government Conditions for Approval
Approval came after a detailed review under the National Security and Investment Act, reflecting concerns over maintaining the integrity of Royal Mail’s operations. A range of legally binding commitments have been imposed to ensure the continuity of the postal service's obligations and preserve its operations within the UK.
Key conditions include:
- Universal Service Obligation: The assurance that six-day-a-week, one-price-goes-anywhere delivery for letters will remain intact.
- Golden Share: The government will acquire a controlling share to influence decisions on structural changes, tax residence, or headquarter relocations.
- UK Base Retention: EP Group has pledged to keep Royal Mail’s headquarters, tax base, and branding within the UK for at least five years.
- Worker Benefits: A 10% share of dividends distributed to Royal Mail workers under Kretinsky's ownership.
Stakeholder Votes and Challenges
While the government’s approval is a key milestone, the deal still hinges on shareholder and union endorsements. With Kretinsky already holding a 27.5% stake in IDS, the vote among other shareholders will determine whether the takeover proceeds. Union leaders must also agree on worker dividend arrangements, adding another layer of complexity.
Additionally, the UK’s Competition and Markets Authority (CMA) could launch an investigation into the implications of the takeover, creating potential delays.
Analyst Perspectives
Hargreaves Lansdown analyst Susannah Streeter highlighted the deal as “a historic moment,” emphasizing the binding commitments as essential for maintaining public trust. “Kretinsky clearly sees opportunity ahead,” she added, pointing to the challenges Royal Mail has faced with declining letter volumes and increased parcel competition.
AJ Bell’s Russ Mould, however, cautioned that the takeover remains one of the most complex deals in recent years. “Shareholders may decide to take the money and move on,” he noted, underlining the lingering uncertainty surrounding the outcome.
Market Reaction and Outlook
Shares in IDS rose modestly, gaining 0.7% to 361.65p following the announcement. While investor sentiment remains cautious, the deal’s successful completion could mark a turning point for Royal Mail as it navigates a challenging business environment.
With significant milestones still ahead, including union negotiations and shareholder approval, the deal encapsulates a pivotal moment in the evolution of one of Britain’s most historic institutions.
