The takeover of Royal Mail has edged closer after its owner agreed terms and conditions on a £3.57bn takeover by the Czech billionaire Daniel Křetínský.
In an update to the market on Wednesday, the postal service’s parent company, International Distributions Services (IDS), said it had accepted a cash offer from Křetínský’s EP Group.
The deal means Křetínský would pay 360p a share for the nearly 73% of the struggling postal service he does not already own.
IDS shares rose by 3% to 331p when markets opened – still far short of EP’s offer, suggesting the market remains unconvinced the deal will definitely go through.
The deal still needs to be approved by IDS shareholders at the annual general meeting on 25 September and could still be scrutinised and blocked by the government under the National Security and Investment Act. Earlier this month, IDS bosses held a meeting with the business secretary, Kemi Badenoch, to discuss the bid and reforms to the universal service obligation (USO).
The chancellor, Jeremy Hunt, had said that any takeover bid for IDS would face a “normal” security review but the government was not opposed to EP’s bid in principle.
Labour, which is forecast to form the next government after the 4 July election, welcomed the assurances given by Křetínský and said the party would ensure they were adhered to if it won power.
The proposed undertakings and contractual commitments with the government and unions include the following.
Retaining Royal Mail’s proposals for the USO for a first-class postal service to anywhere in the country for a fixed price six days a week for a period of at least five years. IDS has suggested second-class post could go to every other weekday.
A commitment to maintain base salaries and benefits for staff for at least two years.
No changes to Royal Mail’s branding or ownership for three years and a commitment to keep its headquarters and tax residency in the UK.
EP also said it does not intend to make any material changes to the overall headcount or reduce the number of frontline workers, and will speak to unions about extending the current agreement of no compulsory redundancies past April 2025.
Royal Mail’s largest union, the Communication Workers Union, said it would meet Křetínský next week to seek a reset in employee and industrial relations and further commitments on the future of the company.
“We’ll be looking for pension guarantees, we’ll be looking for a stake for the employees in the future ownership model of the business,” the CWU’s general secretary, Dave Ward, told BBC Radio 4’s Today programme on Wednesday.
“I think it’s about testing Křetínský as to whether he’s got any plans for investing in the workforce and investing in growth strategies for the company, or whether his intentions are purely to asset strip the company.”
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The formal submission of the £3.57bn bid, which had been improved from an earlier £3.1bn offer that IDS had said significantly undervalued the company, came in hours before a “put up or shut up” deadline of 5pm on Wednesday.
Křetínský, who has been nicknamed the “Czech Sphinx” because of his reluctance to speak in public, also owns parts of West Ham football club and Sainsbury’s.
In a statement on Wednesday morning, he said he had the utmost respect for Royal Mail’s history and traditions and understood that owning the company came with enormous responsibility for employees but also UK citizens who relied on the services every day.
He added: “But IDS’s market is evolving quickly, and it must accelerate its transformation and investments into modernisation to keep up with the competition.
“We will support the business in the next critical phase of its transformation and beyond, providing our experience and financial resilience to support the management team.”
The chair of IDS, Keith Williams, said it had negotiated a “far-reaching package of legally binding undertakings and commitments” from EP Group as part of the deal.
He said: “These cover the provision of the one-price-goes-anywhere universal service obligation (including first-class letters still delivered six days a week), the financial stability and maintenance of the IDS Group including Royal Mail, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.”