The sale of Royal Mail to Czech billionaire Daniel Kretinsky has been approved by the government.
Mr Kretinsky‘s company EP Group will buy the postal service’s parent company International Distribution Services (IDS).
The £5.3bn deal had been agreed in May but was subject to a government review under national security laws as Royal Mail is considered vital national infrastructure.
It’s possible regulator the Competition and Markets Authority (CMA) could decide to investigate the takeover.
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Royal Mail’s headquarters, tax base, and corporate structure will remain British for five years under the “legally binding” agreement reached with the government.
The universal service obligation to deliver letters to every address in the UK, six days a week, at a uniform price will also remain indefinitely.
The government will retain a “golden share” requiring it to approve major changes.
Under the deal, employees will receive a 10% share of any dividends paid out to Mr Kretinsky. A workers’ group will be formed and meet monthly with company directors.
‘Groundbreaking’ agreement
The measure requires union approval and ratification and so will not be announced on Monday.
It’s been welcomed by the head of the Communications Workers Union (CWU) Dave Ward.
“This agreement provides the foundation to rebuild Royal Mail,” he said.
“These have been challenging negotiations but… we have delivered what by any measure is a groundbreaking agreement which puts postal workers and customers back at the heart of everything Royal Mail does”
It comes after the Royal Mail put forward proposed shake-up plans to Ofcom as part of turnaround efforts, including cutting down on some deliveries.
Daniel Kretinsky’s Russian ties to get greater scrutiny
Royal Mail Group is on its way to passing into foreign ownership, but the state will keep a “golden share” in the company, something the government does with companies seen as crucial to its security, including the weapons manufacturers BAE Systems and Rolls-Royce.
In Royal Mail’s case, it’s the company’s role in communications infrastructure that is of national importance.
Despite safeguards, the deal will heighten scrutiny on the EP group’s secretive Czech owner.
Daniel Kretinsky has already shown a keen interest in UK assets – he has a 10% stake in Sainsbury’s and another 27% in West Ham Football Club.
The sales have been funded from the profits of his vast energy portfolio.
That includes a gas transmission business called EUStream that carries Russian gas into Europe.
The business operates with the permission of the EU and does not buy or trade in Russian gas.
The UK government is clearly satisfied with Mr Kretinsky’s Russian ties but they will likely come under greater scrutiny.
In Royal Mail, he sees a challenge and an opportunity to turn around and modernise a company that has missed targets and been hit with fines by regulators.
Who is Daniel Kretinsky?
The 49-year-old Mr Kretinsky is ranked 33rd on The Sunday Times Rich List with an estimated net worth of £6bn – up £2bn since 2023.
In 2021 he bought a 27% stake in West Ham United – a deal worth £150m. His EP Group already owned 27.5% of Royal Mail holding company IDS.
He’s a nearly 10% shareholder in Sainsbury’s.
Business secretary Jonathan Reynolds thanked Mr Kretinsky and EP group for their “constructive approach”.
It has brought about a good deal for customers and the UK, he said.
“For too many years progress on securing a stable future at Royal Mail has stalled,” he added.
What next?
IDS shareholders need to decide to sell their shares for the deal to be final.
Only when EP Group owns 75% of IDS will the takeover be complete. This is expected to take place in the first three months of 2025.