The UK government has approved the £3.6 billion takeover of Royal Mail’s parent company, International Distribution Services (IDS), by Czech billionaire Daniel Kretinsky. The deal, which is set to be completed early next year, comes with legally binding commitments aimed at ensuring the long-term future of Royal Mail.
Kretinsky’s EP Group, which already holds significant interests in various European businesses, has agreed to maintain Royal Mail’s Universal Service Obligation (USO), which requires the delivery of letters six days a week and parcels five days a week. The company has committed to preserving the USO for as long as it owns Royal Mail. Earlier this year, Kretinsky promised to uphold the service in whatever form it takes “for as long as I am alive.”
The government will retain a “golden share” in IDS, allowing it to approve any major changes to Royal Mail’s ownership, headquarters location, and tax residency. Additionally, EP Group has agreed to keep Royal Mail’s brand, headquarters, and tax residency in the UK for at least five years.
The USO is currently under review by regulator Ofcom, which is considering proposed changes that could include reducing second-class deliveries to every other weekday. This move could potentially save Royal Mail £300 million a year, a change the company believes is essential for its survival. Ofcom has stated that it will make a decision next year, emphasizing the need for a sustainable and economically viable postal service as letter volumes continue to decline.
Business Secretary Jonathan Reynolds welcomed the government’s approval, stating that the agreement would benefit Royal Mail, its employees, and customers. Kretinsky expressed confidence in the future of Royal Mail, outlining plans to modernize the service and improve its financial performance.
The deal includes agreements with unions, including a commitment to share 10% of any dividends with workers and the creation of a worker’s group that will meet monthly with Royal Mail directors. Dave Ward, the general secretary of the Communication Workers Union (CWU), described the deal as the “best opportunity” to secure the future of Royal Mail, though he added that discussions on USO reforms were ongoing.
Kretinsky, who has a net worth of £6 billion, also owns 27% of West Ham United football club and 10% of Sainsbury’s. He aims to bring expertise from his profitable European parcels business, GLS, to the UK, hoping to regain market share in the growing parcels sector.
Royal Mail, which has faced declining letter volumes and financial losses in recent years, was fined £10.5 million by Ofcom last week for failing to meet delivery targets. Despite this, the company remains committed to investing in improvements while seeking reforms to the USO to better align with changing consumer habits.
