Government greenlights Royal Mail takeover – but greetings industry questions ‘weak’ obligations
Government approval of Czech billionaire Daniel Křetínský’s EP Group bid to buy Royal Mail means the sale to foreign owners is on the cards – but the total £5.3billion deal does still have to be approved by shareholders.
The news broke late on Sunday, 15 December, with business secretary Jonathan Reynolds claiming the “legally binding” undertakings the government had agreed mean the takeover “will be a good deal for the UK, be a good deal for the people who work for Royal Mail and a good deal for customers”.
However, there are warnings from within the greeting card industry that these assurances seem “pretty weak” although there is support for how a “savvy operator” like Mr Křetínský could harness the public’s love and demand for the 508-year-old Royal Mail to grow it.
The takeover of Royal Mail’s parent company International Distribution Services is a £3.6bn payment plus debts, valuing the company at £5.3bn in total, and the move taking it into foreign ownership for the first time in its history is expected to be completed early next year once shareholders have been persuaded to sell their shares as the IDS board has already given its approval.
The government will retain a so-called “golden share” in the organisation which will require it to approve any major changes to Royal Mail’s ownership, HQ location and tax residency, which must stay in the UK for the next five years, during which time the Czech will not take any dividend payout unless the delivery service equals or exceeds the 2023/34 performance.
EP Group also has to maintain the one-price-goes-anywhere universal service obligation (USO) to deliver letters six days per week, Monday to Saturday, and parcels Monday to Friday to all UK addresses.
Daniel Křetínský said the talks with the government had “resulted in unprecedented commitments and undertakings”, and that EP Group had a “mission to make Royal Mail a successful modern postal operator with high quality service and products for its customers”.
An agreement in principle has also been reached with unions that includes workers receiving a 10% share of any dividends paid out to Mr Křetínský, as well as the formation of a workers’ group that will meet monthly with RM directors to give employees a bigger voice is how the company is run.
Dave Ward, general secretary of the Communication Workers’ Union, told the BBC it was an “extensive agreement” and the deal was the “best opportunity” to save the future of Royal Mail.
However, Cardology co-owner David Falkner, who is also the GCA lead on Royal Mail relations, was interviewed on both BBC Radio 4’s Today programme yesterday, 17 December, and the Associated Press news reel which can be watched here, where he gave his personal views on the deal and conditions of the sale.
“Items like the government share are welcome safeguards but, overall, the assurances appear pretty weak,” David said. “Just five days ago, Royal Mail received a £10.5m fine for failing minimum service standards, which was almost double the previous year’s fine for causing significant public harm – yet the new assurances essentially say ‘just don’t get worse, and you’re fine’.
“It’s easy to forget the service failings that resulted in the fine are a recent, post-pandemic phenomenon – we’ve had five centuries where service performance was there or thereabouts. It’s only in recent years the batching of letters many of us now experience even became a thing and service fell off a cliff.
“The narrative of the letters business being a longstanding millstone around Royal Mail’s neck is misleading. Not only do Royal Mail need letters revenues to spread fixed costs within more competitive markets, the most recent results show the letters business revenues grew 12.7% year-on-year, the fastest across IDS.
“The real financial burning platform is the slowdown in Royal Mail’s parcel business, where it faces competition.”
Pointing out that, as Christmas approaches, the joy of sending and receiving cards is still strong, with GCA figures showing 91% of Brits are engaged with sending cards last year and over 60% of young adults intend to send more cards this year, David added: “Our £1.5bn creative industry is thriving despite the postal challenges.
“There’s still hope. The demand is there, and a savvy operator like Daniel Křetínský could harness it to rebuild trust and success. Daniel, we’ve certainly got some great ideas for how you can grow the market if you want to roll up your sleeves alongside us!”
And, referring to Ofcom’s ongoing consultations regarding second-class post and possible cuts to just three or even two days a week leaving first-class deliveries with its unregulated costs to meet the USO, David hopes the conclusion will be a “far simpler solution of restoring service stability and holding Royal Mail more accountable for its financial performance and letters growth”.
Retailers were also included in the reporting with indie Earlybird featured on ITV news broadcasts on Monday, 16 December, which can be seen above, with co-owner Heidi Early speaking from her Stoke Newington store explaining that the current postal service is so unreliable, she has to pay extra to track orders dispatched by Royal Mail.
“People don’t know whether their post is going to turn up in two days, three days or ever,” Heidi said. “Right now, RM have got seasonal staff, so it’s improved, but before that, in general, it’s got much worse. We can’t rely on the service anymore.”
