29th May 2024 15:44
(Alliance News) - International Distributions Services PLC on Wednesday backed a takeover by Czech billionaire businessman Daniel Kretinsky, who talked up the "scale of the commitments" it gave to the UK government as it looks to get the deal over the line.
The GBP3.57 billion deal values each IDS share at 370 pence. Including debt, the deal values the Royal Mail owner at GBP5.28 billion.
The all-cash offer to IDS shareholders includes a payment of 360p per share from the buyers, a final dividend of 2p from IDS in respect of the financial year that ended March 31, and a special dividend of 8p, contingent on the acquisition becoming unconditional.
The offer has been made through a special purpose acquisition vehicle owned by J&T Capital Partners as and EP Corporate Group as, a subsidiary of EP Investments SARL.
EP Investments is a Luxembourg-based company founded by Czech billionaire businessman Daniel Kretinsky, who also serves as its chair.
On May 15, Kretinsky put forward a bid for IDS worth around GBP3.5 billion, to which IDS said it was "minded" to agree.
IDS Chair Keith Williams said: "IDS has the potential to become a leading international logistics player. Both the IDS board and EP are acutely aware of their responsibilities to IDS and particularly to the unique heritage of Royal Mail and its obligations as the designated universal service provider of postal services in the UK."
Williams noted that IDS has negotiated a "far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards."
These include five-year guarantees to maintain the one-price-goes-anywhere service in the UK, and for first class letters to continue to be delivered six days a week.
The offer also guarantees that, for the three-year period following completion, there will be no change in the control of Royal Mail or General Logistics Systems BV, IDS's international parcels arm.
"It is the IDS board's belief that EP will continue to enhance IDS's investment in strategic areas such as network and out-of-home solutions," Williams continued.
Kretinsky commented: "The EP group has the utmost respect for Royal Mail's history and tradition, and I know that owning this business will come with enormous responsibility - not just to the employees but to the citizens who rely on its services every day.
"The scale of the commitments we are offering to the company and the UK government reflect how seriously we take this responsibility, to the benefit of IDS' employees, union representatives and all other stakeholders."
AJ Bell analyst Dan Coatsworth said the "hard part" is now getting UK government backing for the deal.
"The big question is which political party is going to be in power to decide, given the general election is only five weeks away. Takeovers often take ages to complete, meaning there is a high chance that Labour will be the one to decide, judging by the latest polls," the analyst said.
Business Secretary Kemi Badenoch met IDS bosses earlier this month for talks on the deal, PA reported, and underlined the need to protect services for the vulnerable, those in remote areas and small businesses.
The news agency reported Labour's Shadow Business Secretary Jonathan Reynolds said he would hold Kretinsky to his promises.
He said if Labour wins the general election in July, it "will take the necessary steps to safeguard [Royal Mail's] undeniable identity and place in public life".
IDS shares rose 4.4% to 335.40 pence each in London on Wednesday afternoon. This gives it a market capitalisation of GBP3.21 billion, keeping it below the valuation as communicated in the Kretinsky offer.
Coatsworth added: "That implies the market doesn't believe this is a done deal despite the bidder's promises to retain the brand, UK headquarters and UK tax residency – key things which should appease whichever government is in power."
Kretinsky's other investments include stakes in UK supermarket chain J Sainsbury PLC, French newspaper Le Monde and London football club West Ham United.
By Eric Cunha, Alliance News news editor
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