Royal Mail shareholder slams takeover bid as government comes under fire
The second largest independent shareholder in Royal Mail’s parent company, International Distributions Services (IDS), has publicly backed the company’s rejection of a takeover bid.
Redwheel, which owns 6.7 per cent of IDS, said today that the offer from EP Corporate Group, led by ‘Czech Sphinx’ David Křetínský, “significantly undervalues” the company.
Last week, EP Group made a non-binding offer for a £4.5bn takeover of the company.
Vesa Equity, owned by EP Group, is already the largest shareholder in IDS with a nearly 28 per cent stake, followed by Schroders and Redwheel.
Redwheel argued that it was not in the interests of shareholders, employees or customers for Royal Mail to be broken up or sold off, stating it had a “sustainable future” if changes would be made to the business.
As well as criticising the deal, Ian Lance, co-head of Redwheel’s value and income team, slammed the government for delaying reforms to Royal Mail, which he said had caused its share price to fall “substantially”.
Bosses at the company have been calling for Universal Service Obligation, (USO), which requires Royal Mail to deliver letters to addresses everywhere in the UK for the same price every day except Sunday, to be reformed without any success.
“The USO means Royal Mail must maintain a high fixed cost network without the revenue to sustain it,” said Lance, noting that the current system costs the company between £325m to £675m every year.
“We call upon Ofcom to reflect on both the timing and the level of this offer which we regard as opportunistic,” he added.
“We believe that progress is already being made to transform Royal Mail into a profitable and sustainable business but we would urge Ofcom to reform the USO in order to make Royal Mail profitable once more and ensure its long term sustainability as an independent business,” said Lance.
Ministers have similarly come under fire from Royal Mail insiders, with one telling the Daily Mail that the lack of reform had left the company “vulnerable”
IDS Group saw its share price jump 27 per cent after the offer from EP Group last week, but is still slightly down since the beginning of the year as the company’s credit rating has sank to BBB on negative watch.