EP Group offered a price of 370p per share in mid-May to buy out the entire issued share capital of IDS not already owned by its subsidiary VESA Equity, which currently holds around 27.5% of IDS shares.
Hammering out the details over the following two weeks, the two sides have now come to an accord, with the decision now pending shareholder agreement at their next meeting in September 2024.
Valuing IDS at £3.57bn, the deal is contingent on a five-year period in which EP Group must maintain the Universal Service Order (USO) by which post is delivered throughout the UK at a standard pricing, keep Royal Mail headquartered in the UK, recognise the postal workers’ union representation and preserve employee benefits and pensions.
Křetínský, founder and chairman of EP, said: "IDS, and Royal Mail in particular, form part of the national infrastructure of the countries they operate in. More than that, Royal Mail is part of the fabric of UK society and has been for hundreds of years.
“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.”
The 500-year-old organisation employs more than 150,000 people across the UK, with many represented by the Communications Workers Union (CWU).
CWU general secretary Dave Ward said: “This situation is a direct result of a failed and ideological privatisation over a decade ago, mixed with the blatant mismanagement of the company in recent years.
“These events have ripened one of the most iconic and important companies in the UK for a takeover by foreign investors.
“We do welcome some of the commitments that have been made, but the reality is postal workers across the UK have lost all faith in the senior management of Royal Mail and the service has been deliberately run down.”
Ward added that the CWU would meet with EP Group in early June for “a complete reset in employee and industrial relations,” as well as engaging with the Labour Party – current favourites for the 4 July UK general election – to call for a democratised model of ownership for the firm.
Křetínský said: “The EP group is a patient, supportive investor with a long-term view and decades of experience in owning critical national infrastructure. We are committed investors in the UK and first became a shareholder in IDS four years ago, as we saw the potential for the business to become one of the largest postal logistics groups in Europe.
“But IDS' market is evolving quickly, and it must accelerate its transformation and investments into modernisation to keep up with the competition.
“We will support the business in the next critical phase of its transformation and beyond, providing our experience and financial resilience to support the management team. We look forward to working closely with all of IDS' stakeholders to deliver against its full potential."
The IDS board’s acceptance comes after the firm posted its delayed annual figures for 2023/2024 at the end of last week.
Royal Mail revenues grew in the second half of the year contributed to IDS making a reduced adjusted operating loss of £28m, down from the prior year loss of £71m.
IDS’ German and Canadian logistic businesses again served to buffer the group against Royal Mail’s adjusted operating loss of £348m; though Royal Mail saw “strong” revenue growth in the second half of the year, approaching breakeven with strong letter revenue growth and recovery in the parcel market.
Between 2022/23 and 2023/24, Royal Mail cut its operating losses by £71m from £419m to £348m.
Martin Seidenberg, IDS chief executive, commented on the results: “In the last six months, we have set Royal Mail on the right trajectory. We made good progress delivering our modernisation agenda, and returned to growth in the second half.
“We have improved quality, won back customers lost during industrial action, controlled costs and delivered Christmas for our customers. Positive momentum is building, although there is hard work in front of us to get back to profitability.”
He added that the transformation should be supported by reforms to the USO; Royal Mail leadership previously proposed in April to cut all second-class deliveries to every other day, along with standard bulk business mail.
Seidenberg said: “Our proposal to Ofcom would deliver a more efficient, more reliable and more financially sustainable service, whilst protecting what matters most to customers.
“The need for reform is urgent and these changes, which do not require legislative change, should be enacted quickly by Ofcom. They just need to get on with it.”
