Royal Mail takeover by Czech billionaire approved
4 min read
The UK government has approved Czech billionaire Daniel Kretinsky's £3.6 billion takeover of Royal Mail's parent company, EP Group, with commitments to maintain services and protect jobs.
The UK government has officially approved the £3.6 billion takeover of Royal Mail’s parent company, International Distribution Services (IDS), by Czech billionaire Daniel Kretinsky’s EP Group. The deal was granted the go-ahead after Kretinsky’s group agreed to a series of legally binding commitments designed to protect the future of Royal Mail and its services.
Under the terms of the agreement, the government will maintain a “golden share,” which ensures that it must approve any significant changes to Royal Mail’s ownership structure, headquarters location, or tax residency. Additionally, EP Group has committed to preserving the Universal Service Obligation (USO), which requires the delivery of letters six days a week and parcels five days a week, a crucial part of Royal Mail’s operation. Kretinsky has previously pledged to uphold this commitment “for as long as I am alive,” emphasizing his long-term intentions for the company.
However, the USO is currently under review, with Royal Mail proposing changes that could reduce second-class deliveries to every other weekday, potentially saving the company up to £300 million annually. The proposal has been sent to Ofcom, the UK’s communications regulator, which is examining the issue. Ofcom Chief Executive Dame Melanie Dawes indicated that the regulator would look at the economic sustainability of the service, especially given the ongoing decline in letter volumes. Ofcom is expected to release plans next year to address these challenges and ensure the service remains financially viable.
Business Secretary Jonathan Reynolds expressed confidence that the deal would help secure the future of Royal Mail, particularly its ability to serve communities that other providers may not reach. He described the settlement as a step toward ensuring the financial stability of Royal Mail and protecting its essential service. Kretinsky also praised the agreement, highlighting the “unprecedented commitments” made by EP Group, underscoring its intention to be a long-term investor and to modernize Royal Mail’s services to better meet customer needs.
The takeover deal, which will see EP Group acquire IDS, is expected to be finalized early next year. As part of the agreement, EP Group will maintain the Royal Mail brand and keep its headquarters and tax residency in the UK for at least five years. Additionally, the company has reached an agreement with unions representing Royal Mail workers. Under the terms of this deal, employees will receive a 10% share of any dividends paid to Kretinsky, and a new workers’ group will be established to meet monthly with Royal Mail’s directors to give employees a stronger voice in the company’s governance.
Dave Ward, general secretary of the Communications Workers Union (CWU), welcomed the deal, calling it the best opportunity to secure the future of Royal Mail. However, he clarified that the union had not agreed to any changes to the USO and stressed that further discussions were needed.
In addition to acquiring Royal Mail, EP Group also owns GLS, a highly profitable European parcel business, which made more than £300 million in profit last year. Kretinsky plans to use GLS’s parcel expertise to help Royal Mail regain market share in the growing and profitable parcels business. By integrating innovative delivery solutions, such as out-of-home delivery lockers, Kretinsky aims to build a pan-European logistics network that will benefit both Royal Mail and the broader EP Group.
Kretinsky, who also holds significant stakes in West Ham United and Sainsbury’s, as well as a gas transmission service, has faced scrutiny over his business dealings, particularly regarding his past links to Russia. Earlier this year, the UK government reviewed the national security implications of the takeover, given the strategic importance of Royal Mail’s services. However, Business Secretary Jonathan Reynolds defended Kretinsky as a legitimate businessman, noting that his alleged connections to Russia had already been thoroughly examined when he became the largest shareholder of Royal Mail nearly two years ago.
Royal Mail, which was privatized a decade ago after being separated from the Post Office, has struggled financially in recent years, leading to mounting losses. The company was recently fined £10.5 million by Ofcom for failing to meet delivery targets for first and second-class mail. Ofcom’s Dame Melanie Dawes stated that it would be up to the new ownership to implement improvements and that the regulator would hold Royal Mail accountable for meeting future performance targets.
Royal Mail is investing in technology and infrastructure to improve its service, but Jenny Hall, director of corporate affairs, emphasized the need for the USO to be reformed to reflect changing consumer behavior. With letter volumes having halved since 2011, Hall suggested that Royal Mail must adapt to the realities of a shrinking postal market.
The approval of EP Group’s takeover marks a pivotal moment for Royal Mail, as it faces challenges from declining letter volumes and the need for modernization. With substantial investment from Kretinsky’s group, the company hopes to strengthen its position in the parcel business while continuing to serve all corners of the UK.
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