Copied and pasted but an interesting read26 Aug 2022 09:41
Daniel Kretínský, the billionaire with a 22% stake in the Royal Mail group, never says much – thus his nickname “the Czech Sphinx” – but he picks his moments. On the eve of the first strike at the postal service since privatisation in 2013, he has been revealed to be planning to increase his shareholding.
We know this only because Kwasi Kwarteng’s department told us. In the formal language, the business secretary “reasonably suspects that arrangements are in progress or contemplation” that would lift Kretínský’s stake above 25%. Thus the planned purchase will be reviewed under the new National Security and Investment Act because Royal Mail, as we were reminded during the long months of Covid lockdowns, is still a critical piece of national kit.
Advertisement
Kretínský’s planned manoeuvre adds another layer of complexity to a situation where the stakes were already high. The current industrial dispute may appear to be a conventional one over pay and working practices, but there’s much more going on. The explicit threat from the boardroom is to break the group into two if a deal can’t be done on how Royal Mail runs itself. “We will look for significant operational change or split the company,” says the chair, Keith Williams.
The split in question is the separation of GLS, the international parcels operation run out of Amsterdam and making annual operating profits of £350m-ish, from Royal Mail, the UK business employing 115,000 people and heading for “material” losses this financial year, according to the group’s financial update issued after the Communication Workers Unions announced four strike days.
The break-up option, then, is one that would leave an independent Royal Mail to sink or swim. The business is facing a decline in letter volumes (still) and stiff competition from the likes of DHL and Amazon in parcels. It is why many City analysts ascribe a negative value to the UK operations within sum-of-the-parts valuations of the £2.5bn group. One does not have to make many assumptions to see how a crisis could unfold in a post-separation world.
The affordability of the universal service obligation, or USO – the requirement to deliver to every address in the land at a uniform price six days a week – might quickly come under pressure. A switch to five days for letters (dropping Saturday) has been rumoured for ages, but only parliament can approve. It is definitely a political matter: protecting the USO was guaranteed at the point of privatisation.
Advertisement
What is Kretínský’s game in seeking a bigger stake? A full bid is perhaps the least likely. Instead, there are probably three possibilities. First, that he likes management’s approach and thinks it will eventually produce a deal to turn Royal Mail into a slicker parcels-focused operation. Second, that he’s gung-ho for a break-up and wants to hold management’s feet to the fire. Third, if GLS shakes loose, he wants to be in pole position to buy it.
Sign In
Follow the stocks
