The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Currently Kretensky owns 27.5% of 950million shares, which leaves approximately 690 million shares that he needs to finance the purchase of. His current bid of 320p will cost him 2.2 billion to purchase the outstanding 690 million shares he doesn't yet own. A new offer of 385p would increase the cost of his bid by 65p per share, which would be approx £450 million on top of the 2.2 billion of his initial offer for a total valuation of 2.65 billion for GLS and RM. This is still not a serious bid and will be rejected. I think his next bid has got to be above 400p before he gets any allies amongst the institutional investors, and higher still for a successful bid.
Mike, Kretinskys been building a stake here since at least early 2020, when the sp was totally bombed out sub £2. Difficult to divine whether or not he has always had the long term goal of taking over IDS, he has however continued to build his stake until he is now in the current position of being able to launch a bid at the time of his choice, i.e. cheap share price and positive alignment of IDS's particular position and that of the wider economy. This is precisely the time he should be making his move and he has been waiting for this moment. Kretensky knows £3.20 is way off the mark. He knew it would be rejected, the response has been registered, and seems to be somewhere around £4.50. Kretensky will be making another offer and knows he will never have he opportunity to own GLS and RM at a better time or price. He has until 15th May, he hasn't got himself into this position just to make a disparaging offer then throw his hand in, and I think if his next offer is not £4.20+ he may well have thrown the opportunity away.
I read somewhere that the board were meeting this week to prepare their defence against Kretinskys bid. Redwheel and other investors are also taking the bid seriously. Even if the defence against Kretinsky is the Nations security, the main players haven't mentioned it thus far, so it is clearly not cut and dried that the act will be applied.
Money, in some ways a buyout and a fat cheque in a single payment would be nice, but I also believe that IDS is on the cusp of achieving its potential and delivering consistent dividends year on year, which, depending on your average share price (particularly long term holders) could easily be 10%+ p.a. The sp will follow and 320p achieved in the next couple of years. I also have a feeling that Seidenberg is a cut above, and capable of doing something special with RM. His plan for the USO was researched, simple, and compliant. I think £4.50 mark would do it for me, but nonetheless the future of IDS is beginning to look more interesting than it has for many rears.
IDS has got the best delivery structure in the country, especially after the investment in the new sorting/ distribution hubs.
The USO will be updated and restructured along the lines defined by Seidenberg because any other course would be suicidal, and the regulator are fully aware of this. Final results released May 22ndish(?) will be good; The timing of Kretenskis bid is no coincidence, and as the largest shareholder he know things we don't.
Macro economic data has turned a corner. Inflation is due another large drop next month when the reduction in energy costs feed in. The consumer is going to feel a lot wealthier, particularly with interest rate cuts looming in less than 4 months. There could not be a better time to buy IDS, especially at the currently absurdly low sp, as it limps towards a startling recovery on the back of an existential conflict with the union, after which even Dave Ward had an anvil on the toe moment and recognised that blinkered socialist ideology and dogma will kill the business.
I don't think there is any doubt that competitors will be looking at IDS. Kretensky has the edge because he only needs to fund the purchase of 72.5% of IDS. If he were to increase what he is willing to pay from 2.2 billion to 3 billion, the offer per share would be £4.36. Kretinsky knows IDS is a cash cow, and Seidenberg will certainly bring RMG to profit.
The potential for IDS at this point in time, the bottom of the economic curve, is absolutely huge. A renewed offer of circa £4.50 would be closer to the ballpark, and will have been considered by Kretensky.
Its late in the day, so I thought I'd just do a quick sum to calculate how much it would cost Kretinsky if he were to pay £3.20 for each of the outstanding shares:
Total number of shares= 950,000,000. He owns 27.5% already, so he has to fund the purchase of the remaining 72.5%.
950,000,000 x .725 = 688,750,000 shares he doesn't currently own.
688,750,000 x £3.20 = £2,204,000,000.
He's got £2.2 billion down the back of his sofa.
IDS rejected initial bid of 320 as opportunistic, a significant undervaluation, and ignoring future potential of the group.
Response from an 'inside source':
- "Czech billionaire Daniel Kretinsky is working on improving an offer for the owner of Britain's Royal Mail, a source with knowledge of the plans said on Wednesday, after his investment vehicle said it had made a non-binding bid this month which was rejected."
IDS's reasons for the rejection of the initial offer of 320p were comprehensive, and made it clear to Kretinsky he's well short of the mark. If the source is correct about another offer, and the strength of the boards rejection of the first offer is taken into account, Kretinsky knows he is going to have to increase the offer significantly to gain any traction with his bid.
The Board of IDS (the "Board") confirms that on 9 April 2024 it received a preliminary and conditional non-binding proposal from EP Group regarding a possible cash offer for the entire issued and to be issued share capital of IDS not already owned by EP Group and its affiliates, namely VESA Equity Investment S.à r.l ("VESA Equity") at 320 pence per share (the "Possible Offer"). VESA Equity is an approximately 27.5% shareholder in IDS.
SUPERSONICTRADER, 5am INSOMNIAC commentator shouting in capitals, lay off whatever it is you're doing its not good for you and addles the brain. 99p sp? very much doubt it. Todays inflation figures down to 3.2%, getting closer to the 2% prerequisite for interest rate reductions. Next months figures will include the April energy price cap reduction, which was around 15%, another big reduction in the in the inflation rate, and real cash into the pocket of every consumer. Also next month final results, which are going to be good, and, I'm happy to have been reliably informed will include a dividend!
Just looked at Q3 update release 18 Jan 2024 07:00.
Had a scan, no mention of dividend! Looking for the group to break even at end of financial year. If no one can tell me where I can see an RNS telling me of a dividend, then it's conjecture, speculation or BS to be direct. Brendy, what conference are you talking about? How come you're so certain?
Derek, I only look in the mirror when I shave. I can't remember ever having to look in the mirror and re-evaluate my sense of self at a strangers or any one else's suggestion.
Just to clarify my point: There are many more addresses to deliver to, and the building boom continues. Currently, this means there are more walks to complete whilst letter volumes decline. The number of walks needs to be reduced whilst complying with the USO.
Seidenbergs proposals are the best solution I have seen to enable this puzzle to be achieved in a cost/green/resource effective manner. His track record is excellent, and he appears to be rapidly adapting to his role as CEO and focusing on RM. I am very positive about all aspects of Royal Mail under his leadership and believe the future will be very successful.
derek rochol: you have an appallingly negative outlook re royal mail. o.k. , the system designed to handle 20 billion letters may have been dismantled to some extent. it would be idiotic not to, considering we are in an electronic age where mail and mobile calls are virtually free and instant. consequently letter volumes have collapsed and that trajectory will continue. people won't pay to lick or sniff or listen to the sound of paper being crumpled as it's thrown in the bin.
in parallel to this, the population and number of addresses have skyrocketed. for r.m. this is a lose lose. instead of looking for reasons to **** off any innovative ideas to square this circle why don't you use your vast experience (no p*ss take) to suggest how seidenbergs proposals could be enhanced. you know, some real ideas to fit the world we currently inhabit, after all didn't you spend your whole life at r.m.?
the goalposts have, and will continue to move, a new philosophy is required and i believe seidenberg is a person of originality and creativity. he has approached this problem in the correct manner by asking customers how they want the system to function and then creating a proposal that really can work.
JB, as you say, could have been done a long time ago, so why wasn't it? No legislation required simplifies it for everyone. It can't become a political issue which I'm sure will be a relief for sunak and starmer, and there is no decision to be made and therefor no issue to kick down the road. Just look at what's been written on this board about what will have to be done to change the USO. Ooh it's going to be so difficult etc., no it isn't it's a piece of p*ss.
Seidenbergs plan's continue to provide a USO, and crucially give RMG the opportunity to stop haemorrhaging cash every year, and and instead of dying, RMG can be built into a successful British business proving an improved service.
A system built for 20 billion letters, servicing a demand of 7 billion letters, forecast to be 4 billion letters in 5 years time. This is farcical and anyone with a fragment of brain can see that a pragmatic solution that continues to serve the requirements of the USO and continue to employ 100,000 people should be seized with both hands.
This is the key line from todays RNS:
'The proposal for reform can be achieved with regulatory change without the need for legislation.'
It appears as if Seidenberg has found more efficient ways to comply with the USO without the requirement of parliamentary approval. This is quite remarkable considering the short period of time he's been in the job. The added plus is that the CWU are unlikely to cause too much fuss as the 1000 anticipated redundancies will be voluntary.
It will be very interesting to see how this moves forward.
Just had a look at ADvfn. It states last trade was at 16:35:12. If you look at the Share trades tab above on this site you'll see the UT trade took place at 16:35:12:
15-Mar-24 16:35:12 216.40 2,753,439 Sell* 215.20 215.50 6m UT
It was a sell for 2,753,439 shares, so the Advfn data is clearly incorrect. The IDS share price tab above will give you access to fridays total trades; buys, sells and by inference unknown trades, of which there were more than 3 million.