The recent announcement of EP Holding (EPH) making a formal offer to acquire International Distribution Services (IDS) marks a landmark in the European parcel and postal world.
This deal, initiated by the newly established entity EP UK Bidco Ltd (Bidco), reveals the collaborative efforts of Czech billionaire Daniel Křetínský and Slovak tycoon Patrik Tkáč, who controls J&T Capital Partners. This partnership, formalized in late 2020, has now led to a strategic bid which could well reshape the landscape of the postal and delivery service industry.
Key players and their stakes
Daniel Křetínský and Patrik Tkáč‘s collaboration through EPH has been a critical factor in this takeover attempt. Křetínský holds a majority stake in EPH with 50% plus one share, while a group of managers holds 6%, and Tkáč controls 44% minus one share. This ownership structure is mirrored in the planned acquisition of IDS (the owner of both Royal Mail and GLS Groups), indicating a unified front in their strategic ambitions.
Financial and non-financial commitments
The financial terms of the offer remain consistent with the improved proposal presented in mid-May, following the rejection of an initial offer of 320p per share by IDS management. However, the non-financial commitments secured in the takeover documents are particularly noteworthy.
Křetínský has committed to maintaining the universal service obligation for Royal Mail’s 130,000 employees, ensuring six-day-a-week deliveries for at least five years. Additionally, he pledged to maintain current salary and benefit levels for two years post-acquisition, addressing key concerns of both employees and government ministers.
In an interview with the Financial Times, Křetínský emphasized the importance of out-of-home delivery systems, warning that without immediate investment, Royal Mail’s market share could suffer. He envisions installing approximately 20,000 remote mail parcel boxes across the UK to enhance efficiency and reduce costs.
Future plans and market reactions
Despite these assurances, concerns remain. Jeremy Hunt, the UK Chancellor of the Exchequer, for instance, questioned the sufficiency of Křetínský’s three-year commitment not to break up Royal Mail. This commitment includes the intention not to dispose of GLS, with Křetínský expressing interest in acquiring additional companies to expand their footprint.
EPH’s involvement in the postal industry extends beyond the UK. Its subsidiary VESA holds a significant stake in PostNL, the market leader in the Benelux region. The non-financial commitments made to IDS could serve as a blueprint for future attempts to gain control over PostNL. However, any move on PostNL is unlikely to occur before the IDS deal closes in Q1 2025. Factors such as upcoming stamp price increases and legislative changes in the Dutch postal service regulations make a pre-closure bid less feasible.
Implications for competitors
The potential impact of the IDS takeover extends beyond the UK. InPost, partly owned by another Czech investor, PPF, relies on Royal Mail for to-door deliveries while focusing on out-of-home delivery solutions in the UK. The rise of parcel lockers, a key element in Křetínský’s plan for Royal Mail, poses a competitive challenge to InPost or Quadient. This increasing competition in the UK market highlights the strategic importance of the planned investments and their potential to alter the competitive landscape.
Křetínský is right to stress the importance of OOH, which we see as one of the only ways to maintain a financially and ecologically sustainable USO, but without the posties and unions on board, this may end up being a bridge too far.
To complicate matters further, any plan to create a meaningful alternative to DPD’s pan-European network via GLS requires a strong presence in the UK. Give the issues at stake at Royal Mail, this would imply partnering or buying a meaningful national player(s). We have a few bets on this, but that’s for another article.
Conclusion
EPH’s bid to acquire IDS represent a strategic maneuver by Křetínský and Tkáč, aiming to reshape the European postal and delivery services industry. The deal’s financial and non-financial commitments reflect a comprehensive approach to securing stakeholder support and addressing market challenges. As this story unfolds, the implications for competitors, market dynamics and future investment opportunities will be closely watched, marking this takeover as a potentially pivotal moment in the industry.