Royal Mail Takeover Bid Under Investigation
With news of a government probe into Royal Mail's takeover by Czech billionaire Daniel Kretinsky due to potential links with Russia, we ask experts whether the deal is likely to be blocked and what it means for other acquisitions led by companies with Russian ties.
Interview 2
A UK government rejection of the Royal Mail takeover by Daniel Kretinsky would set a strong precedent for any future proposed acquisitions between companies with Russian ties and British infrastructure firms, according to an expert.
Any company with “clear Russian ties” or backed by Russian investments is extremely unlikely to be allowed to take over any part of British critical infrastructure in the current political environment, the expert felt.
The expert, who has several decades’ worth of experience in the mail and logistics sector, said the fate of Mr Kretinsky’s deal with Royal Mail depends on whether the UK government makes a commercial or political decision.
The takeover should be approved from a commercial perspective, but the new government may feel allowing it is too politically unpalatable in the current climate.
The fact the investigation has been launched demonstrates the new Labour government’s belief that it is imperative to be seen to be taking this sort of suggested acquisition seriously, the expert said.
Ultimately, the outcome will depend on whether the government’s investigation into Mr Kretinsky finds any close links to Russia.
The expert said the Czech billionaire is likely to have “a number of skeletons in the cupboard” given that he has built up his wealth on the back of the collapse of the Soviet Union and then the growth of eastern European countries. However, it is unclear how much of this the investigation will pick up.
The expert added that allowing the takeover would offer an opportunity for some “fairly dramatic changes” to the Royal Mail’s structure, at a time when the company is in financial difficulty and in need of making significant efficiency savings.
This could include putting Royal Mail’s struggling core business back into public ownership, which the expert felt would be welcomed by unions and the British people given their affection for the brand which traces its origins back to the Tudor era.
Investors should expect the investigation to take two to three months, although the expert said there would be some urgency on the government’s part to complete the probe as Mr Kretinsky’s bid won’t be “open-ended”.
The investigation will be run by the Cabinet Office with input from the Department for Business and Trade.
Interview 1
The UK government is likely to allow a high-profile takeover of Royal Mail by an eastern European billionaire unless its investigation into his activities finds “substantial ties” to sanctioned Russian individuals, a former British cabinet minister has told Hartford.
The former minister, whose expertise includes international trade and business, said the deal between Czech businessman Daniel Kretinsky and Royal Mail would only be blocked if it emerges that Mr Kretinsky has significant links to either the Putin regime or other Russians subject to sanctions.
UK government officials have launched the probe because of concerns Mr Kretinsky has inappropriate links to Russia, potentially through his ownership of a business called EUStream which carries Russian gas into Europe – according to media reports.
The expert felt that allowing the takeover would create uncertainty about the Royal Mail’s future, as little is known about Mr Kretinsky’s objectives for buying the 500-year old British institution.
They explained that the privatisation of Royal Mail in 2011 was intended to lead to ownership by “institutional investors” such as pension funds and insurance companies which take a long-term view and can help raise capital for the company.
However, the expert said it was currently unclear whether Mr Kretinsky is a reliable and long-term investor or merely looking to strip the company for short-term gain.
But blocking the deal, whatever the reason, would also create a problem of leaving Royal Mail bereft of new investment and other ownership bids.
The expert compared the current state of the market to the steel industry, where people are “trying to get out, rather than get in”.
This means that in the absence of any other viable bids, the government may feel compelled to allow Mr Kretinsky’s takeover unless there is clear evidence of inappropriate links between Russia and Mr Kretinsky – the expert said.
Finally, the expert noted that the Communication Workers Union (CWU), a trade union which represents Royal Mail staff, has raised national security concerns about the deal.
However, the expert was sceptical about the validity of these claims given the union’s history of being staunchly against privatisation.
Asked whether the proposed deal has implications for other acquisitions by firms with potential risks to Russia, the expert said there was a general “tightening” of rules on the purchase of British assets due to the war in Ukraine.
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