The UK government has given its nod to the £3.6 billion takeover of Royal Mail’s parent company by Czech billionaire Daniel Kretinsky’s EP Group, after the company agreed to a series of legally binding undertakings that addresses key concerns surrounding the operation and ownership of the postal service.
The government would hold a golden share in the Royal Mail and this would confer upon it the ability to decide all major matters related to ownership, the location of its headquarters, and its tax residence. EP Group also agreed to maintain the Universal Service Obligation, that required daily letters to be delivered from Monday through Saturday, and parcels Monday through Friday. The company has promised to preserve this service as long as it retains ownership of Royal Mail. In the spring, Kretinsky assured them that he would uphold the USO in its present form “for as long as I am alive.”
The USO itself is under review, where Royal Mail is suggesting that if second-class deliveries are made every other weekday, it will save the business up to £300 million annually. In addition to these undertakings, the government has emphasized the importance of ensuring a financially stable Royal Mail with strong links to communities that other providers might overlook.
Business Secretary Jonathan Reynolds was quoted as saying that the government is committed to maintaining essential postal services for all areas of the UK. Kretinsky stated that he was confident that investment by EP Group would place Royal Mail in the right position to succeed, to deliver high-quality services for customers while modernizing operations.
Under the terms of the deal, EP Group agreed to provide unions with 10% of any dividend distributed to Kretinsky as well as establish a workers’ group that will meet with Royal Mail directors monthly to help make employees’ voices stronger within company decisions.
The purchase of International Distribution Services which controls Royal Mail is expected to be concluded in early next year. This happens amid significant challenges facing Royal Mail, including falling letter volumes and financial losses. Despite such hardships, Kretinsky will invest in infrastructure, such as delivery lockers, to improve efficiency in the fast-growing parcel delivery sector. Regulator Ofcom, which recently fined Royal Mail £10.5m for failing to meet delivery targets, said it will ensure that the new owners are made accountable for improving performance and announced plans to publish new guidelines next year to make the service sustainable.