Foreigners are stripping the UK of its assets. Vulture capitalists are swooping down on our historic companies. We need a strategy to defend jobs and services. We will hear lots of arguments over the next few days about why the Czech billionaire Daniel Kretinsky should not be allowed to complete his agreed takeover of Royal Mail. And yet, the more interesting question is this: why on earth would he want it?
In reality, Royal Mail is a dog of a business, and one that is likely to be very difficult to turn around. Kretinsky may well come to regret his latest acquisition.
Royal Mail has been a poorly performing business for years, and it is not about to get any better
After months of negotiations, Kretinsky has today finally won control of Royal Mail. The board of the company has agreed to a £3.6 billion takeover, allowing Kretinsky to complete the acquisition of the business in which he had already built up a 27 per cent stake. To win it, he has made a series of concessions, including maintaining six-day-a-week first class mail deliveries, keeping the branding and maintaining the head office in the UK, as well as protections for its 150,000 employees.
Even so, the deal is already proving controversial. There have been calls for the historic business to be kept in British hands, and plenty of pressure on the Business Secretary Kemi Badendoch to block the takeover. With an eye on the Tory leadership contest in the autumn, Badendoch may well take action. After all, there are not many votes in selling anything with the word ‘Royal’ in its name, at least not in the Conservative party.
And yet, none of this addresses the question of why Kretinsky wants it. Royal Mail has been a poorly performing business for years, and it is not about to get any better. Its main product, letters, has been in freefall for years, as we have all made the switch to emails and WhatsApps. And while there is still a huge market in delivering parcels for all the stuff we buy online it is a fiercely competitive industry – one that may well have stalled as internet shopping stabilises at around 30 per cent of the retail market. The business has a massive workforce with powerful unions that resist modernisation and automation. With a Labour government about to take power, all the extra employment rights and beefed up union powers it is about to introduce will make it harder to achieve the cost savings the business needs. Perhaps worst of all, Kretinsky is being hustled into promises that make the company fundamentally unprofitable just to get the deal through.
True, Kretinsky is a very smart operator. In the Czech Republic, he came from nowhere to build up a fortune worth an estimated $7 billion (£5.5 billion). And yet, much of that money was made in the energy industry, snapping up assets on the cheap. It is possible that he has some clever idea for turning Royal Mail around and minting a fortune from it. And yet, it is far more likely that he is about to get bogged down in a business with little prospect of making any money, and subject to constant interference from British politicians and regulators who, with alarmingly little evidence, appear to have decided they know how businesses should be run. It is a good deal for shareholders – but Kretinsky may well have taken on more trouble than he bargained for.
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