- Author, Simon Jack and Tom Espiner
- Role, Business editor & business reporter
The prospective new owner of Royal Mail has stated that it will not shirk its obligation to deliver letters across the United Kingdom six days a week for as long as it operates the service.
“As long as I live, I completely rule it out,” Czech billionaire Daniel Kretinsky told the BBC.
Mr Kretinsky ensured that Royal Mail’s board accepted a £3.6 billion offer.
Shareholders are expected to approve the deal on September 25, but the government also has a say in whether the deal goes ahead.
Currently, the Universal Service Obligation (USO) requires Royal Mail to deliver letters nationwide six days a week for the same price, but there are questions about whether the service could be restricted in the future.
In an exclusive interview with the BBC, Kretinsky also stated that he would be willing to share the profits with employees if he received the green light to buy the group.
However, he apparently rejected the idea of giving employees a stake in Royal Mail, as the unions had demanded in return for their support.
Royal Mail’s board in May approved a £3.6 billion takeover bid by Mr Kretinsky for the 500-year-old company, which employs more than 150,000 people. Including assumed debt, the offer is worth £5 billion.
However, because Royal Mail is a company of national importance, the government has the ability to review the deal and, if necessary, block it.
In addition to keeping the new government on his side, Mr Kretinsky also faces the task of convincing postal unions that the proposed deal will benefit workers.
The USO is a potential sticking point for both the government and the unions.
Royal Mail is required by law to deliver letters six days a week and parcels five days a week to any address in the UK for a fixed price.
How well this works in practice is another question. Ten years ago, 92 percent of first-class mail arrived on time. At the end of last year, this figure had fallen to just 74 percent, according to the regulator Ofcom.
Royal Mail is pushing to water down this requirement, saying it wants to limit second-class letter delivery to every other working day. This would save £300 million and lead to “fewer than 1,000” voluntary redundancies.
“Unconditional commitment”
Mr. Kretinsky has committed himself in writing to comply with the USO, but only for five years.
And after that, the new owners could theoretically just get out.
However, Kretinsky told the BBC: “As long as I am alive, I completely rule this out and I am sure that anyone who could become my successor would understand that completely.”
“I say this as an absolutely clear, unconditional commitment: Royal Mail will be the provider of the universal service obligation in the UK, I would say forever, for as long as the service is needed and for as long as we exist.”
Mr Kretinsky added that the five-year written commitment was “the longest commitment ever offered in such a situation”.
Another possible stumbling block for the deal, however, is the future corporate structure.
Unions would welcome renationalisation of the company, but Dave Ward, general secretary of the Communication Workers Union (CWU), told the BBC that this would be “difficult in the current political and economic environment”.
Instead, the CWU is pushing for “another model of ownership,” namely employee ownership of companies.
To gain support for the takeover, the union is demanding employee participation in the company and other concessions, including employee representation on the board of directors.
It states that profit sharing “will not be sufficient to ensure our support and the support of the workforce.”
Further strikes possible
If the union cannot get its demands met, it will not rule out industrial action, Ward said. Its members have already gone on strike in 2022 and 2023.
Although Mr. Kretinsky said he is “very open” to profit sharing, he is not a proponent of shared ownership.
“I don’t think that participation is the right model,” he said. “The logic is: profit sharing, yes, [but an] The ownership structure leads to great complexity.
“What happens, for example, if the employee leaves? He has shares, he leaves, he does not work for the company, he [still] must be remunerated.”
Kretinsky said he did not want to create an “anonymous structure” but instead “compensate the people who work for the company and create value for the company.”
The union is also concerned about job losses and changes in the contractual conditions of postal workers.
Mr Kretinsky has guaranteed that there will be no redundancies or changes in working conditions, and only until 2025.
“If we are more successful and need to deliver more packages, we will need more people, not fewer,” he said. “So layoffs are not actually part of our plan at all.”
He said that if management, union and employees work together, “we will be successful.”
Another concern is the possible break-up of the company.
Royal Mail’s parent company’s profit last year was generated entirely by its German and Canadian logistics and parcel business GLS. Royal Mail itself made losses.
Mr Kretinsky has promised not to split off GLS or to sell the parent company The company is over-leveraged, although borrowings will increase if the deal goes through.
But he still has a long way to go before he can convince the CWU.
“I can’t think of any other country in the world that would simply hand over its entire postal service to a foreign investor,” said Mr Ward of the CWU.
However, Kretinsky said the postal unions are well aware that they are “on the same ship and that we need that ship to be successful. And once we have done that, we will have no real problems because the sky is blue for everyone.”
The union cannot stop this deal, but the government can block it under the National Security and Investment Law.
Business Secretary Jonathan Reynolds said he would closely examine the assurances and guarantees given and urged Mr Kretinsky to work constructively with the unions.
Mr Kretinsky may say that he and the unions are ultimately in the same boat, but at present they are not in agreement.
Who is Daniel Kretinsky?
Daniel Kretinsky began his career as a lawyer in his hometown of Brno before moving to Prague.
He then made a lot of money with energy interests in Central and Eastern Europe.
This includes Eustream, which transports Russian gas via pipelines that run through Ukraine, the Czech Republic and Slovakia.
He then invested in other assets, including a nearly 10 percent stake in British supermarket chain Sainsbury’s and a 27 percent stake in Premier League club West Ham United.
The Czech businessman’s fortune is reportedly worth around £6 billion.