The Czech billionaire who will be the new owner of Royal Mail revealed plans to restructure the company. This could threaten the employment of tens and thousands of postal workers, as well as thousands of red pillar boxes that are the trademark of the Royal Mail.
Daniel Kretinsky has made a rare comment in public. His interests were recommended for a £3.5billion takeover by the board at Royal Mail parent International Distribution Services.
Kretinsky’s offer for the company sparked speculation that he had a larger plan to merge Royal Mail, and/or the European sister business of Royal Mail with PostNL, a privatised Dutch post giant in which Kretinsky holds a 31% stake.
Daniel Kretinsky claimed that modernisation will be easier if Royal Mail is not in the public eye
Kretinsky told Reuters: “Logistics companies must be prepared to invest in order to not miss the out-of home delivery wave.
He said that he would invest up to £400m in Royal Mail for the creation of a network of dropboxes, delivery lockers and continental-style dropboxes. This will eliminate the need to have packages and post delivered directly to households.
“We think that if [IDS and Royal Mail] don’t respond correctly on the out of the home solutions, it could have a negative impact on their market share. Any shrinkage in market share, especially in the UK would be disastrous.
It is an exciting time for the European Postal Market. In the next two or three years, we will know which company will take on the role of out-of home delivery.
Only half of UK e-commerce companies offer remote mailbox or out-of home locker pick-up. This is a worldwide trend that has not taken off in the UK.
Online sellers and buyers can decide when and where to deliver their internet purchases. This is known as Pudo, or pick-up-and-drop-off in the industry.
Its supporters say that it is an efficient, convenient and cost-effective way to deliver. This eliminates the unreliability associated with not being able deliver to a residential address. Detractors claim it’s a cost-saving ploy to eliminate postmen and postal workers. This could mean the end of many red pillars boxes that have been a staple of British high streets and villages for over 100 years.
We will give management permission to quickly implement such a rollout, said Kretinsky. He added that he envisaged installing about 20,000 remote mail parcel boxes in Britain.
He said that such modernisation plans and initiatives would be easier to implement for Royal Mail when it was not in the public spotlight as a listed company. Kretinsky said in takeover documents filed Wednesday that “Royal Mail…and the IDS Group would be better positioned to obtain and structure this investment as a privately held company.”
The unions of Royal Mail, who are scheduled to meet Kretinsky in the next few days, will be alarmed by the proposal to eliminate much of what is known as the “final mile” delivery. This requirement is part and parcel of Britain’s Universal Service obligation.
These documents provided numerous assurances contractually from Kretinsky to try to win the 130,000 Royal Mail workers over and to the ministers, who have the final word on whether or not the takeover can proceed.
For a five-year period commencing at the date of a completed acquisition, Kretinsky pledged that Royal Mail would uphold the obligations of the universal service to deliver six days a week to households on a one-price-goes-anywhere basis but will continue to support Royal Mail’s campaign for Ofcom, the regulator, to relax the rules; will ensure that Royal Mail continues to recognise the CWU and CMA Unite in accordance with the relevant agreements in place with the unions; and for a period of “at least two years” contractually commit that base salaries, wage rates and bonuses “will, at a minimum, be maintained” and that benefits and allowance packages “will be no less favourable than those in place as at completion of the acquisition”.
The chancellor expressed concerns that Kretinsky’s three-year promise not to dismantle Royal Mail was unsatisfactory.
In documents published on Wednesday, the billionaire who was recommended to take over Royal Mail by its listed parent at 370p per share, said that “he will ensure that for the three-year period beginning and following the completion of the purchase, there is no change of control in GLS or Royal Mail”.
GLS, the European courier company that is sister to Royal Mail and the IDS group, has a very profitable business model.
In the City, it has been long assumed that Kretinsky is interested in IDS because of GLS. GLS was long regarded as the “jewel on the crown” for the group. Royal Mail’s financial stability would be at risk if the group was split up.
Jeremy Hunt, speaking to LBC radio, said that those deciding on the bid must “very carefully” examine the pledge.
“I cannot predict what will happen in five or ten year’s time, but three years are a long time. I am sure that the government will continue to monitor it. It is possible that we may decide to extend the program beyond this time frame. “But that’s only for three years.”
Hunt stated that he did not oppose the Kretinsky takeover and the future of Royal Mail under foreign ownership.
The chancellor stated: “I believe that in order to modernise our economy, we must attract investment from around the globe.”
Kretinsky also pledged to continue using the Royal Cypher for five years and the use of the Royal Mail name. The company’s headquarters and tax residency will remain in the UK.
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