Royal Mail and Anglo American shareholders prepare for final takeover offer

Shareholders of Royal Mail and the mining company Anglo American await a deadline for firm offers on Wednesday. If they are not met, two of Britain’s largest companies could be sold to foreigners.

Czech billionaire Daniel Kretinsky made an approach to International Distributions Services, which runs Royal Mail. Meanwhile, Australia’s BHP wants to buy Anglo American, a stalwart in London’s FTSE 100.

According to UK takeover law, companies are given a short window of time after an approach before they must make a firm bid or walk away. This is known as the “put-up or shut-up” deadline in the City. The deadline for both companies is 29 May.

The EP Group bid, made by Kretinsky, who made his money from coal-fired electricity stations, is the one that appears to have the best chance of success. IDS stated earlier this month it was “minded” to recommend the proposal if a formal offer was made following talks.

Kretinsky’s bid values the post office at £3.5bn. However, this is still far below the £5.3bn value that the company achieved in late 2021. IDS shares traded at 324.6p Tuesday morning. This was well below the EP Group’s 370p per share offer. If enough investors think there’s a good chance that the deal won’t go through, shares will trade below the offer price.

The IDS board warned on Friday in its delayed annual report that Kretinsky’s bid might create risk for the company’s finances if new owners struggled to maintain current loans and secure additional funding.

If Kretinsky makes a firm bid, the takeover of a 508-year old postal service by a non-Russian firm will be closely scrutinized. Jeremy Hunt has stated that the government will examine the implications for national security. It is likely that whoever won the general elections on 4 July would continue this policy.

BHP’s attempts to acquire Anglo American have been less successful. Anglo American has refused three takeover bids. The last one was worth £38.6bn. BHP increased its initial offer of £31bn. Some analysts believe that there is little scope for increasing the bid. It would be the biggest in the history mining industry.

The combined company will be a major player on the global commodities markets, including those for iron ore and potash. It would also have a significant presence in the metallurgical coal market, which is used to make steel. BHP is also believed to be interested in Anglo American’s assets, especially copper. Copper plays a crucial role in the transition towards a net-zero energy system.

Anglo’s Chief Executive, Duncan Wanblad has responded to this bid with a plan to overhaul the 107 year-old company. This includes a promise that the business will be broken up and sold, as well as its platinum division, De Beers Diamonds.

Analysts are worried that British companies are undervalued compared to their rivals from other countries. Stuart Clark, portfolio manager at Quilter investors, warned investors last week to be wary of the “comforting boost in investors’ portfolios” that increased mergers-and-acquisitions (M&As) activity can provide.

He said that a renewed focus should be placed on improving the competitive environment for UK businesses and the UK Stock Market. “This combined with a rise in economic activity will do much more for investor returns than the sweet rush of acquisitions.”

If the target companies wish to have more time for negotiations, they can request a deadline extension from the Takeover Panel. Anglo American extended its deadline by a week after being pushed into negotiations by investors.

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