Royal Mail is under threat of foreign ownership after a Czech billionaire’s bid to takeover the company

Daniel Kretinsky wants to take full control of the parent company IDS, which is responsible for the postal service

Royal Mail has rejected a takeover offer from billionaire Daniel Kretinsky of the Czech Republic, as the 500 year old postal service faces foreign ownership.

On April 17, the board of International Distributions Services, which owns Royal Mail revealed that it had turned down a preliminary takeover offer from Mr Kretinsky. He is the reclusive West Ham Football Club co-owner, also known as “the Czech sphinx”.

Royal Mail’s owner was valued at around £3.1bn (or £4.5bn if debts are added).

The offer represented a 50% premium over the closing price of April 16, 2016. IDS’s Board rejected the offer, calling it “opportunistic”.

In the next few weeks, Mr Kretinsky who is estimated to be worth $7.1bn could still make a fresh offer. According to City takeover regulations, he has until 15 May to make a formal offer.

The shares of IDS increased by 28.8pc at 276p on the news of this bid.

Mr Kretinsky already owns 27.5pc of Royal Mail, but his attempt to control the entire company is likely to be controversial.

Royal Mail is a historic company, and its role in UK communications makes it a target for intense political scrutiny. The decision by Mr Kretinsky to increase his shareholding in the company to over 25pc was reviewed under national security, but ultimately cleared.

Jeremy Hunt, Chancellor of the United States, announced that the Government will review how “former monopolies in the public sector” are regulated, to protect the provisioning of essential services.

M. Hunt refused to comment on the takeover strategy directly, but he did tell reporters attending the International Monetary Fund meeting in Washington that “we need to ensure that companies are regulated so that whatever happens to their balance sheets doesn’t damage the public services that we all depend on.”

The powerful Communication Workers Union (CWU), a powerful union of posties, was appalled by the proposal and vowed “publicly” to fight any future bid.

Dave Ward, CWU’s general secretary, stated: “The truth of the matter is that handing ownership of one of UK’s most prestigious institution to a foreign equity shareholder cannot be right. The current model and direction of the firm are also not right.

“Royal Mail must adopt a new ownership model and governance structure that will build a postal service for workers and customers, and not just one that is focused on shareholder profits and driving down service levels and worker conditions.”

EP Group, the company of Mr Kretinsky, said on April 17, that it “recognises Royal Mail as an important national asset”. It said that it was “prepared to support Royal Mail in its transformation and rebuilding into a modern post operator”.

The company added that “weak financial performance, poor customer service and a slow transition, combined with a market undergoing structural change, has placed the business under an unsustainable amount of pressure.

Private investment in Royal Mail is crucial, given the growing competition in the UK postal sector from multinational companies.

IDS stated that the offer “significantly underestimates” the value of the company. They added: “It doesn’t reflect the growth prospects and prospects of Royal Mail under the new management, the significant modernisation program underway, or the ongoing review of Ofcom regarding the future of Universal Service obligation.”

Kretinsky, it is believed, is not planning a hostile bid for the board and will look to get their backing on any offer.

Red Wheel, Royal Mail’s largest shareholder, had previously indicated that it would support a takeover offer, but at a price at least of 350p per share.

BNP Paribas is said to have advised Mr Kretinsky’s bid.

Royal Mail hired Mark Sorrell from Goldman Sachs, the son of advertising magnate Sir Martin Sorrell to work with bankers at Barclays, Bank of America and Barclays.

Analysts speculate that the Czech tycoon could be looking to create a new European parcels company by merging IDS’s GLS courier with PostNL, a Dutch parcel company where he holds approximately a 30% stake. Royal Mail’s plans are less certain.

Mr Kretinsky has already established himself as a major investor in the UK. He owns stakes in Sainsbury’s, and holds a 27 percent stake in West Ham. He owns the Czech football club AC Sparta Prague.

He made his name in the Czech Republic as a young businessman at industrial investor J&T Group. His sphinx moniker was earned because he refused to talk publicly about his investment.