The takeover of Royal Mail, by a private financier, is a cause for concern. On the long-term, it is fair to say everything about the 500 year-old institution may be in danger.
After a few short years, the string of commitments that the Czech billionaire Daniel Kretinsky made in his bid to buy the parent company of the postal service, International Distribution Services (IDS), which was accepted by the board on Wednesday will be subject to renegotiation.
Relationships with more than 5m companies and 28 million households are at risk. The question of whether customers can still afford to send a letter is a central one. A second question is whether people on the fringes of the vision of the new owner – such as rural residents and the elderly – can be excluded in order to increase the profitability of the company.
Kretinsky offers to buy IDS for £3.57bn and absorb £1.7bn in existing debt. He claims he will buy the company with £1.2bn cash and £2.3bn borrowed funds. This means Royal Mail would be saddled with more debt if the deal goes through.
Businesses that are indebted and deemed strategic by the UK Government, like Thames Water, may use these borrowings to exert influence over regulators and ministers.
Renationalisation is not an option for a minister when a high debt burden is involved. The debt is like a poison that stops ministers from taking decisive action.
There are also the commitments made to maintain Royal Mail as a distinct entity. Kretinsky has promised to keep the brand sacred for five more years.
The promise to keep base salaries and employee benefits will only last two years. A pledge to not dissolve the company, however, is good for three years.
These are small commitments in the context of a company that has its origins back to Henry VIII.
Ministers will no doubt be told to stop making demands on Kretinsky, as this will make him leave, and that Royal Mail will not survive if left alone.
Jonathan Reynolds, shadow business secretary who met Kretinsky during the recent World Economic Forum at Davos has turned away from union demands for renationalisation.
Reynolds welcomed the Czechs’ assurances that Royal Mail will “retain British identity” and protect its workforce, which indicates he would be willing to approve the takeover if Labour wins the election.
In France, the government finances a universal service that not only binds society, but also provides a feeling of collective welfare. Everyone can use paper to communicate for official or friendly purposes. The US Postal Service is also owned and managed by the US.
It is clear that Kretinsky is being audacious in his bid for IDS. It is a bold move to turn a UK public company that has a rich history and close ties with the monarch into a cog of a vast private empire.
The next government must take a firm stance. It is one thing to privatise the company and list it on the stock market, where companies must be transparent in their operations. It is another thing to sell it to a private investor whose main operations are overseas.
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