The Telegraph: Royal Mail suitor to spend £800m and take on Amazon

[Basildon Bond]

Daniel Kretinsky, the ‘Czech sphinx’ behind a £3.6bn takeover, plans to undercut rivals

James Warrington and Luke Barr | 13 July 2024 • 1:05pm

The Czech billionaire behind a controversial takeover of Royal Mail is preparing to spend £800m on undercutting rivals and rolling out a network of parcel lockers as he seeks to take on Amazon.

Daniel Kretinsky, who has tabled a £3.6bn offer for parent company International Distribution Services (IDS), is planning to slash parcel prices in an effort to win back market share from rivals.

The tycoon will also invest heavily in deploying a network of 20,000 Amazon-style parcel lockers, allowing customers to collect and drop off packages more conveniently.

Mr Kretinsky’s EP Group is planning to spend as much as £800m on the measures over the next three to five years. It underscores efforts by the tycoon, known as the “Czech sphinx”, to build a new parcels powerhouse that can cash in on booming demand in the ecommerce era.

Royal Mail has increased its focus on parcel deliveries amid a decline in its struggling letters business. While the majority of revenues now come from parcels, it has lost market share to rivals such as DPD, Evri and InPost.

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The company also faces tough competition from Amazon’s own proprietary delivery network, which operates around 5,000 parcel lockers across the UK. Royal Mail is more expensive than many competitors. For example, it costs £3.19 to send a parcel of up to 2kg via Royal Mail, compared to £2.79 with DHL.

More broadly, the Czech billionaire is understood to be keen to create a new pan-European retail and logistics empire to rival Jeff Bezos’s company.

Alongside Royal Mail, IDS also owns European parcels business GLS and Mr Kretinsky holds a large stake in Dutch operator PostNL. EP Group’s retail interests include a major stake in Sainsbury’s, while it also controls French supermarket chain Casino and German wholesale group Metro.

Mr Kretinsky’s swoop on Royal Mail has raised eyebrows amid concerns that a key national asset will pass into private hands for the first time in its 508-year history. It is also the first time that any country has allowed its postal service to be controlled by a foreign owner.

It is understood that the Government launched a national security investigation into the deal in recent weeks. Sources close to EP Group expect the takeover to be called in for closer scrutiny.

Mr Kretinsky has already laid out a series of undertakings in an effort to allay concerns about the deal, including maintaining Saturday deliveries for first-class letters, protecting the Royal Mail brand and keeping the company’s headquarters and tax base in the UK.

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In addition, EP Group is in talks with union bosses about a profit-sharing scheme that would see employees handed bonuses if the company meets key financial and delivery targets.

The Czech billionaire’s debt-fuelled swoop has also sparked concerns about soaring interest payments that could hurt the postal service’s bottom line.

The Telegraph revealed this month that the company could be left with additional interest payments of up to £170m as a result of the £2.9bn of fresh loans being used to finance the deal.

Ratings agency S&P has said it is minded to downgrade IDS’s credit rating as a result of the transaction in a move likely to further push up its cost of borrowing.

However, it is understood that Mr Kretinsky plans to ask S&P to link the company’s credit rating to EP Group, which will guarantee financial support if required. EP Group may also pay off some of the £750m bridging loan and issue new bonds instead.

Ultimately, Mr Kretinsky will require government approval for the takeover. In its manifesto, the Labour Party said it would “robustly scrutinise” the deal. The takeover is also subject to shareholder approval.

The non-executive members of IDS’s board, who include chairman Keith Williams and non-executive director Baroness Hogg, will step down once the deal is completed.

Chief executive Martin Seidenberg is understood to have the backing of Mr Kretinsky, however it is not yet clear whether he will stay on in his role.

[scoobydo79]

It will be stripped bare. The only place left for him to make savings will be cutting wages or shedding your jobs.

[Barnacle]

So he wants to compete with a mahoosive retailer who doesn’t even do the same thing as us. Fabulous.

If he continues the trajectory of only concentrating on parcels, that’s a downward spiral to oblivion. The company will become like all the other parcel companies, will struggle to compete and will inevitably cease to exist.

[Smoothbackground]

Amazon Logistics, as distinct from Amazon the e-retailer, does something very similar to Royal Mail: it delivers millions of parcels each year. And it doesn’t just deliver for Amazon the e-retailer (which is obviously its biggest customer, not to mention parent company); it delivers for many other customers too.

[Barnacle]

Amazon Logistics, as distinct from Amazon the e-retailer, does something very similar to Royal Mail: it delivers millions of parcels each year. And it doesn’t just deliver for Amazon the e-retailer (which is obviously its biggest customer, not to mention parent company); it delivers for many other customers too.

You’re being pedantic there. Amazon Logistics is the delivery arm of goods purchased on Amazon, Amazon being made up of millions of retailers, but they all operate under the Amazon banner and have their goods delivered by Amazon Logistics unless the customer chooses a different delivery option.

[TopperGas]

So he wants to compete with a mahoosive retailer who doesn’t even do the same thing as us. Fabulous.

If he continues the trajectory of only concentrating on parcels, that’s a downward spiral to oblivion. The company will become like all the other parcel companies, will struggle to compete and will inevitably cease to exist.

What's the alternative for a postal delivery company concentrate on mail, which itself could virtually cease to exist in the next 5 to 10 years?

[Barnacle]

So he wants to compete with a mahoosive retailer who doesn’t even do the same thing as us. Fabulous.

If he continues the trajectory of only concentrating on parcels, that’s a downward spiral to oblivion. The company will become like all the other parcel companies, will struggle to compete and will inevitably cease to exist.

What's the alternative for a postal delivery company concentrate on mail, which itself could virtually cease to exist in the next 5 to 10 years?

Well they are making a concerted effort to price mail out of existence. None of their promotions and propaganda are designed with the aim of arresting the decline of mail. If you don’t water a plant it dies. They don’t need to ‘concentrate’ on mail, just stop ignoring it in the hope that it will die already.

[clashcityrocker]

None of their promotions and propaganda are designed with the aim of arresting the decline of mail. If you don’t water a plant it dies.

Isn't Delivery to Specification an attempt to arrest the decline? By offering a different product at a reduced price to people who might stop using the service?
And sometimes if you do water a plant it still dies.

[Barnacle]

None of their promotions and propaganda are designed with the aim of arresting the decline of mail. If you don’t water a plant it dies.

Isn't Delivery to Specification an attempt to arrest the decline? By offering a different product at a reduced price to people who might stop using the service?
And sometimes if you do water a plant it still dies.

DTS sounds more like RM routinely delaying mail to save money to me. Nothing to do with providing a better service to encourage mail business.

[clashcityrocker]

DTS sounds more like RM routinely delaying mail to save money to me.

Then you don't understand it.

[Barnacle]

DTS sounds more like RM routinely delaying mail to save money to me.

Then you don't understand it.

Explain it then.

[clashcityrocker]

DTS is a service offered to businesses where their mail is only delivered if that address has another piece of mail.
It is held by the machines and what remains is released on Friday.
They pay a reduced price to encourage them to continue using the mail.

While you might see Patra and Damart catalogues, do you ever see Pretty Thing or Nasty Girl catalogues?
The demographic that responds to those sort of catalogues is literally dying off and with it will go another stream of mail - like bills, bank staements, cheque payments - I could go on.
No amount of "watering" is bringing those things back.
DTS aims to slow the demise of more of it.

[Barnacle]

DTS is a service offered to businesses where their mail is only delivered if that address has another piece of mail.
It is held by the machines and what remains is released on Friday.
They pay a reduced price to encourage them to continue using the mail.

While you might see Patra and Damart catalogues, do you ever see Pretty Thing or Nasty Girl catalogues?
The demographic that responds to those sort of catalogues is literally dying off and with it will go another stream of mail - like bills, bank staements, cheque payments - I could go on.
No amount of "watering" is bringing those things back.
DTS aims to slow the demise of more of it.

That’s how I thought DTS worked.

[SpacePhoenix]

DTS is a service offered to businesses where their mail is only delivered if that address has another piece of mail.
It is held by the machines and what remains is released on Friday.
They pay a reduced price to encourage them to continue using the mail.

While you might see Patra and Damart catalogues, do you ever see Pretty Thing or Nasty Girl catalogues?
The demographic that responds to those sort of catalogues is literally dying off and with it will go another stream of mail - like bills, bank staements, cheque payments - I could go on.
No amount of "watering" is bringing those things back.
DTS aims to slow the demise of more of it.

The remaining DTS stuff is released on the 5th day of passing through the CSS. We think that any other DTS mail for a DP where some mail has hit the 5 day limit also gets released.

[clashcityrocker]

That’s how I thought DTS worked.

So it is not "routinely delaying mail?"