From the end of April, the 500-year-old Royal Mail will be controlled by a Czech billionaire who co-owns a football club and is a major investor in a British supermarket – so, why would he want this ailing institution?
“A pair of scissors, one empty teapot and some hot water, please.” The slightly baffled staff at Claridge’s scrambled to comply with Daniel Kretinsky’s breakfast order as he sanitised and moisturised his hands.
The upscale hotel has been serving tea to the global elite for decades but Mr Kretinsky brought along his own packet of Chinese green tea, which he snipped open (hence the scissors) and poured into the empty pot.
He was tall, perfectly groomed, steely-eyed but unfalteringly polite and thoughtful. If you told anyone in the dining room he was a billionaire, they would have no problem believing it.
Known as the Czech Sphinx for his enigmatic style, Mr Kretinsky, who is 49, is worth £6bn according to the Sunday Times Rich List. He lives in plush mansions in Paris and London, was originally a lawyer and made his fortune in European energy markets.
Our meeting was at Claridge’s in June 2024 – I was trying to convince him to give me an interview about his audacious attempt to buy a British institution that was once seen as a national treasure: Royal Mail.
His profile as a buyer was one that unions and ministers typically would be wary of because of his historic connections with Russia – his companies own a gas pipeline that has transported Russian gas to Europe.
But six months on, his bid to buy Royal Mail’s parent company was cleared by the UK government after he agreed “legally binding” undertakings.
The government was awarded a so-called “golden share”, requiring it to be notified of any major changes to Royal Mail’s ownership, headquarters location and tax residency. The deal was also blessed by unions.
Earlier this month, the owner of Royal Mail said that the takeover could be completed by the end of April as the deal cleared the final regulatory hurdles standing in the way.
But step back and Royal Mail seems a strange target for a globally mobile oil and gas billionaire investor to set his sights on. It begs the question why would anyone, let alone a successful international entrepreneur, want to buy this faded relic?
How Royal Mail’s crown slipped
Royal Mail was founded by Henry VIII more than 500 years ago and still carries the royal cipher on its vans. It is part of the fabric of British life and many people still have a fond relationship with their ‘postie’, who walks down their path bringing their letters and parcels to their door.
But in recent years Royal Mail’s crown has slipped. It is losing money and market share, has been fined for missing delivery targets and has made an enemy of its own workforce through a series of bitter strikes.
Royal Mail’s letter business is in steep decline too. It has gone from a peak of 20 billion letters sent in 2004 to under seven billion sent last year.
In December 2024, it was fined £10.5m by the regulator Ofcom for failing to meet delivery targets for first and second class mail.
While the boom in e-commerce has seen the volume of parcels rise, Royal Mail’s share of that more profitable business has been falling as new competitors like DPD, DHL, Amazon and Evri have eaten into its market share.
Royal Mail was split off from the Post Office in 2012 and privatised in 2013 at a value of £3.3bn. Its shares immediately rocketed by 38% on the first day of trading, leading to criticism – from the National Audit Office, among others – that it had been sold on the cheap.
At its peak in Covid-era May 2021, the company was worth more than £6bn but had slumped to just over £2bn when Mr Kretinsky launched his takeover bid last April.
He sealed the deal at £3.6bn – 63% higher than before he signalled his intent, but barely more than it was worth at privatisation over a decade ago.
“Royal Mail is a business that has historically found it difficult to grow revenues by more than costs,” says Alex Paterson, an analyst at Peel Hunt stockbrokers. “It has seen its parcels market share eroded by more dynamic competition that has been able to invest more in technology, and it has struggled with industrial relations to keep staff working towards a common goal.
“This is not a challenge to underestimate nor one that can be overcome quickly, but that requires considerable long-term investment in infrastructure, technology and staff.”
Part of the challenge, and one that puts Royal Mail at a disadvantage compared with its rivals, is that unlike them, Royal Mail has to meet a string of legal and regulatory obligations, says Hazel King, the editor of Parcel and Post Technology International.
Under what is called the universal service obligation (USO), Royal Mail is required by law to deliver letters six days a week and parcels five days a week to every address in the UK. So it cannot pick and choose which business it wants to do.
“Royal Mail must meet their universal service obligation while trying to compete with private firms who often cherry-pick the most profitable business,” says Ms King.
The ‘Czech Sphinx’s’ plan
Mr Kretinsky says he has a plan. His success in the energy sector allowed him to buy a 27.5% stake in Royal Mail’s parent company, International Distribution Services (IDS). And his company – EP Group – intends to build a pan-European conglomerate built on three pillars: energy, retail and logistics.
He sees IDS as the cornerstone of the logistics pillar, with a plan to go toe-to-toe with the likes of Deutsche Post DHL, DPD and Amazon.
The USO has been under review by Ofcom, with Royal Mail hoping that the regulator will reduce the requirement to deliver second-class letters from six days a week to every other weekday. That single move could save Royal Mail £300m a year – putting it back on a break-even footing.