### Mixed Reactions to Royal Mail Takeover Bid Amid Regulatory Hurdles
**Wednesday 29 May 2024 3:53 pm**
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While the Royal Mail deal may face regulatory resistance, the alternative scenario might be worse for the next government.
International Distributions Services (IDS), the owner of Royal Mail, has agreed to the £3.5bn takeover, but the future of Royal Mail remains uncertain.
Shares in IDS rose over four percent on Wednesday as the market welcomed the news that the board had accepted a bid from EP Group, owned by Czech billionaire Daniel Kretinsky. However, the stock is still trading around 334p, below the offer price of 370p, indicating skepticism in the City about the deal’s completion.
Reactions in the City are mixed. Some analysts doubt the deal, citing potential regulatory barriers.
“Now comes the hard part in getting the government to approve the deal,” said AJ Bell investment analyst Dan Coatsworth.
Under the National Security & Investment Act (NSIA), the government can block the deal if national security is at risk. A foreign takeover might raise concerns about the security and continuity of critical postal services.
Liberum analyst Gerald Khoo believes the government will block the takeover, seeing NSIA clearance as a significant obstacle.
“Our expectation is that an appropriate review of the proposed takeover could be lengthy. Even if not, any decision could be affected by the pre-election prohibition on long-term decisions that tie the hands of the next government,” Khoo said.
**Read more: Royal Mail owner ‘minded’ to accept raised £3.5bn takeover offer by Czech billionaire**
### Government’s Position on the Royal Mail Deal
Chancellor Jeremy Hunt has said any takeover bid for Royal Mail would undergo “normal” national security scrutiny and would not be opposed in principle. However, Coatsworth noted that “his view might soon be irrelevant.”
“The big question is which political party will be in power to decide, given the general election is only five weeks away,” he added, highlighting that takeovers can be lengthy processes.
With current polls unfavorable for the Tories, the decision may fall to Labour.
Jonathan Reynolds, Labour’s shadow business secretary, has welcomed assurances that Royal Mail will “retain its British identity and safeguard its workforce with no compulsory redundancies. Labour in government will ensure these are adhered to.
“While the Conservatives have ignored Royal Mail, Labour will ensure that it delivers once again for customers and postal workers,” Reynolds added.
EP Group’s offer includes commitments to maintain Royal Mail’s brand, avoid compulsory redundancies, and keep the company headquartered in the UK.
**Read more: Can Royal Mail owner IDS turn itself around?**
Kretinsky stated: “The EP group has the utmost respect for Royal Mail’s history and tradition. Owning this business comes with enormous responsibility—to the employees and the citizens who rely on its services daily.”
Currently, Royal Mail is struggling with delivery targets, heavy losses, and falling letter volumes. Last week, communications regulator Ofcom launched an investigation into the service’s delivery performance.
IDS has called for “urgent reform” of the universal service obligation (USO) governing Royal Mail, arguing that reducing delivery days could save hundreds of millions of pounds. Ofcom is reviewing these proposals.
Peel Hunt analyst Alexander Paterson noted that neither major political party is showing encouraging signs on USO reform, failing to recognize the magnitude of the change required.
Another analyst told City A.M. that while the deal may face regulatory resistance, the alternative situation might be worse for the next government.
The last thing any new government wants is to fund ensuring the post arrives on time, the analyst said.
This might mean the takeover proceeds without significant delay.
**Read more: Why there’s doubt over Royal Mail’s fourth chief in five years, before she’s even started**
