The Labour party manifesto released today highlights plan to ‘robustly scrutinise’ Royal Mail takeover. The party wants to give workers and customers a bigger say in how Royal Mail is run, however the Czech bidder might take the view Labour is interfering too much with postal provider if it wins election.
As shares in Royal Mail parent company IDS wobbled as Labour manifesto was published, Dan Coatsworth, investment analyst at AJ Bell, comments on the plans as follows:
“Labour doesn’t seem keen to let Royal Mail slide into foreign ownership without guarantees that protect workers and the people who rely on the postal service, namely the whole of the country.
“While Czech bidder Daniel Křetínský has already pledged a series of undertakings to whoever is in government, Labour explicitly referencing the company in its election manifesto implies it will not be a pushover if elected to Number 10 on 4 July.
“Labour’s intention to let workers and customers have a ‘stronger voice’ in how the company is run would give them nearly the same rights as a shareholder. Křetínský might think that is a step too close to nationalisation.
“Křetínský no doubt wants to take Royal Mail out of the public spotlight so that it can be fixed without investors demanding constant updates. But Labour drawing up a list of demands because Royal Mail is a vital part of UK infrastructure could effectively keep that spotlight shining bright. That may present an even bigger hurdle for the bidder to clear.
“Royal Mail is so engrained in the UK’s infrastructure system that any foreign bidder would find it hard to take the business private and do what they want behind closed doors. Investors seem to share that view judging by the share price reaction since the formal bid on 29 May.
“The offer is 370p but shares in parent company International Distributions Services have consistently traded below that level since the bid was made. That means it is far from a done deal.
“Shares in International Distributions Services wobbled the second Labour’s manifesto came out, dropping even further. They fell from 332p to 326p, which is the market’s way of saying it thinks there is even less of a chance that the takeover will complete. The shares have since recovered most of the lost territory, albeit still to a level well below the 370p price on the table.”
