- Business

Is Royal Mail ripe for break-up or even a takeover?

The word is that the busted flush of Royal Mail UK could be split from the European and US parcel courier called GLS

Is Royal Mail ripe for break-up or even takeover?

Until recently it was perhaps heresy to think so. Her Majesty’s Royal Mail, founded more than 500 years ago was, if not a national treasurer, a service for which many had ingrained affection.

Even after the float in 2013 that converted it to a public company listed on the stock market, it had a certain level of protection, both political and actual.

It is still mandated to provide a Universal Service, the idea that it is one price to deliver a letter anywhere in Britain.

Lately though, the company has struggled. The letters business has seen profits collapse. The more profitable parcels business is doing ok, but it faces tough competition from UPS, City Sprint, myHermes and many others.

Today the business admits it will make a “material loss” for the year, though the figures were still better than the City expected.

Moreover, City eyes are drawn to recent news that Czech billionaire Daniel Kretinsky – the “Czech Sphinx” who owns Sparta Prague football club – has become the largest single shareholder.

The word is that he would like to split off the busted flush of Royal Mail UK from the European and US parcel courier called GLS.

Royal Mail wouldn’t comment on any of this. But perhaps it is interesting that the latest annual report does note: “In the medium term, an international presence is clearly important; the opportunity remains to create more value, and sustainable profits for shareholders.”

Russ Mould at AJ Bell says: “You could conceivably look to spin off GLS from Royal Mail (UK), but that would still leave the issue of who would want to own the latter and how you would value it. GLS’ profits and cash flow will also come in handy right now as support for the overall company, as management tries to further adapt Royal Mail (UK)’s cost base to an ongoing mix shift away from letters toward the fiercely-competitive parcels business.”

So, far from a straightforward task then. But no longer looking impossible.

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