Vince Cable urges Labor to block Royal Mail takeover bid

Labor has been warned this week not to welcome a proposed £3.6 billion deal for Royal Mail by former Business Secretary Vince Cable, the architect of the privatization of the postal service a decade ago.

Cable said Ministers should be cautious about the application of Daniel Kretinsky, the Czech gangster because of his high debt and his links to the Kremlin.

The former Lib Dem Minister’s intervention is heavy because Cable was responsible for the privatization of Royal Mail in 2013 under the Coalition Government. He sold it for £3.3 billion, or £3.30 a share, in a deal seen listed on the London Stock Exchange.

‘The concern about Kretinsky’s proposal is understandable,’ Cable told the Mail on Sunday. ‘The debt settlement and its links with Russia should be carefully considered by Ministers.’

Cable, 81, faced fierce criticism 11 years ago after being accused of agreeing to an airline fee that was undermining business. Shares rose after the announcement, hitting a record high of around £6.07.

Chuka Umunna, the then Shadow Business Secretary, said the group had been sold ‘at a low price’. The former Labor MP has become an adviser to Kretinsky.

Shares closed this week at £3.59, valuing the business at £3.43 billion, a fraction above the initial purchase price set by Cable more than a decade ago.

Cable said he did not think Kretinsky’s £3.6bn bid on the firm was too low, saying: ‘This offer is an increase on the original purchase price of £3.3bn. If the value is so low where are the other applications?’

However, when asked whether he had hoped to take Kretinsky out when he bought Royal Mail, Cable said: ‘We thought about long-term investors.’

Cable has repeatedly defended Royal Mail’s purchase price, a problem that is escalating. It made a loss of £138 million for the six months to 29 September.

In January last year, the former Minister said the decision to buy the shares at £3.30 was long overdue and the coalition Government ‘got the best of us’.

Kretinsky, nicknamed the Czech Sphinx for his ingenuity, made his fortune in the electrical sector. He is the largest shareholder in parent company Royal Mail International Distribution Services (IDS) with a 28 percent stake.

He took over Royal Mail earlier this year with a £3.6bn bid.

If he succeeds, the firm will fall into foreign hands for the first time in its 508-year history.

But the proposal was highly controversial, with Kretinsky apparently agreeing with the Labor Government.

He has agreed to maintain a firm-wide service obligation, requiring mail six days a week.

Other restrictions include not affecting the balance of the Royal Mail employee pension scheme.

Although the proposal still requires a Government hearing under the National Security and Investments Act, Ministers are expected to take action in the coming weeks.

Last month, Business Secretary Jonathan Reynolds appeared to dismiss concerns about the businessman’s takeover, saying Kretinsky had a ‘proper business model’.

But there is still concern about the billionaire’s plans and his international business connections.

In 2021, EP Group, the holding company for Kretinsky’s business empire, signed an £823 million financing deal with a group of banks that includes Beijing-owned Bank of China.

Audits for the EP also revealed that one of its commodity trading firms is involved in a £174 million dispute with a Russian firm after it failed to fulfill a carbon contract when the conflict in Ukraine began.

EP Resources was willing to buy coal from the Russian firm in light of international sanctions.

The dispute is in arbitration, and EP has warned that the outcome is unpredictable.