IDS shares bounced on Wednesday after the Royal Mail owner announced it had agreed a takeover deal worth up to 370p to shareholders.
After fairly smooth negotiations with a group controlled by a Czech billionaire, the IDS owners have agreed on 360p in cash and up to 10p in dividends to eligible shareholders. The group had previously offered 320p, which was rejected by the IDS board.
Many will argue that the offer fundamentally undervalued the business’s future potential, but given the IDS share price’s recent performance, it’s easy to see why the deal has been agreed upon.
IDS has had a rollercoaster ride as a public company. Royal Mail listed at 330p and was met with strong investor demand, leading to periods above 500p. However, regulatory pressures, falling volumes, competition, and strike action have consistently dogged the company, and shares hugged the 200p mark for months on end.
While investors are cheering the news on Wednesday, sending IDS shares 3.3% higher, the deal is far from done with the government having the final say in whether it goes ahead.
“The first hurdle has been cleared in Daniel Kretinsky’s attempts to buy the owner of Royal Mail. The price has been agreed and recommended by the board, now comes the hard part in getting the government to approve the deal,” said Dan Coatsworth, analyst at AJ Bell.
“The big question is which political party is going to be in power to decide, given the general election is only five weeks away. Takeovers often take ages to complete, meaning there is a high chance that Labour will be the one to decide, judging by the latest polls.
“Chancellor Jeremy Hunt has suggested the takeover would not be opposed in principle, but his view might soon be irrelevant. Meanwhile shadow business secretary Jonathan Reynolds welcomed assurances that the proposed new owner of Royal Mail will respect the company’s history and tradition and offered a series of undertakings so as not to rock the boat with the UK operations. Labour says it would take the necessary steps to ‘safeguard its undeniable identity and place in public life’.”
If the deal goes ahead, it will be another lowly-valued UK company snapped up by overseas investors and taken private.