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IThere is an air of inevitability about the government's decision to call for and review Daniel Kretinsky's takeover bid for Royal Mail.
At the very least, political expediency dictated that the Cabinet, with the help of the Department of Trade and Business, would want to be seen examining the Czech billionaire's £3.57bn bid for the shares he does not already own in the company that owns the national postal service, International Distribution Services (IDS). This will take the edge off opponents, in parliament and in the media.
It is not relevant that Kretinsky's EP Group is already the largest shareholder in IDS and effectively has enormous influence over Royal Mail. Nor is it relevant that the previous government took this into account when it increased its stake in IDS from 25 to 27.5 per cent in August 2022 and gave the green light to the move.
Other national goods and well-known brands have been sold to foreigners without this level of scrutiny. The National Lottery comes to mind, sold to a company belonging to another Czech with a similar background to Kretinsky.
Never mind. This is now: there is a new regime in power and Sir Keir Starmer and his colleagues want to be seen to be playing by the rules.
And Royal Mail is different. It is part of the very fabric of the UK. Imagine, if there was no Royal Mail, what would have happened?
The justification for the government's action is based on the idea that not many countries would allow such a major company to fall into private, let alone foreign, hands. Even more unlikely is allowing a sale to someone who has ties to a country that is currently (and historically, for periods) not friendly to the UK.
Kretinsky owns a stake in one of Russia's main gas routes to Europe, called EUStream, a Slovakian pipeline that supplies gas from Russia to Western Europe and Ukraine. He insists that it is only a transmission operation, and that he does not buy gas from Russia or have any dealings with Russia.
The review is not the same as merger or market inspections carried out by competition authorities or industry watchdogs. It focuses specifically on national security implications. That will cover its links, or lack thereof, to Russia and the risks that could arise from them.
Rishi Sunak's administration said it would explore the national security aspects of a full takeover when the bid was announced in May, but then Chancellor Jeremy Hunt said ministers were not opposed in principle to the sale.
IDS bosses met Kemi Badenoch, then business secretary, with whom they discussed the proposal and the changes they wanted to make to the universal service obligation (USO), which guarantees delivery to every UK household six days a week. Kretinsky has pledged to maintain first-class deliveries six days a week and to keep Royal Mail headquartered in the UK for five years. She supports an existing Royal Mail proposal to reduce second-class deliveries to every other working day.
To appease workers and the union, Kretinsky's people have indicated that they would be prepared to introduce an incentive scheme. Instead, the union is calling for employees to own a significant stake in Royal Mail. Ideally, there would be renationalisation – but that is not going to happen.
Kretinsky's public relations are not helped by her enigmatic character and her historical reluctance to speak in public. This is why she has earned the nickname “the Czech Sphinx.”
He is 49 years old, the son of a university professor and a judge. He was raised by his stepfather, the well-known Czech photographer Vladimir Zidlicky.
Kretinsky trained as a lawyer and joined J&T, the Central European private equity and finance firm. J&T invests in energy, property, sports, media and healthcare. He became a partner in 2003 and a year later took over the leading football club, AC Sparta Prague.
It was later spun off from J&T to form EP Group, which through a subsidiary owns 49 percent of the EUStream pipeline.
For someone so willing to stay in the background, Kretinsky has no qualms about putting himself in the spotlight. He is co-owner of the Czech News Centre, which publishes the tabloid bleskHe also holds a significant minority stake in the French newspaper, The world.
He owns shares in J Sainsbury, a company that has not gone unnoticed either. This was followed by a headline-grabbing purchase of retail chain Foot Locker. And another, together with business partner Pavel Horsky, when he acquired 27 per cent of West Ham United and became a director of the football club. He has also been linked with a possible investment in the Telegraph Group.
It's hard to discern a common thread. He believes his acquisitions are undervalued and have potential, but they are in different sectors and don't fit with someone who shuns the spotlight.
For an asset that is at the very heart of British life, constantly in the spotlight and politically significant at both local and national levels, it is hard to imagine anything comparable to Royal Mail.
As far as industrial relations are concerned, it is a hornet's nest. It may provide an essential service, but financially it is not in great shape. Royal Mail barely makes a profit, despite the growth in parcels from online shopping. That may explain Kretinsky's interest: other European courier companies are very profitable, but they do not employ such a large workforce: they are more automated and do not have to deal with the USO.
He is playing his cards close to his chest and going with the flow, not wanting to cause trouble, but if Kretinsky is to make his £5bn investment pay off, he will have to make major changes, which will no doubt bring him into conflict with workers, MPs, the press and consumer groups.
Until then, it will have to deal with the government's security review, which could prove a lot easier than taking down Royal Mail.
