Skip to content

Royal Mail acquisition generates £146m bonanza in advisory fees

Unlock Editor’s Digest for free

Bankers and other advisers are expected to get up to £146m in fees for helping Czech billionaire Daniel Křetínský’s takeover bid for the owner of Royal Mail, in a development that risks further angering postal workers of the former state group.

Banks including Barclays, Bank of America, Goldman Sachs, BNP Paribas, Citigroup and JPMorgan will collect as part of the payment that includes financing fees as well as payments for legal and public relations advice, according to an offering document sent to shareholders on Wednesday . .

The payment, which follows a complex process in which Křetínský had to undergo increased scrutiny by the UK government and a large unionized workforce, comprises approximately £89.1 million in expenses to be paid by his EP Group and a estimated £56.9m bill for London-listed Royal Mail owner International Distribution Services.

The majority of the fees will go to financing Křetínský’s work. I treat everything in cash which values ​​IDS at £5.3bn including debt.

If the deal is approved, IDS’s fees and expenses will amount to about 1 percent of the transaction value, putting it at the upper end of the historical range, according to a Previous Financial Times analysis.

The total payment remains below other massive fees, such as the nearly $1 billion that The advisors were paid of the £46bn alliance between drugmakers Takeda and Shire in 2018.

But the relatively high rates risk drawing the ire of the postal workers union, which has long opposed the privatization of Royal Mail and has threatened to go on strike if Křetínský does not meet their demands to protect labor rights and postal service standards.

In an apparent effort to appease those workers, EP Group also said Wednesday that it was considering “potentially offering a form of employee engagement model in the business” that could include a profit-sharing mechanism.

The Communications Workers Union, many of whose members receive dividends from IDS after shares were distributed to staff following privatization, has already demanded “a new ownership model for royal mail where our members and clients have a direct voice and vote in key decisions.” He has also called for “the creation of a golden share,” a type of share that gives the owner veto power over business decisions.

The Labor Party, which is leading the polls to win next week’s general election, has also said the takeover will be “rigorously scrutinised”, adding that it will “explore new business and governance models for Royal Mail so that workers and customers who rely on Royal Mail services can have a stronger voice.”

Barclays, Bank of America Securities and Goldman Sachs have assisted IDS, which was also advised by law firm Slaughter and May. BNP Paribas, Citigroup and JPMorgan have advised EP Group, which worked with law firms Kirkland & Ellis and Paul Weiss.

While at least a portion of the payments for financing and financial advice depend on approval of the deal, legal advisors have charged EP Group and IDS fees on an hourly or daily basis, according to the filing.

EP, Goldman, Barclays and Paul Weiss declined to comment. Royal Mail, the other banks and law firms did not immediately respond to a request for comment.

IDS shareholders were encouraged on Wednesday to accept EP Group’s offer of 370 pence per share, about 70 percent higher than the share price before Křetínský’s offer was formally announced, by August 25.

The transfer of shares to EP Group could also see a collective payout of £677,973 to current IDS directors, including £264,317 for chief executive Martin Seidenburg, whom EP Group intends to retain in his role.