The Czech Sphinx takes top spot at Royal Mail amid talk of break-up
THE billionaire known as the Czech Sphinx has quietly become the largest shareholder in Royal Mail, heaping more pressure on the troubled postal service as it faces calls for a break-up.
Daniel Kretinsky, who owns Sparta Prague football club and who made his fortune in energy, has amassed a £250 million stake in the historic FTSE 250 company.
Analysts believe that after years of poor performance by Royal Mail he could push to spin off its European parcel business GLS.
The company is seen as particularly vulnerable to a break- up because it has been without a permanent chief executive since May when it ousted former boss Rico Back, who had overseen a decline in letter volumes and a breakdown in relations with unions.
Kretinsky has been slowly building his stake and now owns more than 13 per cent of Royal Mail.
Last week, Schroders trimmed its stake in the company, meaning Kretinsky’s Vesa vehicle overtook it to become the largest shareholder.
The Mail on Sunday first revealed Kretinsky’s stake-buying in May, triggering a wave of speculation in the City about his intentions. However, he is famously tight-lipped and has yet to reveal his reasons.
Kretinsky, who controls Vesa with his business partner Patrik Tkac and is worth a reported £2.7 billion, made his fortune in energy in Eastern Europe. His company EPH then embarked on a major expansion, snapping up energy transmission networks and gas pipelines, as well as power plants in the UK.
EPH now owns four UK power plants: Eggborough in North Yorkshire, Lynemouth in Northumberland, Langage in Devon and South Humber Bank in Lincolnshire. In March, the company also bought an underground gas facility in Hampshire. And Kretinsky has recently bought stakes in the US department store chain Macy’s and the retailer Foot Locker.
Royal Mail was privatised in 2013 and the Coalition Government floated the company on the stock market. However, the share sale quickly attracted controversy.
Critics argued it undervalued the company as the share price quickly surged and nearly doubled within a few weeks. Since 2018 however, the company’s fortunes have suffered and the share price is now languishing below the float price. Royal Mail has also been hurt by a big fall in letter volumes since lockdown.
In June, City investment firm Alliance Bernstein called for a break-up of Royal Mail, suggesting its overseas parcels division GLS should be sold. It was set up by former boss Back in 1989 when it was known as German Parcel.
Royal Mail has been working to improve its UK business but Bernstein analyst Daniel Roeska said: ‘We believe it would be in shareholders’ best interests to split the company in two and let shareholders themselves decide on the future of the two businesses.
‘If GLS stays within the group, we see a substantial risk that cash flows from it or sale proceeds will be consumed in part by the UK Parcels and Letters transformation.
‘In its current form, Royal Mail Group is worth less than the sum of its parts. Why is Royal Mail the best long-term owner of GLS?’
JPMorgan has said it believed Kretinsky is pushing for a sale of GLS and would leave the UK parcels and letters business UKPIL untouched. Analyst Samuel Bland said: ‘We think [Vesa’s] ability to change anything in UKPIL is limited and presume it is pushing for a disposal of GLS.’