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Bankers and other advisers are expected to net up to £146mn in fees for assisting Czech billionaire Daniel Křetínský’s takeover bid for the owner of Royal Mail, in a development that risks further antagonising postal workers at the former state-owned group.
Banks including Barclays, Bank of America, Goldman Sachs, BNP Paribas, Citigroup and JPMorgan will cash in as part of the payout that includes financing fees as well as payments for legal and public relations advice, according to an offer document sent to shareholders on Wednesday.
The payout, which follows a complex process in which Křetínský had to navigate heightened scrutiny from the UK government and a large unionised workforce, comprises an estimated £89.1mn in expenses to be paid by his EP Group and an estimated £56.9mn bill for Royal Mail’s London-listed owner, International Distribution Services.
The largest chunk of fees will pay for the financing of Křetínský’s all-cash deal that values IDS at £5.3bn including debt.
If the deal passes, IDS’s fees and expenses will amount to roughly 1 per cent of the transaction value, placing it at the higher end of the historical range, according to a previous Financial Times analysis.
The total payout remains below other massive fees such as the almost $1bn that advisers were paid from the £46bn tie-up between drugmakers Takeda and Shire in 2018.
But the relatively high fees risk provoking the ire of the postal workers’ union, which has long opposed the privatisation of Royal Mail and has threatened to strike if Křetínský does not meet its demands to protect labour rights and postal service levels.
In an apparent effort to appease those workers, EP Group on Wednesday also said it was considering “potentially offering a form of employee participation model in the business” that could include a profit-sharing mechanism.
The Communication Workers Union, many of whose members receive dividends from IDS after shares were distributed to staff following privatisation, has already demanded “a new model of ownership for Royal Mail where our members and customers have a direct say in key decisions”. It has also called for “the creation of a golden share”, a type of share that gives the owner a veto over business decisions.
The Labour party, which is leading in the polls to win next week’s general election, has also said the takeover will be “robustly scrutinised”, adding 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 provided advice to EP Group, which worked with law firms Kirkland & Ellis and Paul Weiss.
While at least part of the payouts for financing and financial advice depend on the deal passing, legal advisers have charged EP Group and IDS on hourly or daily rates, according to the document.
EP, Goldman 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 370p a share, about 70 per cent higher than the share price before Křetínský’s bid was formally announced, by August 25.
The transition of shares to EP Group could also amount to a collective payout of £677,973 to IDS’s current directors, including £264,317 for chief executive Martin Seidenburg, who EP Group intends to keep in his role.