Winners (and losers) from the £3.6bn Royal Mail takeover – as investors prepare to give deal their stamp of approval

The proposed sale of Royal Mail to a foreign billionaire for £3.6billion will lead to a windfall for some investors – but others are set to lose out if the deal goes ahead.

Czech tycoon Daniel Kretinsky has been given the all-clear by ministers to buy the postal service’s parent company International Distribution Services (IDS) for 370p per share.

That paves the way for Royal Mail to fall into foreign hands for the first time in its 508-year history. 

The ultimate decision will fall to shareholders, who must vote to approve the deal, while regulators can still have a say. 

So what does it mean for investors, will they make or lose money from the deal, and is there still time for others to cash in?

Anyone who bought shares in Royal Mail when it listed on the London stock market more than a decade ago looks likely to receive a small windfall.

The shares were sold for 330p each when the Coalition government privatised the company in 2013.

Kretinsky – who is known as the Czech Sphinx – is now offering to pay 370p for each share. That represents a 40p per share gain for those who bought in at 330p.

Due to overwhelming demand at the time of the privatisation – 700,000 members of the public applied for shares – retail investors were allowed to buy a maximum of 227 shares each.

Those who bought the maximum paid £749.10. They now stand to get £839.90 if the sale to Kretinsky, 49, goes through. That amounts to a profit of just over £90.

Postal workers will do better. Some 150,000 staff, including posties, were handed 613 shares each worth just over £2,000 in the privatisation.

Employees who have held on to all their shares will make £2,268 if the deal goes through.

The takeover may therefore seem attractive to staff as well as those who bought shares in the company at the start. Others will have bought and sold shares since privatisation.

Some will be sitting on handsome gains. Others on hefty losses. The shares peaked at 631p in 2018.

Someone who bought £1,000 of shares at this price will only get £586 in the takeover.

But an investor who bought when Royal Mail shares fell to 118p in 2020 is now in the money. A stake that cost £1,000 at that point is worth £3,136 under the terms of the deal.

Shareholders now have a decision to make after the Government waved through the Czech businessman’s bid.

Once investors holding 75 per cent of the stock back the deal, it will go through – unless it is blocked by the regulators.

Shares last night closed up 0.8 per cent, or 2.8p, at 361.8p, which is below the offer price and suggests that there is still some doubt about whether the deal will go ahead.

An investor who bought £1,000 shares at 362p today would make around £22 if the takeover goes ahead at 370p.

This may actually be less than the dealing fees, so it might not be worth the hassle unless an investor is willing to pump in a large amount of cash. And if the deal is blocked by investors or regulators, the share price may tumble.

Concerns: Royal Mail shares are currently trading at around 362p, which is below the offer price and suggests that there is still some doubt about whether the deal will go ahead

As such, investors may be tempted to sell their shares now, even though they are trading at slightly less than the 370p they will get in the takeover.

Richard Hunter, head of markets at broker Interactive Investor, said: ‘For investors, it is a question of deciding whether they believe the deal will go through, which seems most likely although not guaranteed.

‘Approval from the Government is certainly one of the final and major hurdles.

‘The news lifted IDS shares to 362p, as against an offer of 370p.

‘The reason for the discrepancy between those prices is the market recognising the admittedly unlikely outcome that shareholders do not vote the deal through, or that the Competition and Markets Authority decides to look into the takeover.

‘If the deal were to be scuppered, the shares would fall sharply as a result.

‘The current share price suggests that the deal is more likely than less to pass, in which case existing holders of IDS could wait until the 370p is received, probably in the early part of next year. 

‘By the same token, however, there needs to be recognition that this is not yet a slam dunk deal.’

Dan Coatsworth, an investment analyst at investment platform AJ Bell, said: ‘The Government and union news implies the fate of the company is now in shareholders’ hands.

‘They have to choose to accept or not accept the deal.’

He added: ‘The final stages of the takeover look to be a formality and the clock is counting down towards IDS’s likely departure from the UK stock market.

‘It’s been a whirlwind ride for investors who originally bought at 330p in 2013, saw the share price exceed 630p in 2018 and hit a record low of 118p in 2020.’

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