(Bloomberg) -- Czech billionaire Daniel Kretinsky plans to fund the takeover of International Distribution Services Plc, owner of the UK’s Royal Mail, with both equity and debt.

The tycoon’s EP Group plans to use £1.2 billion ($1.5 billion) of equity, and about £2.3 billion of debt to fund the transaction, the head of M&A for his EP Corporate Group, Roman Silha, said in an interview Wednesday. Kretinsky, who also spoke exclusively to Bloomberg, said Royal Mail is in need of investment now in order to maintain its market share.

“We believe for the future success of IDS and of Royal Mail it is really beneficial to create a situation where they have a clear owner backing the long-term strategy,” Kretinsky said. 

The tycoon’s EP Group has agreed to buy the shares it doesn’t already own in IDS and to protect Royal Mail as a “key part of the fabric of UK society.” A year ago, Kretinsky said he wasn’t actively considering a takeover of IDS — which also owns parcel and freight delivery services firm GLS. But the need for investment, in particular in the out-of-home parcel delivery both for Royal Mail and GLS, made him reconsider.

With a net worth according to the Bloomberg Billionaires Index of $8.1 billion, the tycoon has spent a decade cobbling together an empire that stretches from power plants to retail and media, with his most recent purchases targeting mostly entities in financial distress. 

Although not in dire straits, Royal Mail’s business model faces critical challenges as it grapples with a decline in letter writing and the rise in parcel deliveries tied to e-commerce. IDS this month reported another annual loss for the year ended March 31. 

“The problem with IDS is that, because of the past issues of Royal Mail, the first priority of the company was logically to regain the trust of investors, delivering quarter by quarter,” Kretinsky said in the interview. “While understandable for a listed company, we think that strategy is not the right one for a postal operator and universal service obligation provider.” That’s because the company has to operate all across the UK, with a cost base that’s difficult to reduce.

The debt to fund the deal has been fully underwritten by BNP Paribas, Citi, Societe Generale and Unicredit, with £1.1 billion in the form of a term loan that will be for five or six years, Silha said. The rest will be bridges that EP would like to replace with bonds in the two or three years following the closing of the deal, or to be repaid with proceeds from EP Holdings, he said. 

“The package is structured in a way that IDS will maintain an investment grade rating; it was a condition for us,” he said.  

Kretinsky’s £3.6 billion takeover of the parent of Royal Mail on the eve of a UK general election looks set to unleash a struggle over the future ownership of Britain’s postal service. He has pledged not to break up the group for at least three years and to deliver letters six days a week for the next five years. 

Still, the deal, coming just days after the election was called, is likely to face opposition from UK politicians who have previously voiced concern about Kretinsky already owning a chunk of the former state-owned company. His stake is currently more than 27%.

In the UK, Kretinsky also has stakes in grocer J Sainsbury Plc and Premier League football club West Ham United.

The 48-year-old owner of the largest privately-held energy conglomerate in Europe has seen his fortunes soar, buoyed mainly by rising power prices during the continent’s crisis. His main company, the Prague-based Energeticky a Prumyslovy Holding AS, had €24.2 billion of revenue in 2023, less than the record €37.1 billion reported in 2022 due to the energy crisis in Europe but still three more times than in 2020.

The billionaire has sought to diversify, completing the takeover of troubled French grocery chain Casino Guichard Perrachon SA in March. He got a green light last week from Germany’s Thyssenkrupp AG’s supervisory board to buy a 20% stake in its Steel Europe unit — and is in discussions to buy an additional 30%. He’s also bidding for the embattled IT services firm Atos SE, a former French tech champion now in need of a rescue. 

The IDS investment fits within EP’s strategy to diversify from energy, with wholefood and retail distribution as well as logistics being the two big areas of focus for the group, Kretinsky said.

The takeover of IDS is expected to be completed in the first quarter of 2025, and needs antitrust approval not only from the UK and the European Commission, but from other countries where GLS operates, including the US, Canada and Serbia.


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