Before I start discussing International Distributions Services (LSE: IDS) and the IDS share price, I’ll start with a recap of recent stock market movements.
Currently, the UK’s elite FTSE 100 index stands just 0.2% below its 52-week high and a similar level under its all-time intra-day high of 8,047.06 points, hit on 16 February 2023. Meanwhile, the US S&P 500 index lies 5.4% below its record high of 5,264.85 points, reached on 28 March.
This share suddenly soared
Go back a week and more and the International Distributions Services share price was in decline. On Tuesday, 16 April, this widely held stock closed at 214.2p, 26.4% below its 52-week high of 291.2p recorded on 22 December.
Then last Wednesday, some great news arrived out of the blue, sending IDS shares soaring. The reason? An unexpected takeover approach for the company from a deep-pocketed, acquisitive Czech billionaire.
Daniel Křetínský and his EP Group made an indicative £4.5bn offer to buy the entire business, formerly known as Royal Mail. This valued the UK’s universal postal service provider at 320p a share — a near-50% premium to its closing price the previous day.
However, several of the group’s leading shareholders were quick to dismiss this offer as ‘opportunistic’ and ‘an absolute joke’. Some claim that GLS — the company’s European logistics arm — alone could be worth £4 a share.
As is typical in M&A (mergers and acquisitions) battles, the FTSE 250 company’s board was quick to reject this opening offer. Thus, the man known as the ‘Czech sphinx’ has until 15 May to make a formal offer for IDS or walk away.
With a 27.5% holding, Křetínský is already the largest stakeholder in IDS. But I suspect that it will take a lot more than 320p a share to win over long-suffering shareholders in this former state-owned monopoly.
We sold our IDS shares
I feel I must make two disclosures at this point. My wife and I owned IDS shares from June 2022 until December 2023, selling out for a small profit late last year. Also, Daniel Křetínský is a major shareholder in West Ham United, of which I am a fan.
According to various reports, Křetínský intends to return with a higher offer to win this battle. But even at the original 320p, the IDS share price has nearly 15% upside from the current 278.35p. Of course, should he walk away, then the shares could slump southwards again.
What next?
In Europe, GLS is a highly profitable outfit for IDS, but the Royal Mail’s postal service is heavily loss-making. Also, the UK arm was hit by sustained and painful strike action last year. Even so, the group has a leading market share of about a quarter of UK parcel deliveries.
Twenty years ago, Royal Mail delivered about 20bn letters a year, but this figure has crashed to a forecasted 7bn deliveries this year. Despite this volume collapse, Křetínský clearly sees value in the wider group.
If he were to return with a bid of 360p a share, then this would be a 29.3% premium to the IDS share price today. For now, I will sit back on the side-lines as an ex-shareholder and await any future fireworks!
