Should we be worried by the Russian business links of the man trying to buy Royal Mail?

With an interest in a pipeline for Russian gas, the Czech billionaire is now facing ministerial scrutiny. But that might be the least of the problems facing anyone running Britain’s postal service, writes Chris Blackhurst

Daniel Kretinsky has been nicknamed the ‘Czech Sphinx’ (Reuters)

There is an air of inevitability about the government’s decision to call in and review Daniel Kretinsky’s takeover bid for the Royal Mail.

If nothing else, political expediency dictated that the Cabinet Office, with help from the Department for Business and Trade, would want to be seen to be scrutinising the Czech billionaire’s £3.57bn offer for the shares it does not already own in the national postal service’s owner, International Distribution Services (IDS). It will take the wind out of opponents, in parliament and the media.

The fact that Kretinsky’s EP Group is already the largest shareholder in IDS and effectively enjoys huge influence over the Royal Mail is neither here nor there. Nor is it relevant that the previous government looked at him when he raised his stake in IDS from 25 per cent to 27.5 per cent in August 2022 and cleared the move.

Other national assets and household-name brands have been sold to foreigners without this level of inspection. The National Lottery, sold to a company belonging to another Czech with a background not unlike Kretinsky’s, springs to mind.

No matter. This is now – there’s a new regime in charge and Sir Keir Starmer and his colleagues want to be seen playing by the book.

Also, the Royal Mail is different. It’s part of the very fabric of the UK. Imagine, if there was no Royal Mail, what then?

Justification for the government’s action comes from the thought that not many nations would allow such a key business to fall into private hands, let alone foreign ones. Even more unlikely is countenancing a sale to someone with links to a country that is currently (and historically, for periods) no friend of the UK.

Kretinsky owns a stake in one of the main gas routes from Russia into Europe; called EUStream, it’s a Slovakian pipeline that supplies gas from Russia to Western Europe and Ukraine. He’s insistent it’s only a transmission-operation, that he does not buy gas from Russia or have dealings with Russia.

The review is not the same as those merger or market inspections conducted by the competition authorities or industry watchdogs. It’s specifically into the national security implications. That will cover his ties, or lack of them, to Russia and the risks that might ensue.

Rishi Sunak’s administration said it would explore the national security aspects of a full takeover when the bid was announced in May but then chancellor, Jeremy Hunt, said ministers were not opposed in principle to the sale.

IDS chiefs did meet Kemi Badenoch, then business secretary; they discussed the bid and changes they wanted to make to the universal service obligation (USO), which guarantees delivery to every home in the UK six days a week. Kretinsky has committed to maintaining first-class deliveries six days a week and keeping the Royal Mail headquarters in the UK for five years. He supports an existing Royal Mail proposal to cut second-class deliveries to every other weekday.

To placate workers and the union, Kretinsky’s people have indicated they would be willing to introduce an incentive scheme. Instead, the union is calling for employee ownership of a significant stake in Royal Mail. Ideally, they would like renationalisation… but that is not going to occur.

Kretinsky’s PR is not helped by his enigmatic nature and historic reluctance to speak publicly. For that, he has earned the nickname “the Czech Sphinx”.

Aged 49, he is the son of a university professor father and a judge mother. He was raised by his stepfather, well-known Czech photographer Vladimir Zidlicky.

Kretinsky trained as a lawyer and joined J&T, the central European finance and private equity house. J&T invests across energy, property, sports, media and healthcare. He became a partner in 2003 and a year later, took charge of the leading football club, AC Sparta Prague.

Subsequently, he split with J&T to form EP Group; via a subsidiary, it owns 49 per cent of the EUStream pipeline.

For someone so keen to remain in the background, Kretinsky is not averse to putting himself in the spotlight. He is a part-owner of the Czech News Center, which publishes the tabloid Blesk. He’s also the holder of a large minority stake in the French newspaper, Le Monde.

He owns shares in J Sainsbury – again not a low-profile company. This purchase was followed by another headline-grabbing buy: of the retail chain Foot Locker. And another, along with business partner Pavel Horsky, when he acquired 27 per cent of West Ham United and became a director of the football club. He’s been linked, too, with a tilt for the Telegraph Group.

It’s hard to discern a common thread. He thinks his buys are undervalued and have potential, but they’re in different sectors and they don’t square with someone who eschews the limelight.

In terms of an asset that is at the very centre of British life, that permanently arouses interest from the media and is of political importance both locally and nationally, it’s difficult to imagine anything that fits the bill quite like Royal Mail.

It’s a hornet’s nest where labour relations are concerned. It may provide an essential service but, financially, it’s not in great shape. Royal Mail barely makes a profit, despite the growth in parcels from internet shopping. That may explain Kretinsky’s interest: other, European delivery firms are highly profitable. But then again, they do not employ such a large workforce – they’re more automated and they do not have the USO to contend with.

He’s playing his cards close and is going with the flow, not wishing to cause upset, but if Kretinsky is going to make his £5bn investment pay then he is going to have to make major changes. That is bound to bring him into conflict with the workers, MPs, press and consumer groups.

Until then, he’s got the government’s security review to contend with. That could well prove a lot easier than turning round Royal Mail.