Jhat climbed quickly. A day after Royal Mail workers voted in favor of a pay strike, their employer is threatening to carry out the splits unless a “meaningful operational change” occurs. The UK Postal Service would go one way, taking with it its industrial relations disputes and modernization challenges. GLS, the most profitable parcel operation which is run from Amsterdam and serves continental Europe and North America, would go the other way.
It’s a drastic move on the part of chairman Keith Williams, although the first stage of the deal is only a cosmetic change of name for Royal Mail plc’s holding company to International Distributions Services (a ugly name, but at least it’s not Consignia, the ridiculous nickname briefly adopted a few decades ago until the mockery became unbearable).
But the serious intent-threat has been clearly stated. “In the event that significant change within Royal Mail is not achieved, the board will consider all options to protect the value and prospects of the group, including separating the two companies,” the statement said.
According to Williams, the breakout option simply reflects events on the ground since privatization in 2013. GLS has grown massively, to the point of contributing two-thirds of the group’s operating profits over the past three years. . And, as there are few operational links between GLS and Royal Mail, it is unsustainable to expect the weakling to be held back by stragglers, especially now that the Covid whoosh to UK parcel volumes is on the rise. is faded.
Presented in this way, the case of separation is quite coherent. GLS was the junior partner during the privatization, but this year’s forecast sees it earning up to £350m operationally from a break-even position for Royal Mail, assuming there is no has no strike, after a quarter in which losses amounted to £1million a day. That’s a far cry from last year’s pandemic-inspired £412m operating profit at Royal Mail.
So, yes, two very different businesses are housed under one roof and there is an obvious candidate as a potential buyer for GLS. This is the group’s 22% shareholder, Daniel Křetínský, the Czech billionaire who many say has always been drawn to the idea that the overseas operation would one day go wild.
Yet Williams must also know that privatization has not completely removed Royal Mail from the political arena. It is a regulated company that has an obligation to deliver letters to all addresses in the country at a uniform price. Removing GLS from the group would raise many questions – how much debt to leave to the Royal Mail rump, for starters. The stock market, according to sum-of-the-parts calculations by UBS, currently values the UK Postal Service at £1billion, so should it get a dowry to adjust to independent living? This question would be a dispute in itself.
A successful outcome would see the pay dispute quickly resolved, which is not impossible as there has been no major strike at Royal Mail since privatisation. But the two sides’ positions currently seem miles apart. On the one hand, the CWU union argues that a group which only recently sprayed £400million on shareholders via takeovers and special dividends can afford a pay rise in real terms. On the other hand, management claims that the investor prices were, in fact, from a GLS company which they are ready to whip if things go wrong. The happy medium is very difficult to spot.
Another biotech opts for the NYSE
A successful £2.5bn biotech company has already topped the Alternative Investment Market (Aim), London’s junior stock exchange, you might say. It is therefore reasonable for Cambridge-based Abcam to seek new pastures in search of “cash”, which means more people are trading its shares.
Unfortunately, Abcam decided that New York was that place. It plans to convert its secondary listing on Nasdaq to a single listing and drop its presence on Aim.
It wouldn’t be the first UK-listed biotech company to emigrate, but the timing is terrible. The UK is trying to sell London on tech and still has a (weak) hope of getting SoftBank to re-list chip titan Arm Holdings here.
The main political cheerleader of the patriotic push was a certain Rishi Sunak. Perhaps the candidate for prime minister could demonstrate his powers of persuasion by speaking ahead of the Abcam shareholder vote.
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