(Bloomberg) -- The owner of Britain’s Royal Mail said it rejected a £3.1 billion ($3.9 billion) bid from Czech entrepreneur Daniel Kretinsky because it “significantly undervalues” the company.

International Distributions Services Plc said it turned down the cash offer, worth 320 pence a share, on April 11. The shares surged 28% on Wednesday, closing at 276 pence — still well below the offer price.

“The board believes the timing of the proposal is opportunistic,” IDS said in a statement. “It does not reflect the growth potential and prospects of the company under a new management team, a significant modernization program underway at Royal Mail” and the potential for regulatory easing. 

Kretinsky’s EP Group, which already holds a 27.5% stake, had said earlier in the day that it’s considering options and wants to “engage constructively” with IDS. A new approach is likely, according to people familiar with the proceedings who didn’t wish to be named because the deliberations aren’t public.

Royal Mail is attracting takeover interest from one of Europe’s most acquisitive billionaires after weathering a protracted labor dispute. EP Group said private investment was crucial for the company, which has struggled to cope with changing trends in the delivery sector.

“Weak financial performance, poor service delivery and a slow transformation, in the face of a market going through structural change, have put the business under unsustainable pressure,” the Czech conglomerate said in a statement.

Under the UK’s takeover rules, EP Group has until 5 p.m. on May 15 to either announce a firm intention to make an offer for IDS, or walk away.

A bid for the former state-owned business could face opposition from some UK politicians who have previously voiced their concerns about the stake that Kretinsky already owns.

In recent years, he has quickly built up a portfolio of assets across Europe. In the UK, he also has stakes in grocer J Sainsbury Plc and Premier League football club West Ham United. In France, Kretinsky’s consortium has taken control of grocer Casino Guichard Perrachon SA, alongside media investments. 

Diversifying Assets

Kretinsky has been diversifying away from core energy assets, and his interest in IDS fits the strategy of investing in industries that he sees as providing essential products and services to people and businesses, according to a person familiar with the situation.

Royal Mail is grappling with a decline in letter-writing and the rise in parcel deliveries due to e-commerce. Members of the Communication Workers Union voted to accept a new pay deal last year after months of strikes.  

The money-losing company has also pushed for the government to relax rules forcing it to deliver letters on Saturdays, which it has said is unsustainable. This was rejected by the government last year. 

The regulator Ofcom said in January that moving to three-day letter deliveries would save Royal Mail up to £650 million a year. The company said earlier this month that it had made a proposal to Ofcom to deliver second-class letters only three days a week.

Analysts have previously said Kretinsky could look to break up IDS, which also includes the more profitable Amsterdam-based GLS logistics business.

Royal Mail was privatized in 2013. The government sold its remaining stake in 2015.

The approach from Kretinsky was earlier reported by the Financial Times. 

(Updates with deadline for bid in seventh paragraph. An earlier version was corrected to remove reference to Le Monde stake that was sold)

©2024 Bloomberg L.P.