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Vesa Increases Stake in Royal Mail

By Lisa Botter

Vesa Equity Investment Sarl has increased its stake in Royal Mail plc to 8.2%, according to a Tuesday, June 16, regulatory filing.

Czech billionaire Daniel Kretinsky’s investment fund has been increasing its holding in the company since first taking a 4% stake on May 1.

The increase makes Vesa Royal Mail’s second largest shareholder behind Schroder Investment Management Ltd.

Deutsche Bank AG analyst Andy Chu in a May note said there is a potential for a bid for the company that was established in 1516 by King Henry VIII.

Though his investment vehicles, Kretinsky earlier this year increased his stake in French retailer Casino Guichard-Perrachon SA. Kretinsky also holds a 29.99% stake in German supermarket operator Metro AG after a failed takeover bid and a 40% stake in Mall Group, an online retailer operating in Central and Eastern Europe.

“We have no insight into his investment strategy but these investments suggest that Mr. Kretinsky has a deep value strategy and this could explain his investment in the Royal Mail,” Deutsche Bank said in the note. “We have no idea as to the strategy of Vesa Equity Investment for RMG going forward and whether they view RMG as just a financial investment or as an acquisition target.

“Given the potential risk of a bid for RMG … even though we see little scope for any significant strategic changes at RMG, and in our view nothing that would technically block a potential deal (such as a golden share) other than shareholder approval, we move our recommendation from sell to hold,” the analyst added.

Royal Mail has seen its financial position worsen. The company’s shares have fallen more than 20% this year and it scrapped its dividend at the end of March to conserve cash during the coronavirus crisis.

On May 15, the company’s CEO, Rico Back, abruptly stepped down with immediate effect. Back had been at the helm for less than two years, according to relationship mapping service BoardEx, a sister company of The Deal.

Back’s time as CEO has been plagued by weak financial performance and deteriorating industrial relations with the Communications Workers Union.

He has also struggled to implement plans to modernize the 500-year-old organization.

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