Royal Mail deal unlikely to avoid politics - the City says

Royal Mail’s proposed takeover by Daniel Kretinsky's EP Group is unlikely to escape government scrutiny, especially if the Labour party wins the next election and is in power by the time the deal is due to close, that’s the view of one City analyst on Thursday.

The proposed £3.5 billion takeover, which would put the UK postal company’s in ‘foreign’ ownership for the first time, made headlines on Wednesday afternoon and has since sparked public debate.

Much of the attention has been on Royal Mail’s public service obligations, and, whether the sale of the company that was privatised in 2013, under David Cameron’s government, presents a risk to the public interest.

A press report in the Daily Mail, citing un-named sources, claimed government ministers were not planning to intervene in the matter.

Elsewhere, however, City analysts were looking at the prospect in quite opposite terms.

"We remain highly sceptical on the prospects of government clearance, especially if it falls to a potential future Labour government to decide," Liberum analyst Gerald Khoo said in a note.

Chris Beauchamp, chief market analyst at IG, questioned: “"I don’t know whether the bid has much chance in an election year really.

And, according to AJ Bell’s Danni Hewson, UK regulator OFCOM may also scrutinise the proposed deal.

In the UK, the National Security & Investment Act gives the government the power to intervene in takeovers and similar situations related to entities where there is a significant public interest, such as critical national infrastructure.