Candover moves into mail with £349m DX deal
Friday 07 July 2006
Candover, the private equity company, yesterday took the fight to the ubiquitous Royal Mail after agreeing to pay £349m for DX Services, the private post group spun out of the former conglomerate Hays 18 months ago.
Royal Mail still has a market share of more than 96 per cent in the UK, despite attempts to open up the market to competition.
Paul Kehoe, the chief executive of DX, said: "There has been 350 years' worth of inertia in this market and the red post boxes continue to dominate."
Candover's purchase of DX and another private mail company, SMS - two of the bigger competitors to Royal Mail - was applauded by the postal regulator.
"Postcomm welcomes the move. It shows the value that commercial companies place on the newly competitive postal market," a spokesman said.
Marek Gumienny, the managing director of Candover, said it is keen to acquire more UK mail companies to strengthen its position further.
"It's a big market out there, worth $6.5bn [£3.54bn] a year. We will invest to get the top line growing," he said.
The DX takeover brings the ownership of the business full circle, since Candover previously owned Hays after backing a management buyout of the business in 1987. It floated it again two years later.
Candover's offer of 415p a share represents a significant premium to DX's share price and compares with the 260p that it was valued at on demerger from Hays only 18 months ago.
DX Services has struggled since it left the Hays' stable, and has done little to dent Royal Mail's dominance. Mr Kehoe was appointed in November after a series of profit warnings and has initiated cost-cutting exercises.
'The business had lost its way," Kehoe said.
Candover has not disclosed the price it has paid Barings, a division of ING, to buy SMS which provides business-to-consumer mail and specialises in the registered delivery of items such as passports and credit cards.
The merged business will have a combined revenue of around £175m and handle more than 270 million mail items a year. Royal Mail handles around 22 billion items a year.
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