Post Office earmarks pounds 1.5bn for buying spree

THE POST OFFICE confirmed plans for a pounds 1.5bn shopping spree for overseas companies in a bid to fend off growing international competition, earmarking eight companies it was keen to approach.

The Post Office, owner of Royal Mail and Parcelforce, spent more than pounds 300m buying German Parcel in January and wants to grow further. European postal groups are being forced to expand internationally by moves to liberalise the industry.

A Post Office spokeswoman said: "A wave of changes is taking place in the European market, with acquisitions and mergers. Internationally, we foresee a super league of five or six postal authorities, and the British Post Office is determined to be one of them. The acquisition of German Parcel was the first step, and we are certainly not going to stop there. There are eight targets on our radar."

The Post Office is seen as a late-comer to the consolidation. Deutsche Post has taken a stake in DHL, and the Dutch post office bought TNT. The spokeswoman confirmed that the Post Office is keen to raise its stake in General Parcel, a related company to German Parcel.

Some consumer groups are expected to criticise the plans, saying the Post Office should be investing more in its existing UK postal services and keeping down costs to the public.

Key to the Post Office's future expansion will be a government White Paper, due soon, which is expected to grant freedom for the operation to be run more like a private company.

Last year Peter Mandelson, then trade and industry secretary, proposed to allow the Post Office to keep a bigger slice of its profits rather than return so much to the Treasury. It would also be allowed more leeway to buy overseas companies.

In return, the Post Office's monopoly on delivering letters costing less than pounds 1 would be axed, while the operation would be governed by a new regulator.

European rivals have accused the Post Office of using income from the UK letters monopoly to bankroll its purchase of German Parcel.