Shake-up at top of Royal Mail sparks speculation that company could be broken up

[RobertT]

https://www.thisismoney.co.uk/money/mar ... ak-up.html

A shake-up at the top of Royal Mail has sparked speculation that the company could be broken up.

The firm named former Ocado executive Simon Thompson as the boss of its UK operations as it grapples with falling letter numbers and an explosion in parcel deliveries.

The 54-year-old, who spent some of last year running the NHS test and trace app designed to help tackle the coronavirus crisis, was put in charge yesterday, replacing interim chief Stuart Simpson.

Thompson, who has also worked at iPhone maker Apple and supermarket Morrisons, has been tasked with expanding Royal Mail's UK parcel operations after an internet shopping boom during the Covid-19 pandemic has sent demand soaring to record levels.

But his appointment as chief executive of Royal Mail Group's UK arm only – and not the whole business – will fuel speculation that the historic company could be broken up.

The changes come after the departure of former group chief executive Rico Back in May, who was ousted following acrimonious rows with unions that delayed modernisation plans and led to poor performance.

Following Back's departure, the role of group chief has now been abolished.

Instead, Thompson will report directly to the board and have equal status to Martin Seidenberg, the German boss of GLS, Royal Mail Group's European parcels business, a spokesman said. The pair will each get roughly equal salaries of about £525,000 per year.

Keith Williams, who has been executive chairman for the past eight months, will resume his previous role as non-executive chairman. Royal Mail claims the new structure is a better fit because the UK and European businesses have significant differences and each require their own separate strategies.

Williams said Thompson was the right man for a period of 'significant transition' in the UK, while adding that Seidenberg had made an 'impressive' start since taking over as GLS boss last summer.

The chairman, 64, said: 'We have two excellent leaders in place for each of our businesses, focused on the opportunities which they each have to grow and succeed in the future.'

Analysts said the new structure could make a break-up much easier. A spokesman for Royal Mail refused to comment on that suggestion. Daniel Roeska, a senior research associate at Bernstein, said: 'It doesn't close the door on a future break-up.'

[postareale]

RE: Shake-up at top of Royal Mail sparks speculation that company could be broken up

The Royal Mail plc Board of Directors should indeed sell off GLS and use the proceeds of the sale to fund the badly-need capital investment required in the Royal Mail UK business.

Some interesting facts about GLS:

• • Between 2016 and 2017, GLS acquired the California-based next-day parcel delivery company Golden State Overnight Delivery Service, as well as the US overnight parcel delivery company Postal Express.
  • In September 2018 GLS acquired the Canadian parcel delivery company Dicom, expanding operations in North America and Europe.
  • In 2019, GLS was estimated to be worth £2 billion based on an operating profit of £180 million and assuming a price-to-earnings (P/E) multiple of 11x.

GLS CEO Martin Seidenberg's career prior to joining in 2015 was with DHL:

• CEO of DHL Supply Chain Germany and Alps

• CEO DHL Global Mail Crossborder

• Managing Director In-house Consulting DHL Asia-Pacific

DHL International GmbH is a German international courier, package delivery and express mail service, which is a division of the German logistics firm Deutsche Post.

So, why not sell GLS to DHL?

The US and Canadian acquisitions seem to have been part of an over-ambitious plan to grow GLS from a European courier to a Global player. This strategy simply hasn't panned out in the short-term and has been a distraction to the UK business. With Brexit negotiations now concluded, Royal Mail should similarly divest its European subsidiary company and place 100% of its focus on the UK business.

As Keith Williams said: “Royal Mail in the UK is in a period of significant transition and needs to move quickly, put the customer at the heart of everything we do, and adapt our business to better serve changing customer needs."

GLS CEO Martin Seidenberg's history and knowledge of DHL Operations would facilitate the acquisition transaction into the Deutsche Post global business empire.

Royal Mail plc would gain a much required £2 billion cash infusion - to be invested in vital capital projects and financial shoring up underfunded pension funds.

What is not to like about this?

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