How the IDS share price could leap 15%+ from here

On Wednesday, 17 April, the IDS share price soared as news of a takeover bid hit newswires. This offer has been firmly rejected, but another could emerge.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Before I start discussing International Distributions Services (LSE: IDS) and the IDS share price, I’ll start with a recap of recent stock market movements.

Currently, the UK’s elite FTSE 100 index stands just 0.2% below its 52-week high and a similar level under its all-time intra-day high of 8,047.06 points, hit on 16 February 2023. Meanwhile, the US S&P 500 index lies 5.4% below its record high of 5,264.85 points, reached on 28 March.

This share suddenly soared

Go back a week and more and the International Distributions Services share price was in decline. On Tuesday, 16 April, this widely held stock closed at 214.2p, 26.4% below its 52-week high of 291.2p recorded on 22 December.

Should you invest £1,000 in Royal Mail Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Royal Mail Group made the list?

See the 6 stocks

Then last Wednesday, some great news arrived out of the blue, sending IDS shares soaring. The reason? An unexpected takeover approach for the company from a deep-pocketed, acquisitive Czech billionaire.

Daniel Křetínský and his EP Group made an indicative £4.5bn offer to buy the entire business, formerly known as Royal Mail. This valued the UK’s universal postal service provider at 320p a share — a near-50% premium to its closing price the previous day.

However, several of the group’s leading shareholders were quick to dismiss this offer as ‘opportunistic’ and ‘an absolute joke’. Some claim that GLS — the company’s European logistics arm — alone could be worth £4 a share.

As is typical in M&A (mergers and acquisitions) battles, the FTSE 250 company’s board was quick to reject this opening offer. Thus, the man known as the ‘Czech sphinx’ has until 15 May to make a formal offer for IDS or walk away.

With a 27.5% holding, Křetínský is already the largest stakeholder in IDS. But I suspect that it will take a lot more than 320p a share to win over long-suffering shareholders in this former state-owned monopoly.

We sold our IDS shares

I feel I must make two disclosures at this point. My wife and I owned IDS shares from June 2022 until December 2023, selling out for a small profit late last year. Also, Daniel Křetínský is a major shareholder in West Ham United, of which I am a fan.

According to various reports, Křetínský intends to return with a higher offer to win this battle. But even at the original 320p, the IDS share price has nearly 15% upside from the current 278.35p. Of course, should he walk away, then the shares could slump southwards again.

What next?

In Europe, GLS is a highly profitable outfit for IDS, but the Royal Mail’s postal service is heavily loss-making. Also, the UK arm was hit by sustained and painful strike action last year. Even so, the group has a leading market share of about a quarter of UK parcel deliveries.

Twenty years ago, Royal Mail delivered about 20bn letters a year, but this figure has crashed to a forecasted 7bn deliveries this year. Despite this volume collapse, Křetínský clearly sees value in the wider group.

If he were to return with a bid of 360p a share, then this would be a 29.3% premium to the IDS share price today. For now, I will sit back on the side-lines as an ex-shareholder and await any future fireworks!

Should you invest £1,000 in Royal Mail Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Royal Mail Group made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D'Arcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

£10,000 invested in Lloyds shares 20 years ago is now worth…

Lloyds shares are soaring in 2025 after a pretty decent 2024. But it hasn't always been like that, so what…

Read more »

Investing Articles

How much would we need in a Stocks and Shares ISA for £1,000-a-month passive income?

A Stocks and Shares ISA or a Cash ISA? They both have their place, but for long-term investing there's only…

Read more »

Investing Articles

Prediction: this newly-promoted FTSE 100 firm will outperform Rolls-Royce shares

While still rating Rolls-Royce shares, this writer thinks there is a FTSE 100 investment trust that will do even better…

Read more »

Investing Articles

Will the Ocado share price ever amount to more than a hill of beans?

Harvey Jones is feasting on today's small bump in the Ocado share price but can't shake the feeling that it…

Read more »

Investing Articles

The Next share price is up 36% in a decade. Should I buy now for the next decade?

The Next share price has risen over the past decades. Our writer explains why he doesn't regret not investing then…

Read more »

Investing Articles

How an investor could target a passive income of £2,747 a year from just £2k of savings!

Harvey Jones shows how it's possible to generate a high and rising passive income stream from a relatively small initial…

Read more »

Investing Articles

With £2k an investor could consider buying these cheap shares in March

Harvey Jones has been scouring the FTSE 100 for cheap shares, and these stocks caught his eye. He thinks Barclays…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Dividend Shares

Down 30%, this FTSE 250 stock has an 11% dividend yield! I’m tempted

Jon Smith scratches his head as he looks over a FTSE 250 company with a juicy dividend yield but a…

Read more »