Time to wrap up, after a dramatic day of takeover drama in the City which saw a massive mining merger bid collapse, but a firm offer for the UK’s Royal Mail.

Here’s a recap:

The takeover of Royal Mail by the Czech billionaire Daniel Křetínský has edged closer after its owner agreed terms and conditions on a £3.57bn offer.

In an update to the market on Wednesday, the postal service’s parent company, International Distribution Services (IDS), said it had accepted a cash offer from Křetínský’s EP Group.

The deal means Křetínský, who made his fortune in energy and owns a minority stake in one of the main gas pipelines from Russia into Europe, would pay 360p a share for the 73% of the struggling postal service he does not already own, plus 10p in dividends.

BHP Group has walked away from its pursuit of Anglo American, after failing to win support from its rival miner for a £39bn takeover proposal.

BHP abandoned its attempt to take control of Anglo, just before a ‘put up or shut up’ deadline, and said it was disappointed.

Mike Henry, BHP’s chief executive officer, told the City:

While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost and, despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive.

The Guardian has shown how some of the most powerful ticket touts in the UK have discussed a secret plan to try to scupper a Labour crackdown on the industry via a lobbying campaign.

Labour voters now make up the majority of customers at all leading supermarkets apart from Waitrose, according to the latest polling from retail research firm GlobalData.

Rishi Sunak’s election pledge to introduce mandatory national service would leave the UK’s poorest regions millions of pounds worse off, a thinktank has warned.

Orange juice makers are considering turning to alternative fruits such as mandarins as wholesale prices have “gone bananas” amid fears of poor harvests in Brazil.

Ofwat, the water regulator for England and Wales, is understood to be considering cutting fines for sewage-dumping water companies if they are facing financial pressures.

Reuters’ Prague bureau have caught up with the man of the moment, Czech billionaire Daniel Křetínský, to discuss his takeover bid for Royal Mail’s parent company IDS.

Křetínský told Reuters that IDS must focus on not losing market share – something that would be “fatal” in the UK.

Here’s the story:

Royal Mail and GLS need sizable, almost immediate investments to defend market share and face shifting market trends, Czech billionaire Daniel Kretinsky told Reuters on Wednesday after the groups’ owner agreed to a £3.57bn pound takeover.

“It is important for logistics companies not to miss this out-of-home delivery wave, which means they need to be ready to invest now,” Kretinsky said.

“We believe that if the group doesn’t respond properly on the out of the home solutions it may have a detrimental impact on its market share. And specifically in the UK, any shrinkage of the market share would be fatal.”

Anglo American has responded to BHP’s decision to walk away rather than make a firm offer by 5pm today.

Stuart Chambers, chairman of Anglo American, says the company is “fully focused” on the break-up plan it announced earlier this week.

Chambers tells the City:

“Anglo American has set out a clear pathway to accelerate delivery of its strategy and to unlock significant value for its shareholders. Our shareholders will benefit from value transparency and undiluted exposure to a simpler portfolio of world class assets, consistently stronger operational performance, and highly attractive growth in copper, premium iron ore and crop nutrients. Anglo American’s management team, supported by the Board, is fully focused on delivering the plans it has set out to accelerate value delivery, and doing so at pace.

“I thank Anglo American’s shareholders and stakeholders for their constructive dialogue throughout this period, and our employees for their resilience and commitment. We look forward to delivering our plans for the benefit of our shareholders and for stakeholders, both in our host countries and more broadly.”

Shares in Anglo American have dropped by almost 4%, following BHP Group’s decision not to make a firm offer.

They’ve dropped to around £24.58, down from £25.58 last night.

BHP’s final proposal, which valued Anglo at almost £39bn, had been worth £29.34 per share.

NEWSFLASH: BHP Group has walked away from its pursuit of Anglo American.

BHP, which had proposed paying almost £39bn for Anglo American, has given up after failing to persuade its rival miner to accept a takeover offer or extend talks.

The announcement comes about 45 minutes before the deadline to either put up a firm offer or walk away, and also comes hours after Anglo rejected BHP’s request for more time to hammer out an agreement.

Mike Henry, BHP’s chief executive officer, says:

“BHP will not be making a firm offer for Anglo American. BHP is committed to its Capital Allocation Framework and maintains a disciplined approach to mergers and acquisitions.

While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost and, despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive

We remain of the view that our proposal was the most effective structure to deliver value for Anglo American shareholders, and we are confident that, working together with Anglo American, we could have obtained all required regulatory approvals, including in South Africa.”

Exciting news in the music industry… Sony Music is in talks to acquire Queen’s music catalog, Bloomberg reports.

The deal, to buy hits such as Bohemian Rhapsody, in what could be one of the biggest ever deals of its kind, says Bloomberg.

Here’s a flavour of the story:

Sony is working with another investor on a purchase that could potentially total $1 billion, people familiar with the matter said, asking not to be named discussing confidential information.

The talks, which also cover merchandising and other business opportunities, are ongoing and may not result in an agreement, according to the people. A spokesperson for Sony declined to comment. A representative for Queen could not be reached for comment.

Despite the jump in International Distribution Services’s share price today, the London market is sliding again.

IDS are now up 4% at 334p, moving close to Daniel Křetínský’s offer of 370p/share.

That makes IDS the second-biggest rise on the FTSE 250 index of medium-sized companies listed in London, which is down 0.85% today.

The blue-chip FTSE 100 index is in the red too, down 0.5%, and on track for its sixth fall in a row.

Grocery technology firm Ocado are the top faller, down 5%, putting it on track to be ejected into the FTSE 250 when the indices are next reshuffled.

Fiona Cincotta, senior financial market analyst at City Index, explains:

“The FTSE is falling, adding to losses from the previous session, as the UK index continues to retreat from its all-time high earlier this month.

Stronger-than-expected US data and hawkish Fed comments have hurt risk sentiment across the markets.

News that the IMF has upwardly revised China’s growth forecast to 5% after a solid first quarter and recent supportive policy measures from Beijing have helped oil majors higher but have failed to boost the miners. Anglo-American is trading down 1.5% ahead of a key deadline today for a takeover deal with BHP.

Newsflash: Inflation in Germany has picked up this month.

Statistics body Destatis reports that Germany’s annual inflation rate is estimated to have risen to 2.4% for May, up from 2.2% in April.

On an EU-harmonised basis, inflation rose to 2.8% from 2.4%.

Core inflation, which excludes food and energy, was unchanged at 3%.

Good news for UK holidaymakers heading across the Channel this summer – the pound has reached a near two-year high against the euro today.

Sterling hit €1.1785 this morning, meaning one euro was worth 84.8p. That’s the pound’s strongest level since August 2022, before the mini-budget crisis sent it reeling against rival currencies.

The euro is weaker, as traders expect the European Central Bank to cut interest rates next week, while the Bank of England may not lower rates until November, according to the money markets today.

Shares in UK water companies are rallying today, following reports that Ofwat is planning a more lenient regulatory regime for poorly performing firms.

United Utilities, which operates in North West England (where it recently pumped raw sewage into Windermere for hours) are up 2.8%.

Severn Trent have gained 1.5%, while Pennon Group (owner of South West Water, hit by the waterborne disease outbreak in Devon) are up 2.1%.

Greenpeace fears Ofwat is rewarding failure.

Dr Doug Parr, policy director for Greenpeace UK, said:

“If the story is correct the regulator has decided to reward failure, and punish the water companies for devaluing the UK’s water supply by giving them less stringent targets, a holiday on regulatory enforcement and more shareholder dividends.

Thames Water have got exactly what they were asking for - because it seems that in order to encourage other foreign investors to degrade UK infrastructure and turn our rivers into open sewers, they need to get a reasonable rate of return.”

Newsflash: Anglo American has rejected this morning’s request from rival miner BHP Billiton for an extension for the deadline to make a takeover offer.

Anglo tells the City that it has held “extensive engagement with BHP and its advisers”, having rejected BHP’s three takeover proposals so far.

And it remains unimpressed by BHP’s proposal, saying:

The BHP Proposal includes the same highly complex and unattractive structure as the proposals previously rejected on 26 April 2024 and 13 May 2024.

Anglo cites BHP’s demand that it spins off its stakes in its South African platinum and iron ore units, before a deal is done, saying:

The requirement to pursue two contemporaneous demergers of publicly listed companies alongside a takeover and the inter-conditional nature of the three transactions is unprecedented. Undertaking a takeover in parallel with two demergers would result in additional material approvals.

Anglo is also unimpressed by the “socioeconomic measures” proposed by BHP to smooth the deal, saying they would still leave its shareholders carrying most of the risk from the deal:

As Anglo puts it:

On 28 May 2024, BHP put forward a limited number of socioeconomic measures that were confined in scope, impact and duration and that BHP stated would support regulatory approvals.

This approach does not sufficiently address the fact that Anglo American’s shareholders would bear disproportionate execution and value risks and uncertainty over an extended period, nor does it consider that material conditions would likely be imposed in relation to both Anglo American Platinum and Kumba which would require the approvals of their respective boards.

This means BHP has until 5.00 pm today to either announce a firm intention to make an offer for Anglo American, or walk away for six months…..

Another takeover battle could be going into extra time.

BHP Group, the mining giant, has told the City it believes a further extension of the deadline for it to bid for rival Anglo American is needed, so there can be further engagement on its proposal.

BHP says it has proposed a number of “socioeconomic measures” to address Anglo American’s concerns about its proposal, which has been consistently rejected by Anglo.

BHP, which has until 5pm to bid or walk away, says its proposed measures would provide greater economic benefits to South Africa than the break-up plan announced by Anglo American this month.

These measure include a series of steps aimed at addressing concerns over BHP’s condition that Anglo divest some South African assets – its shareholdings in Anglo Platinum and Kumba Iron Ore – before BHP’s proposal, currently valued at £34bn, can go ahead.

The company says:

BHP believes that its proposal will contribute to South Africa and allow the benefits of South African mining to be shared with more South African stakeholders.

Shares in International Distribution Services have jumped 3% at the start of trading, as traders react to the news that Křetínský’s recommended cash offer for International Distribution Services.

That have hit 335.2p, their highest level in over two years.

But, that’s still shy of Křetínský’s offer (which is 360p per share in cash, plus a special dividend of 8p, plus a planned final dividend of 2p).

That suggests the City aren’t 100% certain that the deal will go through. It requires IDS shareholders to vote for it, and will surely also have to clear a national security review.

Křetínský’s EP Group points out that the 370p offer is a 72.7% premium to IDS’s closing share price of 214p on 16 April, the day before his first offer (worth £3bn) was announced.

Křetínský already owns 27.5% of IDS.

The Labour Party has said it will make sure that Křetínský sticks to his promises regarding Royal Mail, should it win July’s general election.

In a statement, Labour welcomes Křetínský’s commitments (see earlier post), saying:

“These assurances are welcome that Royal Mail will retain its British identity and safeguard its workforce with no compulsory redundancies. Labour in government will ensure these are adhered to.”

The board of IDS agreed to Křetínský’s takeover offer after hammering out a package of legally binding undertakings and commitments.

They include a list of Undertakings to the UK Government, which include ensuring that Royal Mail remains the Universal Service Provider (USP) for postal services, for five years after the deal is completed.

That includes complying with the regulatory conditions imposed by Ofcom on Royal Mail for the next five years – including continuing to provide the “one-price-goes-anywhere” service in the United Kingdom and delivering first class letters six days a week.

[However, Ofcom is currently pondering reforms to the universal service obligation, which could include watering down second-class post, or reducing the service to as little as three days a week]

Křetínský also pledges that Royal Mail wouldn’t make any return of capital, asset transfers, loans or loan repayments that would raise its net leverage ratio above 2:1, or undermine its ability to operate as the USP – basically a pledge not to asset-strip the company.

As flagged earlier, both IDS and Royal Mail would maintain their headquarters in the UK for at least five years and remain tax resident in the UK.

The takeover agreement also touches on GLS – IDS’s rather profitable international parcels operation run out of Amsterdam. Křetínský pledges that there will be no change of control for either GLS or Royal Mail for three years.

He is also pledging not to dip into any surplus in the Royal Mail pension scheme, and to continue to recognise the CWU and CMA Unite unions.

Daniel Křetínský says he knows that owning Royal Mail comes with “enormous responsibility” – both to staff and customers.

In a statement released in today’s takeover announcement, Křetínský says:

“IDS, and Royal Mail in particular, form part of the national infrastructure of the countries they operate in. More than that, Royal Mail is part of the fabric of UK society and has been for hundreds of years. The EP group has the utmost respect for Royal Mail’s history and tradition, and I know that owning this business will come with enormous responsibility - not just to the employees but to the citizens who rely on its services every day. The scale of the commitments we are offering to the company and the UK Government reflect how seriously we take this responsibility, to the benefit of IDS’ employees, union representatives and all other stakeholders.

Křetínský - known as the ‘Czech Sphinx‘ due to his enigmatic approach to business – also promises to support International Distribution Services to transform its business:

The EP group is a patient, supportive investor with a long-term view and decades of experience in owning critical national infrastructure. We are committed investors in the UK and first became a shareholder in IDS four years ago, as we saw the potential for the business to become one of the largest postal logistics groups in Europe. But IDS’ market is evolving quickly, and it must accelerate its transformation and investments into modernisation to keep up with the competition. We will support the business in the next critical phase of its transformation and beyond, providing our experience and financial resilience to support the management team. We look forward to working closely with all of IDS’ stakeholders to deliver against its full potential.“

Britain’s struggling water companies are about to get a hand-up from regulators, according to reports this morning.

Water regulator Ofwat is drawing up plans for a special “recovery regime” for Thames Water and other financially stressed UK water companies, the Financial Times reports.

Under this regime, the water companies could receive fewer or no regulatory penalties to encourage them to invest in infrastructure improvements instead.

They would also be given more “realistic” targets for reducing sewage and water leaks and outages – despite some companies having spectacularly failed to hit targets in the past.

One person close to the plan has told the FT that while Ofwat recognises the “moral hazard involved in letting poor performers off the hook, it is also keen to put these companies on an upward trajectory”.

News of Ofwat’s planned leniancy comes a day after the Guardian reported that the regulator was poised to refuse most water companies’ requests to ratchet up consumer bills. Some are expected to get as little as half of what they have asked for, in the next review of bills and spending plans.

The new special “recovery regime” could be announced within weeks, to avoid Thames Water being taken into the government’s special administration regime, the FT adds.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

It’s deadline day in the City today, with suitors for two UK-listed companies – mining giant BHP Billiton and Royal Mail – given until 5pm today to put up a formal bid, or walk away for six months.

And in the last few minutes, Czech billionaire Daniel Křetínský has announced a recommended cash offer for Royal Mail’s parent company International Distribution Services has been agreed.

IDS’s board has agreed to back a takeover worth £3.57bn, or 370p per share.

Earlier this month, IDS said it was minded to approve this improved offer from Křetínsy’s EP Group…

…and this morning Keith Williams, the chair of IDS, says the offer is”fair and reasonable” given the uncertainties ahead.

Williams says various guarantees have been reached with Křetínský, which will be presented to the government as soon as possible.

Those guarantees include ensuring that Royal Mail continues as the Universal Service Provider for five years after the deal is concluded, and maintaining a UK headquarters and tax residency for that period too (but what happens after that, you may wonder….).

Williams says:

The IDS Board has negotiated a far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards.

These cover the provision of the one-price-goes-anywhere Universal Service Obligation (including First Class letters still delivered six days a week), the financial stability and maintenance of the IDS Group including Royal Mail, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.

The deal could still face hurdles, though – chancellor Jeremy Hunt has indicated that the national security implications of such a bid would need to be scrutinised….

The agenda

• 7.45am BST: French consumer confidence for May

• Noon BST: US weekly mortgage applications

• 1pm BST: German inflation data for May