Royal Mail (LON:IDSI) owner International Distribution Services PLC (LSE:IDS) saw its share rating upgraded to hold from sell by broker Panmure Liberum following reports that the UK government is set to approve EP Group's takeover of the company.
The target price was raised to 368p from 200p, aligning with the offer price.
Panmure Liberum analysts expressed their surprise at the reported use of a golden share arrangement in the takeover.
They said: "We are surprised this route to protecting UK national interests has apparently been chosen by the government.
“Our understanding is that the UK is no longer subject to ECJ (European Court of Justice) rulings post-Brexit, but that it is still subject to rulings made in the past when the UK was an EU member.”
A golden share refers to a special type of share that gives its holder significant control or veto power over certain key decisions of a company, even if they hold only a small percentage of the company's total share capital.
They are sometimes controversial because they can be seen as limiting shareholder democracy and free market operations.
But the UK government must also ensure that Royal Mail commits to a certain standard of service for the UK public.
EP Group, which is owned by Czech billionaire Daniel Křetínský, has committed to keeping a UK tax domicile, a London headquarters and Royal Mail’s Universal Service Obligation (USO (NYSE:USO)).
Panmure Liberum does not anticipate shareholders pushing for a higher bid, given Royal Mail's worsening financial outlook.
The company faces headwinds from increased National Insurance costs, estimated to impact its finances by £120 million annually.