ELECTRICAL and tech retailer Currys could be gearing up for a takeover battle after Chinese e-commerce group JD.com said it was “in the very preliminary stages” of evaluating a possible bid for the business.
Currys’ share price jumped by more than 30% to 63p on Monday morning after the potential bid emerged following a statement the retailer at the weekend that it had rejected a £700 million unsolicited takeover approach from US private equity group Elliott, the owner of bookseller Waterstones.
The retailer said that Elliott’s offer “significantly undervalued” the company although it is understood that it is considering making a higher offer for Currys. Before noises about takeover interest, on Friday the share price closed at 47.08p, valuing Currys at about £534m.
Currys confirmed to the stock market yesterday morning that it had rejected Elliott’s possible cash offer of 62p per share. Shares were at 63.09p in mid-morning trading.
Some analysts pointed to investor concerns over London-listed companies being pursued by overseas buyers. Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted yesterday: “There will be fresh worries swirling this morning about the potential of more takeovers of London-listed companies. Currys, the electrical retailer, is the latest to be circled by overseas buyers.”
A staple of retail parks and high streets for years, the retailer has 815 stores in eight countries (nearly 300 in the UK and 16 in Ireland) and a strong online business, employing 15,000 staff. Globally, it has more than 800 stores and employs 28,000 people.
It trades under the Elkjøp brand in the Nordics and as Kotsovolos in Greece and Cyprus – last year, it announced a deal to well its Greek and Cypriot business for 200 million euros (£172m) as part of its strategy to focus on its larger UK and Ireland and Nordics businesses.
Currys – the go-to store for many for TVs, laptops, cookers, fridges, washing machines, computers, mobile phones and air fryers – has felt the same pain of the rising cost of living affecting many other retailers as consumers rein in spending, and last month it reported a dip in like-for-like sales during the crucial Christmas trading period.
However, the group announced a modest upgrade to profit forecasts as a result of cost-cutting measures and higher profit margins on some of its services. These services include Currys’ Care & Repair service – which offers protection, repair, refurbishment and recycling services – and its iD Mobile division.
In November, Currys flagged inflationary headwinds including ongoing cost of living pressures with consumer spending under pressure as it saw group sales drop 4% on a like-for-like basis in all markets in the half year ended October 28 although it pulled back pre-tax losses from £548 million last year to £46m.
Currys’ group chief executive Alex Baldock was bullish, stating at the time: “The economic outlook remains challenging to forecast but as we have shown this year, our business is well positioned to weather any storm and well set to prosper when conditions improve.
“We have market-leading, trusted brands, growing margins, controlled costs, improving cashflows and a robust balance sheet.”
Hargreaves Lansdown’s Ms Streeter added: “It’s no secret that it’s been hard going for Currys recently. It’s been hit hard by cost of living headwinds as shoppers find the purchases of bigger ticket items hard to justify, particularly as many purchases were brought forward during the pandemic.
“Its shares have fallen 90% since their peak in 1995 and have lost further ground since the start of the year. It’s yet another asset considered to be cheap, weighed down by the current economic malaise, but investment firm Elliott clearly sees that there is value to be found in its omnichannel model, and opportunities of a turnaround ahead.”
The move by Elliott, she noted, “is fresh evidence that UK assets are considered to offer significant value, still partly weighed down by the impact of Brexit, the weaker pound, and the stagnating UK economy”.
Under UK takeover rules, JD.com now has until March 18 to make a formal offer or walk away from the deal. The deadline for Elliott is March 16.
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