- Elliott’s £700 million bid rejected
- JD.com considering an offer
- Could Frasers join the fray?
A takeover battle is looming at electricals retailer Currys (CURY), which has rejected a £700 million bid from US investment firm Elliott Advisors and with Chinese e-commerce giant JD.com also considering an offer for the technology products purveyor.
The washing machines, TVs and laptops seller’s shares are down roughly 15% and 50% over one and five years respectively, but excitement surrounding a possible bidding war sparked a 35% rally to 63.4p.
Electronics retail rivals AO World (AO.) and Marks Electrical (MRK:AIM) were also lifted on the bid approach read-across.
ELLIOTT’S BID REBUFFED
In a statement on Monday, Currys confirmed it had received an ‘unsolicited, preliminary and conditional proposal’ from Elliott regarding a possible cash offer pitched at 62p per share, a 32% premium to Friday’s 47p closing price valuing the FTSE 250 retailer at £700 million.
This offer was rejected by the Currys board on 16 February on the basis it ‘significantly undervalued the company and its future prospects’.
Elliott, which already has a presence in the UK retail sector through its ownership of Waterstones, has until 16 March to announce if it plans to make an offer for Currys under City rules.
Sky News cited an unnamed major Currys shareholder who said the board should not engage in talks with Elliott unless it is prepared to offer 75p per share at a minimum.
JD.COM THROWS HAT INTO THE RING
Responding to press speculation, China’s JD.com confirmed it is in the ‘very preliminary stages’ of evaluating a possible deal that ‘may include a cash offer’ for Currys.
‘There can be no certainty that any offer will ultimately be made for Currys, nor as to the terms on which any offer might be made’, stressed the e-commerce colossus.
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Led by CEO Alex Baldock, Currys is the last big UK electricals chain with a physical store estate.
This makes it a unique asset on the domestic stock market and in theory, that status deserves a premium takeout price.
Unfortunately for long-suffering shareholders, Currys has faced stiff headwinds in recent years including fierce competition in the Nordics and subdued UK consumer demand for big-ticket items caused by the cost-of-living crisis, which have weighed on its valuation and left it vulnerable to a low-ball bid.
COULD MIKE ASHLEY JOIN THE BIDDING WAR?
Shore Capital’s Clive Black and Bradley Hughes said one Currys shareholder who ‘may be sitting a little happier over his corn flakes this morn, is Mike Ashley, the man behind Frasers (FRAS)’, which built a stake in the business last year.
‘Quite whether he wishes to become involved in a bidding war for Currys remains to be seen, the firm also has notable positions in AO World, ASOS (ASC), Boohoo (BOO:AIM), and N Brown (BWNG:AIM).’
Black and Hughes added: ‘Additionally, Frasers has just commenced a share buyback. Again, we shall watch with interest but what Mr Ashley has perhaps done, is show the undervalued nature of much of the UK listed retail scene.’
AJ Bell investment director Russ Mould commented: ‘Frasers is always one to spot a bargain. Elliott’s takeover approach implies it sees a resilient streak in Currys and that there is turnaround potential. The fact Chinese retail group JD has now joined the party by expressing interest in the business shows it could be time to load up on the popcorn and sit back and enjoy a bidding war.’
But Mould thinks it is unlikely that Frasers would make a bid for the group. ‘While it has expressed a desire to be a bigger player in electricals, it prefers to buy companies when they are on their knees, not after someone else has also pushed up the price with an offer. Frasers had its chance to bid for Currys last year when no-one else was interested.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
