Currys store in Basingstoke
Elliott may have withdrawn its bid interest in Currys, but this doesn’t mean the target is no longer in play / Image source: Adobe
  • US activist walks away from bidding
  • ‘Multiple’ efforts to engage with board rebuffed
  • But JD.com could yet table a bid

Currys’ (CURY) shares tumbled 9% to 59p after US investment firm Elliott Advisors abandoned its efforts to buy the electricals retailer, having had two bids spurned and ‘multiple attempts’ to engage with the board rebuffed.

Waterstones-owner Elliott may have withdrawn its bid interest in Currys, but this doesn’t mean the target is no longer in play.

After all, Chinese e-commerce colossus JD.com (JD:NASDAQ) has already expressed interest in making an offer and Elliott’s recent approach may have put the washing machines, TVs and laptops seller on the radar of other potential bidders.

WHY DID ELLIOTT WALK AWAY?

In a brief statement to the stock market, feared US activist Elliott confirmed that following ‘multiple attempts’ to engage with Currys’ board, all of which were rejected, it is ‘not in an informed position to make an improved offer for Currys on the basis of the public information available to it. Elliott therefore confirms it does not intend to make an offer for Currys.’

Elliott originally tabled a 62p per share bid in February which it then raised to 67p, an offer valuing the FTSE 250 retailer at around £750 million.

Currys argued these offers ‘significantly undervalued the company and its future prospects’ and the board’s defiant stance was supported by some of Currys’ biggest shareholders including Redwheel.

But before the second Elliott proposal was made, Chinese e-commerce company JD.com threw its hat in the ring.

Noting press speculation, JD.com said it was ‘in the very preliminary stages of evaluating a possible transaction that may include a cash offer’ for the retailer. Under UK takeover rules, JD.com has until 18 March to make a formal offer or walk away from the deal.

AO World sparks up 13% on raised profit guidance and return to sales growth

Cost-of-living pressures have impacted consumer spending in recent years, but self-help is paying off for Alex Baldock-bossed Currys, which delivered a profit guidance upgrade in January following solid Christmas sales.

Currys said it expects group adjusted pre-tax profit for the year to April 2024 to be in the £105 million to £115 million range, ahead of the £104 million previously called for by consensus.

THE EXPERT’S VIEW

AJ Bell investment director Russ Mould explained there is logic in wanting to own Currys, the last major UK-wide seller of electricals still with a physical store presence.

‘There are still plenty of people who like to go into a shop to get advice or technical assistance, compare products in person, and be able to collect items without having to risk a courier losing or damaging their goods during transit,’ said Mould.

‘The business has been through a significant restructuring programme and is starting to see some rays of light in terms of the recovery story.

‘Elliott says Currys’ management refused to engage which at that point would normally see a bidder go hostile in their attempt to succeed with a takeover. Instead, it has just walked away which suggests that its original approach was highly opportunistic in the hope Currys could be bought on the cheap.’

Mould continued: ‘Investors like Elliott typically want to pay as low a price as possible with the intention of potentially breaking up the group or driving big changes to realise hidden value in the business.

‘It’s no wonder that Currys’ management didn’t even want to give Elliott time for a coffee let alone open the books to let the suitor undertake due diligence.

‘Reports based on conversations with big shareholders and analysts suggest 75p is a more realistic takeout price, which effectively gives any other interested parties a starting point for negotiations if they want to throw their hat into the ring.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.

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Issue Date: 11 Mar 2024