Currys shares soared by more than a third yesterday as it looked likely to become the target of a bidding war between US and Chinese predators.
The electrical retailer confirmed that late last week it had rejected a £700million takeover offer from US hedge fund Elliott Advisors.
Meanwhile, Chinese online retail giant JD.com said it was ‘in the very preliminary stages’ of weighing up a bid.
Analysts at Peel Hunt said it could be the start of a swathe of takeover offers for retail companies whose cheap valuations may make them look like a bargain.
A battle for the future of Currys could draw in well-known shareholders from tycoon Mike Ashley – whose Frasers Group empire has built up a considerable stake in the retailer – to Carphone Warehouse co-founder David Ross.
Takeover target: Currys confirmed it had rejected a £700m takeover offer from US hedge fund Elliott Advisors
Details of Elliott’s and JD’s interest sent shares in Currys soaring 36.4 per cent, or 17.12p, to 64.2 p yesterday.
The group was valued at just £534million, or 47p a share, at the close of trading on Friday.
Elliott offered 62 p per share, a price which Currys said ‘significantly undervalued’ the business.
Peel Hunt said the Currys board was unlikely to engage at a price anywhere below 80p or £900million.
The surge in value delivered a boost to Frasers which has built up an equity stake of more than 6 per cent in the business.
However, analysts said Frasers itself was unlikely to be vying to take over Currys.
Currys – which traces its history back 140 years to a bicycle repair business founded by Henry Curry – has 28,000 staff and more than 800 stores across eight countries selling electrical goods and mobile phones.
Its current incarnation stems from a merger ten years ago of Currys PC World with Carphone Warehouse.
But it is worth just a fraction of the £3.8billion combined valuations of those companies at the time.
Shares have fallen more than 50 per cent in the last two years alone. In its latest financial year to April 2023 it slumped to a £450million loss as revenues fell 6pc to £9.5billion.
The company’s most recent trading update showed a 3 per cent fall in sales over the crucial Christmas period though it did upgrade full-year profit guidance.
And it pointed to growth in the use of credit – enabling customers to buy now and pay later – as well as repair services and its iD Mobile phone network.
Meanwhile, Currys last year struck a deal to sell its Greek and Cypriot arm for £170million.
And a recent report by analysts at Investec suggests that the growing service-related parts of the business, with millions of customers signed up, could deliver ‘powerful profit tailwinds’.
They said the Currys ‘care and repair’ operation could be worth as much as £667million alone, with the iD Mobile valued at £500million – together far higher than the combined market capitalisation of the entire group.
Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, said: ‘It’s no secret that it’s been hard gong 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.
However, it’s clear that the board believes its market valuation was due to its short-term challenges, and that brighter times are ahead for the company.’
Analysts at Peel Hunt raised the prospect of more UK retailers becoming takeover targets.
‘Cheap valuations across the sector, especially for market leaders, mean we are likely to see much more M&A activity this year,’ they said.
Predators go head-to-head
Slump: Currys chief exec Alex Baldock (pictured) has seen shares fall more than 50% in the last two years
The battle for Currys sees New York hedge fund Elliott Advisors go head-to-head with JD.com, one of China’s biggest online retailers.
Elliott has a fearsome reputation as an activist investor.
It has taken on corporate giants from drug maker GlaxoSmithKline and Dutch paints group AkzoNobel to mining group BHP Billiton.
Led by Paul Singer – once described as the ‘Doomsday investor’ – and founded in 1977, Elliott is known for its relentless campaigns to unlock shareholder value, squaring up to chief executives in the process.
It has even battled Argentina’s government – after the country defaulted on its debt – in an epic international court battle that at one stage saw an Argentinian naval vessel seized in Ghana.
Elliott has nursed book shop chain Waterstones back into profit since buying it in 2018.
China’s JD.com, founded in 1998, has expanded rapidly to become an online shopping giant in the world’s second biggest economy. It notched up sales of more than £120billion in 2022.
JD listed on New York’s Nasdaq stock exchange in 2014 and today is worth around £30billion.
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