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Currys is the last survivor of Britain’s hollowed-out electrical and electronics retail sector.
In an industry where there is intense competition from online rivals Amazon and AO World, innovation requires management to be agile.
Under the current leadership of Alex Baldock, the group has demonstrated a willingness to make difficult decisions, such as eliminating legacy Carphone Warehouse stores.
Additionally, Currys has reviewed product warranties. They are no longer sold as an add-on, but as part of a thriving ‘Care and Repair’ business valued by brokerage Investec at £66 million alone.
That puts Elliott Advisors’ initial £700m offer into perspective. The color of Chinese suitor JD.com’s money remains to be seen.
Undervalued: Electrical and electronics retail chain Currys has become the latest UK company to be targeted by private equity predators
No one in Britain should get excited about Beijing’s flag wrapping an empire of local shops.
Currys stakeholders, including retail parks across the country, need to be fully aware of what a public-to-private or offshore takeover could mean.
Private equity ownership has been a disaster for Britain’s high streets and retailers.
The defenestration of Debenhams left huge voids in the country’s urban centers. Abuse of The Body Shop by successive owners left it in administration.
In the electronics sector, Currys’ main rival Comet collapsed into private equity hands in 2012.
Phones4U imploded under the ownership of private equity barons BC Partners amid acrimony in 2014.
Founder John Caudwell’s supposedly “ruthless” owners destroyed the company. HMV virtually died in 2018 after a period in private equity ownership and recently re-emerged.
The Kalms family, who founded Dixons in 1937 as a photography studio in Southend and later merged with Currys (founded in the 19th century), would be distraught to see their legacy suffer a similar fate to other public and private victims.
If Currys succumbs to predators, it is unlikely to survive in its current form as a British and Nordic company. The temptation to whip the Scandinavian arm, hollow out Britain and Ireland, sell off the shares and dump pension fund liabilities will be enormous.
So far, Currys’ board refuses to sell cheap. But if the bidding war intensifies, it will find it difficult to resist shareholders interested in making easy money.
The largest holder, Redwheel, with 15 percent of the shares, lacks a long-term track record in retail. Mike Ashley, who controls 6 percent of the stock and another 5 percent in options, will also have a lot to say.
Currys is an undervalued asset and a toy for insecure owners who want to make money.
The blame for this lies squarely with British pension funds, which have largely withdrawn from the FTSE indices and own, at best, 4.7 percent of the market.
This is an act of vandalism that dates back to the 1997 Labor government, the end of dividend tax privileges and authoritarian regulation. The doors of Currys have been opened to the barbarians.
Handy Andy
The loss of Andy Haldane as the Bank of England’s chief economist has been a huge mistake.
In 2021, he got ahead of the dogs on the Bank of England’s interest rate-setting committee by wanting to tighten policy and curb inflation.
In an interview with Bloomberg, he now says that if rate setters don’t start cutting soon, the shallow recession seen in the final six months of 2023 is likely to lead to a much deeper decline.
He believes the risks are to the downside unless the Bank relaxes soon.
When Andrew Bailey retires (his term ends in 2028), there will be a solid candidate in exile.
Lost cause
NatWest appears determined to eliminate personal service.
A businessman I know reports that his “Private Bank Manager” has been replaced by an automated machine that offered three options, none of which were relevant.
He finally managed to speak to a NatWest colleague who refused to put him through to his personal banking manager.
Instead, the officer offered to send a message about my friend’s request to make a ten-year rental deposit of £142,000 on behalf of a tenant.
Finally the news came that this facility was no longer available.
My friend’s advice: don’t buy the shares.