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 electricity retailer confirmed that it had rejected a £700m takeover offer from US hedge fund Elliott Advisors late last week.
Meanwhile, Chinese online retail giant JD.com said it was “in the preliminary stages” of weighing an offer.
Peel Hunt analysts said it could be the start of a series of takeover bids for retail companies whose cheap valuations can make them look like a bargain.
A battle over the future of Currys could attract well-known shareholders, from tycoon Mike Ashley – whose Frasers Group empire has built up a sizeable 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 and JD interest sent Share at Currys it soared 36.4 per cent, or 17.12p, to 64.2p yesterday.
The group was valued at just £534 million, or 47 pence per share, at the close of trading on Friday.
Elliott offered 62 pence per share, a price Currys said “significantly undervalued” the business.
Peel Hunt said Currys’ board was unlikely to accept a price lower than 80p or £900m.
The rise in value was a boost for Frasers, which has built up a more than 6 per cent shareholding in the business.
However, analysts said it was unlikely Frasers was vying to take over Currys.
Currys, whose history dates back 140 years to a bicycle repair company founded by Henry Curry, has 28,000 employees and more than 800 stores in eight countries selling electrical goods and mobile phones.
Its current incarnation arises from the merger ten years ago of Currys PC World with Carphone Warehouse.
But it is worth just a fraction of the combined £3.8bn valuations of those companies at the time.
The stock has fallen more than 50 percent in the last two years alone. In its last financial year to April 2023, it slumped to a loss of £450m, while revenue fell 6 per cent to £9.5bn.
The company’s most recent trading update showed a 3 per cent drop in sales over the crucial Christmas period, although it raised full-year profit guidance.
And he highlighted the growth in the use of credit, which allows customers to buy now and pay later, as well as repair services and its iD Mobile telephone network.
Meanwhile, Currys last year reached a deal to sell its Greek and Cypriot subsidiary for £170m.
And a recent report from analysts at Investec suggests that the growing services-related parts of the business, with millions of registered customers, could generate “powerful tailwinds for profits”.
They said Currys’ ‘care and repair’ operation could be worth up to £667m alone, and that iD Mobile would be valued at £500m (together, far more than the combined market capitalization of the entire the group).
Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, said: “It’s no secret that things have been tough for Currys lately.”
‘It has been hit hard by cost of living headwinds as shoppers find it difficult to justify purchasing higher-priced items, especially as many purchases were brought forward during the pandemic.
However, it is clear that the board believes its market valuation is driven by its near-term challenges and that better 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 come face to face
Depression: Currys chief executive Alex Baldock (pictured) has seen the stock fall more than 50% in the last two years.
In the battle for Currys, New York hedge fund Elliott Advisors goes head-to-head with JD.com, one of China’s largest online retailers.
Elliott has a fearsome reputation as an activist investor.
It has taken on corporate giants, from drugmaker 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, taking on CEOs in the process.
He has even fought the government of Argentina – after the country defaulted on its debt – in an epic international court battle that at one point saw an Argentine warship seized in Ghana.
Elliott has helped the Waterstones bookstore chain return to profit since he bought it in 2018.
China’s JD.com, founded in 1998, has rapidly expanded to become an online shopping giant in the world’s second-largest economy. Achieved sales of more than £120 billion in 2022.
JD listed on New York’s Nasdaq stock exchange in 2014 and is today worth around £30bn.