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  • Writer's pictureMark Watson-Mitchell

Currys – the bid whispers are not dying down, while investors agitate for value realisation

There are continuing mutterings in the market that there could soon be some corporate action in the equity of Currys (LON:CURY).


We already know that the technology products and services retailer has been up on the screens of several of the Private Equity houses, as well as those of some of its competitors.


Two Recent Approaches


A month ago, the group reiterated that both Elliott Advisors (UK), the Private Equity player, and JD.com, the Chinese e-commerce company, had backed away from making offers for the group’s equity, even though Elliott had indicated that it was contemplating a 67p a share £742m cash bid, which was 5p higher than its initial approach to the group.


The Board of Currys declared that it was none too interested in talking with potential bidders if they were coming in with cheap offers.


Analysts at Peel Hunt have previously stated that they believe it would take an offer of more than 80p a share for the Board to engage in any discussions.


Subsequent to both the Elliott and the JD.com expressions of interest and then declaring no interest in taking matters further, the retailer concluded the disposal of its Greek interest, the Kotsovolos chain, for £156m net cash – which has bolstered the group’s coffers and also reduced Management time for that chain, enabling it to concentrate upon the recovery of its Nordic operations.


Management Comment


CEO Alex Baldock recently stated that:


"We've been working to get the Nordics back on track, while keeping up the UK&I's encouraging momentum.


Both are progressing well, despite still-challenging markets, and we now feel confident to raise this year's profit expectations to at least the top of our previous guidance.


Stronger trading, selling more of the solutions and services that boost margins and build customers for life, and strong cost discipline have all been important."

 

The Business Today


Currys, which was founded in 1884 by Henry Curry as a bicycle-building business before diversifying into the sale of toys, gramophones and radios, floated on the LSE in 1927 and is now a member of the FTSE 250 index of mid-sized companies.


The big advance came about in 2021, when it merged the four brands it then operated – including PC World, Dixons and Carphone Warehouse – into one central brand.


However, the retailer has struggled in the last few years with high inflation hitting demand across all of its markets and in July last year it cancelled its dividend and cut spending in its Scandinavian operations.


Today the group, which employs some 25,000 people, is an omnichannel retailer of technology products and services, operating online and through 720 stores in 6 countries.


In the UK & Ireland it trades as Currys and operates its own mobile virtual network, iD Mobile.


In the Nordics it trades under the Elkjøp brand.


It is the market leader in those markets.


The group's operations also include its impressive ‘state-of-the-art’ repair facilities in Newark, UK, as well as a sourcing office in Hong Kong and an extensive distribution network which enables fast and efficient delivery to stores and homes.


List Of Professional Holders


Some 65% of the retailer’s shares are held in ‘professional hands’, with hedge fund group Redwheel as Currys' largest shareholder with a 14.4% stake, that group is involved in active management with some $17.9bn of funds.


Spanish investment firm Cobas Asset Management holds 8.5%, followed by Schroders with 8.3% of the equity, while retail industry veteran Mike Ashley's Frasers Group (LON:FRAS) is the fourth largest shareholder in Currys, with a 6.6% stake, it already has a 10% stake in competitor AO.com (LON:AO.).


Other investment names include Wishbone Management (5.2%), Artemis Investment Management (5.0%), Ruffer (4.6%), JO Hambro (4.6%), and UBS Asset Management (4.0%) while David Ross (Carphone Warehouse) holds 4.4%.


Proposal To Sell iD Mobile


Of those investors, JO Hambro has been demanding that the group’s Board realises shareholder value, suggesting perhaps the disposal of the Currys iD Mobile virtual network operation, which has over 1.5m subscribers to its services and has been valued at around £350m.


Going Forward


The group has clearly stated that with the disposal of Kotsovolos, its structure has been simplified and it will continue to focus on its larger markets of the UK & Ireland and the Nordics, whilst the strengthened balance sheet will increase flexibility to invest in and grow the business, as well as improve shareholder returns.


Nine years ago, the group’s shares were trading at over 500p each, while in the last year their highest has been 72.45p, which was scored in late February this year.


The group, which will be publishing a Pre-Close Full Year Trading Update on Tuesday 14th May, could well be seeing some fresh market activity if the ‘mutterings’ are true.



It looks as though the £703m capitalised group’s shares, now 63.45p, are destined to rise as shareholder pressure intensifies, possibly ahead of another excursion of predatorial interest.

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