Currys’ top investor cautioned that international companies will start looking closely at London businesses, following a bidding war involving the electronics retailer.
Redwheel, which owns 14.6pc shares in Currys said that it was “completely in agreement” with the board of directors over their decision to refuse a takeover bid from US hedge fund Elliott.
It agreed that Elliott’s offer of 62p per shares was not a fair price for Currys. According to a report over the weekend, Chinese retailer JD.com may also consider a cash bid for Currys. Currys’ current share price is 65.20p. This is down 58pc from early 2021.
Redwheel stated that Currys’ approach revealed a “broader problem with the UK Equity Market”. Redwheel said that certain pockets of the UK equity market were being valued “significantly” below their value because investors had shifted focus to the US despite the fact they could get better returns in London.
Ian Lance, Redwheel’s co-head of UK value and income, stated: “Unless there is a change, we are likely to continue seeing overseas corporate buyers take advantage of UK equity valuations that have fallen, with ownership going to foreigners, while the number of UK listed businesses will continue its decline.”
He added that the authorities needed to “incentivize investors to allocate their money to UK equities in order to save an integral part of the financial ecosystem of the country”, and “we believe a healthy equity markets is beneficial to the working of the economy.”
Mr. Lance is worried about the health of the UK stock markets, which have been affected by declining valuations.Peel Hunt figures show that 35 bids were made for UK companies valued at over £100m in the past year.
A number of companies, including packaging company Smurfit Kappa, and travel agency Tui, have announced their intention to leave the London Stock Exchange.
Superdry founder in talks with potential investors over take-private deal. The squeeze on consumers has slashed profits and sent the share price tumbling.
Frasers, Sports Direct’s owner and a major shareholder in Currys has been buying up shares in rival retailers during a period when the share prices are low. Frasers also owns significant stakes at Boohoo and Asos.
Currys may be the first of many retailers to receive takeover interest in the coming months, according to analysts at Peel Hunt.Halfords, DFS and others are also mentioned as possible targets.
Analysts said that Currys would likely hold out for a higher price, indicating it may be seeking around £900m. Currys was valued at £700m by the Elliott approach.
John Stevenson said, “Currys is not a profitable business. It has many challenges.”
“But in the end, the retail sector has had two to three challenging years, both in terms of consumer and supply chain. Now, it feels as though we are just beginning to emerge from that. And that is not being reflected by valuations.”
Alex Baldock said last month that the Government should do more to boost retailers. He claimed that Jeremy Hunt’s policies regarding business rates and recycling put pressure on many shops.
Mr Baldock stated: “Retail has been overburdened. The retail sector pays 10% of business taxes despite only making up 5% of the overall economy. Adding these additional costs will be counterproductive. It will fuel inflation, reduce investment, reduce jobs, and not achieve its objectives. “Enough is enough.”