Sarah Young
LONDON (Reuters) – Currys shares soared on Monday after Chinese online retailer JD (NASDAQ:.com) joined U.S. activist investor Elliott Advisors in a bid to buy the British electrical group, which had already rejected Elliott’s initial $880 bid million
Curry shares jumped 38% to 65 pence after JD.com confirmed it was interested in the retailer, which sells refrigerators, washing machines, computers and other electrical goods in the UK, Ireland, Sweden, Norway, Denmark and Finland.
Currys on Saturday rejected a possible 62 pence per share cash offer from Elliott, a 700 million pound ($883 million) offer that it said significantly undervalued the company.
Elliott said it was considering another offer.
Analysts have suggested that interest in the company is driven by Currys’ low valuation.
The group has struggled to grow over the past two years as sales fell following a pandemic surge and high inflation squeezed consumer incomes.
Before the interest was made public, Currys shares had lost 54% of their value over the past two years.
That helped attract JD.com, one of China’s leading e-commerce giants and the country’s leading electronics retailer, although two-thirds of Currys’ sales still come from stores.
Currys accounts for around a quarter of Britain’s £20bn electrical market, with sales last year of £5.1bn in the UK and Ireland and £4.4bn in other markets. In November, the company announced the sale of its Greek division.
JD.com said it was “in the very preliminary stages of assessing a potential transaction, which could include a cash offer for the entire issued share capital of Currys.”
Representatives of the Chinese company have held preliminary talks with Carris in recent weeks, Britain’s Telegraph newspaper reported Sunday.
The takeover of the UK store-based firm would represent a shift for online specialist JD.com, whose share of the home market has fallen over the past year. Her interest comes after media reports three months ago suggested that JD.com might consider buying a stake in Germany’s Ceconomy, which owns the MediaMarkt chain.
Ceconomy shares rose 5% on Monday and were up 2.4% in afternoon trading.
Carris declined to comment on JD.com’s statement, and Elliott Advisors, which already owns Waterstones bookshops in the UK, had no further comment on Monday.
Currys, which previously traded under the Dixons and Carphone Warehouse brands in the UK, said in January it expected to benefit from improved consumer confidence and an improvement in its business in Scandinavia.
But despite this optimism, its shares traded at a forward price-to-earnings ratio of 5.58, one of the lowest in the retail sector.
“The move is further evidence that there is significant value in UK assets, which are still partly weighed down by the impact of Brexit, the weakening pound and the stagnation of the UK economy,” said Suzanne Streeter, head of finance and markets at Hargreaves Lansdown. Under UK takeover rules, Elliott has until 1700 GMT on March 16 to make a firm offer for Curry or walk away.
Mike Ashley’s Frasers Group owns 11% of Currys, partly through financial instruments.
($1 = 0.7924 pounds)