JO Hambro fund urges Currys to accept £1bn takeover valuation

5th Mar 2024 14:24

(Sharecast News) - A shareholder of Currys was urging the company to seriously consider a takeover bid valuing the electricals retailer at over £1bn, it emerged on Tuesday.

The JOHCM UK Equity Income Fund, which holds just over 4.4% of Currys, said an offer of between 80p to 100p per share would be reasonable, according to City AM.

It came after the Currys board rejected a £700m takeover offer from activist investor Elliott Investment Management in February, before also turning down a second bid worth about £750m.

At the time of the initial offer, Currys defended its decision by describing it as undervaluing the company.

City AM said that on Tuesday, Clive Beagles and James Lowen, senior fund managers of the JOHCM fund, claimed an acceptable offer for Currys should fall within the 80p to 100p range.

"This compares to an undisturbed share price of 47p, which would be close to a 100% premium," the said in a joint statement.

"At 90p, the market cap would be around £1bn - regular readers may recall our 2023 recommendation for the board to sell two divisions.

"One, the Greek business, was sold for £175m at the end of last year; we value the other, ID Mobile, at £350m."

Beagles and Lowen said that before the bid, the market capitalisation only reflected the value of those two businesses.

"However, Curry's core business, with leadership positions in both online and offline markets across the Nordics and the UK, generates approximately £9.5bn in sales.

"This clearly shows the absurdity of UK stock market valuations, which we have discussed extensively in these reports over the last two years.

"Our normalised earnings per share for Currys is 12p, suggesting an exit PE of 8x at the top end of the range."

The pair said their range reflected "some pragmatism", as they could rotate the value received into other "very cheap" stocks.

"As we await the outcome, we have placed a portfolio construction cap of 200 basis points on our position size, which meant we trimmed the position slightly."

Under Takeover Panel rules, Elliott Investment Management had until close of business on 16 March to make a formal offer for Currys, or withdraw from the process.

At 1614 GMT, shares in Currys were flat at 66.05p.

Reporting by Josh White for Sharecast.com.