Currys shareholder warns of decline of British stock market

CURRYS’ largest shareholder has warned that more foreign corporates will start circling London companies after the electricals retailer found itself at the centre of a bidding war.

Redwheel, which holds 14.6pc of shares in Currys, said it was in “complete agreement” with the company’s board over their decision to reject a takeover offer from US hedge fund Elliott. It said it agreed that Currys was “worth substantially more” than Elliott’s 62p per share approach.

Chinese retail giant Jd.com is also weighing a cash offer, as revealed by The Telegraph over the weekend. Currys is currently trading at 65.2p, down around 58pc since early 2021.

Redwheel said the Currys approach highlighted a “wider problem with the UK equity market”. It said pockets of the stock market were valued “significantly below” their worth because investors were shifting focus away to the US, despite potentially being able to get better returns in London.

Ian Lance, co-head of the UK Value & Income team at Redwheel, said: “Unless this changes, it seems likely that we will continue to see overseas corporate buyers step in to take advantage of the depressed valuations of UK equities with ownership falling into foreign hands and the number of quoted UK businesses will continue to decline.”

He said investors must be “incentivised to allocate to UK equities and save an integral cog of the country’s financial ecosystem”, adding: “We believe that a healthy equity market is beneficial to the functioning of the economy.”

Mr Lance’s comments come amid growing concern over the health of the UK stock market, where valuations have taken a hit in recent years. According to figures from Peel Hunt, there were 35 bids for UK companies worth more than £100m last year.

Meanwhile, a raft of companies have signalled they are planning to exit the London stock market, including packaging supplier Smurfit Kappa and travel company Tui. Superdry’s founder is currently in talks with potential backers over a take-private deal after the squeeze on shoppers hammered profits and sent its share price sliding.

Frasers, the Sports Direct owner which is also a key shareholder in Currys, has been snapping up stakes in rival retailers when their share prices remain depressed. As well as Curry’s, Frasers has also bought significant stakes in Boohoo, Asos and AO World.

Analysts at Peel Hunt suggested that Currys could be the first in a series of retailers to face takeover interest in the coming months, with others including Halfords and DFS touted as likely targets. However, the analysts said the electronics retailer would probably be holding out for a much higher price, about £900m. The Elliott approach valued Currys at £700m.

John Stevenson, analyst at Peel Hunt, said: “You’ve got a retail sector that’s had two or three really challenging years. Now it feels like we’re just starting to come out of that, and that’s not being reflected in valuations.”

Alex Baldock, the Currys chief executive, last month said the Government could do more to buoy retailers.

He said: “Retail is overburdened. It pays 10pc of business tax despite being 5pc of the economy and loading new costs on is simply going to be counterproductive.

“It’s going to fuel inflation, it’s going to reduce investment, it’s going to reduce jobs … Enough is enough.”