Curry's Surges Amid Bidding War

The electronics retail sector in the UK, which is typically calm, has entered a period of significant activity as two prominent investment firms potentially engage in a bidding war for Curry's.

News of Offer Drive Share Price Surge

On Monday, Curry's share price jumped 37% in a single day after reports emerged that Chinese online retail giant JD.com was considering making an offer to acquire the company. This came shortly after Curry's had rejected a takeover proposal from prominent US private equity firm Elliott, deeming the bid too low. Elliott's initial offer was proposed at 62 pence per share, valuing the company approximately £700 million. At the time of rejection, Curry's stock price was trading at 47 pence per share.

While Elliott's bid represented a premium of over 30% to the stock's most recent closing price, the company's board assessed that the offer undervalued Curry's. Analysts now suggest Curry's should aim for at least 80 pence per share from prospective bidders, implying a further 20% premium to its closing price on Tuesday. Since details of the bids surfaced, Curry's share price has risen above Elliott's proposed amount. However, Curry's trailing twelve-month price-to-earnings (P/E) ratio only increased modestly to 16.5 times despite the share price surge.

Further Potential Amid Turnaround Signs

curry's stock has struggled to gain momentum in recent years, trading at a P/E ratio below the FTSE 100 average. The suspension of dividends last year following revenue declines unsettled investors amid challenges in the consumer electronics sector and for high-street retailers during the pandemic. But according to management, Curry's has turned a corner and upgraded its profit outlook in a Christmas trading statement.

Rumours suggest Curry's has fielded several approaches from private equity firms, bolstering management's confidence to rebuff initial bids. Both JD.com and Elliott have until mid-March to increase their offers potentially. However, Curry has yet to formally reject JD.com's approach or disclose details of its bid.​

Heading to 1 Pound After Reversal?

Curry's bottomed out in late October after forming an ending wedge pattern at 43 pence. Subsequently, the stock rebounded and consolidated within a range. However, the recent break above the top of 53 pence could propel prices towards 82 and 87 pence, improving the prospects of a long-term trend reversal back toward triple-digits. The trend is unlikely to change if prices remain above 60 pence and the swing low of 56 pence holds firm. Conversely, if the stock were to close the gap down to 47 pence, that would likely signal further weakness.

Source: SpreadEx / Currys PLC

Key Takeaways

UK's electronics retail sector has seen a period of significant activity, with two prominent firms potentially engaging in a bidding war for Curry's. The company rejected an initial takeover proposal from Elliott, valuing the company at £700 million, which the board deemed too low. Subsequently, JD.com expressed interest in acquiring Curry's, with the announcement boosting its share price up 37% on Monday. Analysts now suggest Curry's should aim for at least 80 pence per share from prospective bidders, implying a 20% premium over Tuesday's closing price. Multiple private equity approaches have bolstered management's confidence to rebuff initial bids, as both suitors have until mid-March to increase offers.