Currys’ largest shareholder warns Elliott offer ‘highlights London equity market drain to US’
The head of Currys’ largest shareholder Redwheel, a boutique asset manager formerly known as RWC said Elliott Advisors’ proposed takeover offer of the retailer has “highlighted a wider problem with the UK equity market.”
In a statement this afternoon, Ian Lance, co-head of the UK value and income team at Redwheel, which owns a 15 per cent stake in the electrical retailer, came out in support of Currys’ board for rejecting its initial offer which valued the firm at 62 pence per share.
Lance said the dramatic bid for Currys highlights a wider problem with the UK equity market, which is losing out to rivals in the USA.
He said: “[This] highlights a wider problem with the UK equity market which no longer seems to fulfil its primary purpose of price discovery and efficient capital allocation.
“Some of the largest market participants in the UK have been allocating away from UK equities, which are close to all time low valuations, and therefore should have the potential to offer attractive returns.
He added: “Instead, investors are allocating to US equities, at close to all time high valuations, a level which has historically been associated with poor returns.
Lance said this has resulted in “pockets of the UK equity market being valued significantly below the true value of the businesses”.
He added: “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.”
Elliott, which has some £43bn of assets under management, had its first £700m unsolicited bid for the business rejected on the grounds it undervalued the firm. It then said it would table a new all cash offer.
Shares in Currys surged over 36 per cent on Monday morning as it confirmed Elliott had made a second swoop to buy the firm.
The Waterstones-owner is fighting off competition from Chinese commerce giant JD.Com which said it is in the “very preliminary stages” of exploring a takeover.
It comes as UK firms have been beaten up by red hot inflation and high interest rates, leading a raft of businesses to look at exiting the London public market.