Mark Kleinman: Elliott will need more to ‘Curry’ investor favour
Mark Kleinman is Sky News’ City Editor and is the man who gets the City talking in his weekly City PM column. This week he tackles Currys’ investor offer, former Tesco chairman John Allan’s new venture and LSEG’s chief executive’s pay rise.
If at first, you don’t succeed, try, try again – that may be the principle adopted by Elliott Advisors in its pursuit of Currys, the London-listed electrical goods retailer.
The renowned activist’s initial offer of 62p-a-share, worth about £700m, was rebuffed over the weekend. One leading shareholder labelled it “opportunistic”, arguing that the Currys board should only engage if Elliott pitches up with an offer worth 75p or more.
Analysts at Investec, which had a target price of 78p prior to the emergence of the bid, seem in broad agreement. They attributed a valuation of up to £667m to Currys’ care and repair business in the UK and Ireland alone, meaning the remainder of the group has effectively been trading with a negative value.
Moreover, its Greek operations, accounting for just seven per cent of the company’s earnings, were sold at a valuation equating to about a third of its market capitalisation.
Ever the value-hunting predator, Elliott has picked its moment to seize on one of the many members of London’s unloved mid-cap index. Concerns about an economy recently revealed to have slipped into recession, and Currys’ performance after a difficult couple of years, have weighed on its share price.
Nat Rothschild, the financier, posted on the social media platform X shortly after I revealed Elliott’s interest last weekend that a business of the scale of Currys should be worth substantially more than £700m.
That, though, ignores the litany of failures – Debenhams, BHS and Arcadia among them – on the high street in the last two decades, in which tens of thousands of jobs were casualties of changing retail fashions.
Indeed, Elliott itself was an investor in one of those, Comet, which collapsed in 2012 less than a year after its sale to a consortium that also included the retail fund Opcapita.
Elliott’s participation in that deal may partly explain why it has been drawn to Currys, a segment of the high street it knows well.
It now faces competition, though, from the Chinese online retail giant JD.com, and any other suitor waiting in the wings. Currys’ board should stand firm and force its suitor to pay up.
Every little helps for former Tesco chairman
It hasn’t taken him long, but I hear that John Allan, the former Tesco and Barratt Developments chairman, is back in the corporate mentoring game. Fresh from selling his stake last year in the joint venture he set up with Anna Joseph, Allan has established Anatom Value Mentoring in the last few weeks.
It has signed up a number of clients, although Allan declined to identify them. Named after two of his children, Allan’s determination to return to this niche of the professional services market reflects its rapid overall growth amid a complex corporate environment.
Allan, a former CBI president and Dixons Retail chairman, was caught up in the fallout from the implosion of the business lobbying group last year when he was obliged to step down prematurely from his two FTSE roles after unsubstantiated claims about his behaviour.
I understand the reference to Value in the firm’s name relates to Allan’s effort to undercut rivals by charging significantly less for mentoring services. Perhaps it’s a throwback to his Tesco days – two mentoring sessions for the price of one, anybody?
The One Where Schwimmer Gets a Big Pay Rise
It’s quite literally a case of putting their money where their mouths are. There’s no more obvious company to lead the charge when setting elevated levels of boardroom pay than London Stock Exchange Group, where senior executive Julia Hoggett argued forcefully several months ago that the reward arbitrage between the City and New York was undermining Britain’s economic competitiveness and that of the UK capital markets.
Even so, the proposals being circulated to LSEG shareholders, which involve a potential near-doubling of (pictured) chief executive David Schwimmer’s £6.25m maximum annual package, look superficially steep.
His annual bonus award could go up from 225 per cent of salary to 300 per cent, while his long-term incentive award could rise from 300 per cent of base pay to 550 per cent. On top of a salary increase from £1m to about £1.2m, that equates to roughly another £4.5m of annual compensation.
Yet while it appears excessive, the feedback from large investors, 90 of whom have been consulted by LSEG during a process lasting several months, has apparently been overwhelmingly positive.
One investor I spoke to prior to revealing the proposals on Monday said they were increasingly concerned about the gulf between pay packages at UK-based companies and their American peers.
According to this shareholder, LSEG’s message has been clear: it is not competing for executive talent with other companies in the top third of the FTSE-100, but with the US technology behemoths who can afford to pay gargantuan sums. Its sweeping partnership with Microsoft serves to illustrate this point.
Moreover, there has rarely been a more opportune moment for a company like LSEG to float such ostensibly audacious pay reforms with its shareholders. The Investment Association, which has in recent years taken a hostile approach to big pay bumps for top executives, is preparing to radically soften that stance, mindful of the increasingly vocal competitiveness argument.
It would be surprising, then, to see a substantial protest at LSEG’s AGM in the spring. If not, then expect others to follow suit.