Knight Vinke has responded to weekend reports that it wants the sale of Comet, the UK arm of Kesa Electricals, dropped with a rare public letter.
And that’s the issue here — obtaining an acceptable price. The likelihood is that Kesa would have to pay someone a couple of hundred million to take the loss-making chain off its hands.
But given that state of the UK electricals market that could be a price worth paying if there is someone brave enough to take the job on.
And what of this alternative plan? It is a JV with Argos or Best Buy, which has halted its expansion plans. Or what about a merger with Dixons Retail – the two drunks propping themselves up at the bar option.
Update: July 5th, 08.49 (BST)
Arden’s Nick Bubb weighs in with his thoughts.
In an effort to clarify their view on what Kesa should do with the struggling Comet, after a report in the Times on Saturday that they now don’t want them to sell the business, the activist fund Knight Vinke published a letter yesterday (see below), to set out their position. Unfortunately, their position is as clear as mud. They don’t want Kesa to just carry on with Comet and they don’t want them to sell it at a loss, but claim they have a third solution that they told Kesa about last week.
Presumably this involves some kind of jv with a rival, but it is not at clear that the likes of Best Buy or Argos have the appetite to invest more in UK electricals, so Kesa are probably a bit nonplussed by it all. Meanwhile, current trading is getting no better and the losses are mounting at Comet.
At least all sides agree on the urgency of the matter and it sounds like Knight Vinke are keen to resolve the situation by the time of the AGM and Q1 update on 15 September. And, with a 19.3% stake in Kesa, Knight Vinke can make their views count. We would keep an eye on the exit door, as Kesa has disappointed us before, but for the time being we give them and Knight Vinke the benefit of the doubt and maintain an Add at this level.
Related link:
Kesa confirms lossmaking Comet up for sale – FT