A potential bid battle for Currys PLC (LSE:CURY) between Chinese giant JD.com and the owner of Waterstones is a sign of what could be a rich vein of merger and acquisition activity this year, according to analysts.
This morning, the electrical group said it had rejected a £700 million offer from Elliott Advisers on Friday, with Chinese e-commerce giant JD.com also confirming today that it is also potentially interested in a takeover.
“Much more” such action in the retail sector is likely in coming months, broker Peel Hunt said in a note, given valuations across the sector that are currently “cheap”.
Many UK retail market leaders trade on low or even single-digit price-to-earnings ratios, the broker explained, with an anticipated uptick in consumer spending also providing appealing prospects.
In terms of the wider sector, Peel Hunt highlighted DFS Furniture PLC (LSE:DFS), Halfords Group PLC (LSE:HFD), Topps Tiles PLC (LSE:TPT), Card Factory (LSE:CARD), Dr Martens PLC (LSE:DOCS) and Marks and Spencer Group PLC (LSE:MKS) as all trading on low valuations.
“With interest rates having peaked, the outlook for mergers and acquisitions [...] seems likely to pick up given the low level of sector valuations,” the Peel Hunt analysts added.
They tipped Currys' board as unlikely to engage in any offer below 80p per share, following a 62p per share offer from Waterstones owner Elliott on Friday.
Elsewhere, another broker suggested another effect of the interest in Currys would be to drive share prices for the sector higher.
JD Sports, M&S, AO World and Dunelm were all mentioned by analyst Clive Black at Shore Capital.