Shares in Kesa Electricals found themselves under heavy selling pressure yesterday as Deutsche bank warned investors that a bid for the retailer from Dixons is unlikely to emerge in the near term. Kesa dropped 7.25p to 256.5p, having soared nearly 13 per cent over the past month on speculation of a bid for the group from its rival.
Although the broker talked of a possible move on Kesa by Dixons last year it believes that such a scenario is unlikely in the wake of the recent report by the Office of Fair Trading on the issue of warranties. Key to a takeover of Kesa is the ability of Dixons to then sell on Comet, Kesa’s main UK business, to a third party. Without such a disposal, Britain’s competition authorities would almost certainly block a takeover.
However, Dixons would struggle to find a buyer for Comet with the issue of warranties hanging over the business. The OFT report last month failed to resolve the warranties question and said it would re-examine the subject in two years’ time. With the absence of a possible bid premium, Deutsche argued that Kesa shares look unattractive at current levels and advised investors to lock-in profits from their recent strength.
Extract from The Independent