Kesa boosted by takeover rumours
Dixons and Darty seen as ideal match
December 17 2003
Electrical group Kesa saw it share price increase as the City speculated that the former Kingfisher business is one again a takeover target for Dixons.
On a generally poor day for UK retail stocks, Kesa shares closed 2p higher at 248p on Tuesday after Deutsche Bank analyst Keith Ruddell said there were sound financial as well as strategic reasons for Dixons buying Kesa, in order to acquire the French Darty business.
Dixons was widely reported to be interested in acquiring Darty earlier this year. Kingfisher chose to demerge its electrcials business as a whole rather than sell off individual chains.
Dixons, the UK’s biggest electrical retailer, would have to sell on the Kesa-owned number two business, Comet, if it bought Kesa.
Although both Dixons and Comet have seen their market share under assault from retailers ranging from Tesco to Argos, any merger plans would undoubtedly attract the interest of the UK competition authorities. Dixons would also want to find a buyer for Kesa’s French furniture chain BUT.
Dixons will be in a stronger position to plan for any expansion once it knows the government’s decision on how it intends to curb the sale of extended warranties. An announcement is expected imminently.
For that reason analysts do not expect anything too stringent, particularly as earlier this year Britain’s third largest, privately owned, electrical retailer PowerHouse went into receivership and was later sold.
Options range from providing better information and cancellation rights for consumers to the far more stringent possibility that retailers could be barred from selling warranties at the point of sale.
